I've stated before that I fully believe Germany will be leaving the Euro. With that in mind, I want to draw your attention to recent comments from Germany's finance minister, Wolfgang Schauble.

Wolfgang Schauble admits euro bail-out fund won't halt crisis

Europe's "big bazooka" bail-out fund is not ready and won't stem the debt crisis that on Tuesday pounded Italy and the European Central Bank (ECB), admitted Wolfgang Schauble, Germany's finance minister.

http://www.telegraph.co.uk/finance/financialcrisis/8924462/Wolfgang-Schauble-admits-euro-bail-out-fund-wont-halt-crisis.html

This is a pretty strong admission from the finance minister of the country that Europe looks to as a financial backstop. And the following is even more disconcerting for the future of the Euro:

Seeing in Crisis the Last Best Chance to Unite Europe

MR. SCHÄUBLE said the German government would propose treaty changes at the summit of European leaders in Brussels on Dec. 9 that would move Europe closer to the centralized fiscal government that the currency zone has lacked. The ultimate goal, Mr. Schäuble says, is a political union with a European president directly elected by the people.

"What we're now doing with the fiscal union, what I'm describing here, is a short-term step for the currency," Mr. Schäuble said. "In a larger context, naturally we need a political union."

Critics say the spending cuts German leaders have demanded from other countries are hurting growth across the Continent, in the process making debts only harder to repay. And his proposals to give the European Commission far-reaching powers to enforce budgetary discipline have been likened by skeptics in Britain to an invasive new "super state." Even some euro supporters fear that Mrs. Merkel and Mr. Schäuble are talking about long-term changes while panicked investors and practiced speculators are tearing the euro to pieces right now.

"There is a limited transition period where we have to manage the nervousness on the markets," Mr. Schäuble said. "If it is clear that by the end of 2012 or the middle of 2013 that we have all the ingredients for new, strengthened and deepened political structures together, I think that will work."

He sees the turmoil as not an obstacle but a necessity. "We can only achieve a political union if we have a crisis," Mr. Schäuble said.

http://www.nytimes.com/2011/11/19/world/europe/for-wolfgang-schauble-seeing-opportunity-in-europes-crisis.html?_r=1&pagewanted=2

Note that Schauble repeatedly emphasizes the goal of a "political union," NOT a "fiscal union" or "monetary union." Indeed, his one reference to a "fiscal union" is in the "short-term," while stressing that in a "larger context" the EU needs a "political union."

The message here is very, very clear: Germany is interested in the EU as a political entity, NOT the Euro as a currency. With that in mind, consider the following story which received almost NO attention from the media:

-German Chancellor Angela Merkel's conservatives on Monday passed a resolution at a party convention urging the government to establish rules in Europe that would allow a country to voluntarily leave the euro zone without giving up membership in the European Union.

The resolution reads:

"Should a member [of the euro zone] be unable or unwilling to permanently obey the rules connected to the common currency he will be able to voluntarily--according to the rules of the Lisbon Treaty for leaving the European Union--leave the euro zone without leaving the European Union. He would receive the same status as those member states that do not have the euro."

http://online.wsj.com/article/BT-CO-20111114-712771.html

I fully believe that Germany is laying the groundwork for it to leave the Euro while still remaining a member of the EU. The alternative to this would be for Germany to demand other nations give up their fiscal sovereignty and make Germany a kind of monetary authority in exchange for additional bailouts. However, the likelihood of this option being presented is next to ZERO as ALL of Europe remembers WWII and the threat of German rule.

So I expect Germany to duck out of the Euro in the near future. It may happen in the next few weeks or it may happen in early 2012. But considering that the Federal Reserve had to step in to save the European banking system today I believe it will be sooner rather than later.

So if you believe that Germany is going to save the EU... you're in for a rude surprise. Indeed, if we look at the bond or credit markets, it's clear we're into a Crisis far greater than 2008. Forget the stock market rally. Stocks ALWAYS get it last (just like in 2008). And before the smoke clears on this mess we're going to see sovereign defaults, bank holidays, riots, and more.

Many people will lose everything in this mess. Yes, everything. However, you don't have to be one of them. Indeed, I can show you how to turn this time of collapse into a time of profits.

Labels: chaos, Debt crisis, Default, Euro finished, Germany leaves Euro

# posted by Generalfoundation @ 3:52 AM 0 comments

With the European End Game now in sight, the primary question that needs to be addressed is whether Europe will opt for a period of massive deflation, massive inflation, or deflation followed by inflation.

Indeed, with Europe's entire banking system insolvent (even German banks need to be recapitalized to the tune of over $171 billion) the outcome for Europe is only one of two options:

1) Massive debt restructuring

2) Monetization of everything/ hyperinflation

These are the realities facing Europe today (and eventually Japan and the US). Either way we are talking about the destruction of tens of trillions of Euros in wealth. The issue is which poison the European powers that be choose.

Personally, I believe we are going to see a combination of the two with deflation hitting all EU countries first and then serious inflation or hyperinflation hitting peripheral players and the PIIGS.

In terms of how we get there, I believe that in the next 14 months, the following will occur.

1) Germany and possibly France exit the Euro

2) ALL PIIGS defaulting on their debt

3) Potential hyperinflation in the PIIGS and peripheral EU countries

Regarding #1, we are already beginning to see hints of this development in the press:

DEATH OF THE EURO: SECRET PLOT TO WRECK THE CURRENCY

Ministers are understood to be deeply concerned that French President Nicolas Sarkozy and Germany's Chancellor Angela Merkel are secretly plotting to build a new, slimmed down Eurozone without Greece, Italy and other debt-ridden southern European nations.

Well-placed Brussels sources say Germany and France have already held private discussions on preparing for the disintegration of the Eurozone.

http://www.express.co.uk/posts/view/283060

FRENCH AND GERMANS EXPLORE IDEA OF SMALLER EURO ZONE

German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller Euro zone, EU sources say.

"France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

"We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don't want to be part of the club and those who simply cannot be part," the official said.

http://www.reuters.com/article/2011/11/09/us-Eurozone-future-sarkozy-idUSTRE7A85VV20111109

With no one willing to foot the bill for the EFSF the markets are hoping Germany will step in and save the day. However, the German constitution forbids Germany from backing Euro-bonds.

German EconMin: court verdict rules out Euro bonds

German Economy Minister Philipp Roesler said on Thursday the constitutional court's ruling on Euro aid made it clear that joint Euro zone bonds were not an option.

Addressing left-wing opposition parties in the Bundestag lower house of parliament, Roesler said: "You continue to talk up Euro bonds although the constitutional court yesterday made it clear that as transfer union such as the one you propose on the left will never be possible, never be allowed."

"We don't want it politically, either, and we will not let the German taxpayer be obliged to pay for the debt of other countries," he said in a parliamentary budget debate.

http://www.reuters.com/article/2011/09/08/Eurozone-germany-Eurobonds-idUSB4E7K600L20110908

Moreover, Germans will simply not permit the monetization of debt. Weimar's hyperinflation happened in the early 1920s and is still fresh in the memories of the German people (those who lived through it undoubtedly told their children and grandchildren about it). So the German people will not tolerate price instability in any form.

Germany is not alone in having little or no desire to attempt to backstop the system. Indeed, NONE of the G20 countries wish to support the EFSF from a monetary standpoint (yet another sign that the bailout game is ending).

No new Euro zone money for debt crisis at G20

The Euro zone won verbal support but no new money at a G20 summit on Friday for its tortured efforts to overcome a sovereign debt crisis, while Italy was effectively placed under IMF supervision.

Leaders of the world's major economies, meeting on the French Riviera, told Europe to sort out its own problems and deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.

"There are hardly any countries here which said they were ready to go along with the EFSF (Euro zone rescue fund)," German Chancellor Angela Merkel told a news conference.

http://www.reuters.com/article/2011/11/04/us-g-idUSTRE7A20E920111104

So... everyone claims they want to support the EFSF... but no one wants to commit the money. Moreover, Germany's constitution forbids the backing of Euro bonds... and the EFSF itself has failed to stage even a three billion Euro bond offering under normal market conditions.

Again, the bailout game is ending. Under these conditions, I believe Germany and France will push to either:

1) Leave the EU

2) Draft legislation that allows countries to leave the Euro but remain in the EU

3) Propose kicking out the PIIGS from the Euro

Whichever one of these options Germany opts for, the Euro will collapse. Indeed, the primary reason the Euro has been rallying since October is due to French banks and others selling assets (buying Euros) to recapitalize themselves.

Put another way, the Euro rally is in fact NOT a sign of currency strength. Instead, it is a sign that the major players are moving to cash (Euros) in an attempt to lower their exposure to PIIGS' debt.

Indeed, if we look at the bond or credit markets, it's clear we're into a Crisis far greater than 2008. Forget the stock market rally. Stocks ALWAYS get it last (just like in 2008). And before the smoke clears on this mess we're going to see sovereign defaults, bank holidays, riots, and more.

Many people will lose everything in this mess. Yes, everything. However, you don't have to be one of them. Indeed, I can show you how to turn this time of collapse into a time of profits.

Labels: chaos, crisis, Euro crisis, Euro default, stocks

# posted by Generalfoundation @ 7:22 AM 0 comments

Stocks broke down in a big way last week as the situation in Europe has become truly dire. I'll be addressing that situation in greater detail soon, but for now, you should know that there are truly only two possible outcomes for the Euro:

1) The ECB prints money and Germany leaves the EU

2) Germany remains in the EU but moves to kick other countries out as the defaults start coming fast

POINT

The market has already proven that the EFSF won't save the Euro. And Italy, the third largest bond market in the world, is creeping towards a default by the minute. So the above outcomes are the only realistic options that are left. And both of them will send the Euro, and stocks, lower in a big way.

On that note, the S&P 500 broke down last week as the descending trendline (black line) from the July top proved to be too much for this latest rally to overcome. We've now taken out the lower trendline (green line) that supported stocks since October as well as critical support (red line) formed by the trading range that dominated the market's action from August through October.

Once we get a definitive move below the red line in the chart above, then the door is open for us to test support at 1,175 and possibly even 1,125 in short order.

This is a holiday week so trading volume will be light. However, recall that it was during Thanksgiving 2009 that the sovereign defaults first started when Dubai asked for an extension on $60 billion in debt. Will we get a European version of the Thanksgiving day collapse this time around with Italy? It's definitely possible as the ECB is now intervening on a daily basis to slow down the bond implosion over there.

On that note, both Gold and Silver are looking deflationary... or at least undergoing liquidations.

Remember, defaults are deflationary in nature, and given that Europe is literally on the brink of systemic failure, Gold and Silver's recent action may be hinting that we're about to see another round of defaults/ deflation in the markets.

After all, when you combine the situation in Europe, along with the ongoing Depression in the US, MF Global's bankruptcy, and the fact that most institutional investors remain heavily invested to the long-side (opening the door for intense selling pressure as everyone has gone "all in"), you've got a recipe for a REAL collapse.

So, just be aware that if things get messy, the markets could get downright UGLY fast. Leverage levels today exceed those of the Tech bubble. And we've already had one player taken out by bad bets (MF Global).

Labels: chaos, Crash, Euro crisis, Euro default

# posted by Generalfoundation @ 7:41 AM 0 comments

There are two primary stories for the markets today. They are:

1) The political/ financial reality facing Europe

2) The US stock market rally

Regarding #1, it is clear as day that the EU in its current form is finished. I've been saying this for months, but now even the mainstream media is picking up on rumblings that Germany wants to exit the Euro or at least restructure the entire EU.

DEATH OF THE EURO: SECRET PLOT TO WRECK THE CURRENCY

Ministers are understood to be deeply concerned that French President Nicolas Sarkozy and Germany's Chancellor Angela Merkel are secretly plotting to build a new, slimmed down eurozone without Greece, Italy and other debt-ridden southern European nations.

Well-placed Brussels sources say Germany and France have already held private discussions on preparing for the disintegration of the eurozone.

http://www.express.co.uk/posts/view/283060

FRENCH AND GERMANS EXPLORE IDEA OF SMALLER EURO ZONE

German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller euro zone, EU sources say.

"France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

"We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don't want to be part of the club and those who simply cannot be part," the official said.

http://www.reuters.com/article/2011/11/09/us-eurozone-future-sarkozy-idUSTRE7A85VV20111109

The reality of the Eurozone is as follows:

1. Germany cannot and will not permit debt monetization to take place and so will back out of the Euro rather than foot the bill for other countries. With Weimar still present in the public's conscious, the German populace simply will not stand for inflation of any kind.
2. The leveraged EFSF has already failed. It's already failed to auction even 3 billion Euros' worth of bonds... and it's supposed to raise over 1 trillion!?! Add to this the fact that no G20 countries want to support it and the EFSF is FINISHED.
3. Greek will default again. Italy will default. Spain and the other PIIGS will default. The Euro will collapse.

These are the facts. Everything else (political elections, austerity measures, etc) is just a distraction. The whole mess is just like 2008 when the plain simple truth was in front of all of us though 99% of the pundits focused on the various distractions (Wall Street CEOs saying the worst was over, Hank Paulson's Bazooka, etc).

And Europe can, at best, hope to replicate what happened to the US in 2008. It's entire banking system is too leveraged. And now we're talking about entire countries going bankrupt.

Now for the other story in the markets today: the stock market rally which is based on fantasy and dreams.

I've heard every excuse for this move ranging from "QE 3 is just around the corner" to "the leveraged EFSF will work," but I've yet to hear anything fact-based that justifies this move as being something more than short covering and the usual bear market rally.

Let's take a look over what's happened since the market bottomed in early October:

1) Greece defaulted

2) Italian bonds imploded

3) The EFSF failed to raise even 3 billion Euros

4) French/German bond spreads hit all time highs

5) The Fed re-opened swap lines to Europe AND the Bank of Japan

And stocks have rallied 14% on these developments?

Do people forget that during the 2008 debacle the market rallied 11%, 17%, even 20%?

Having said all of that, stocks look to have formed a triangle pattern, which presents the possibility of a final thrust up, possibly to 1,300 on the S&P 500.

This move will likely be followed by a very sharp sell-off. With stocks tracking the Euro, it's worth noting that a head and shoulders pattern is forming in European currency.

Folks, here's the deal: the EU is out of options and out of time. Yes, we've seen some symbolic shifts in the political landscape, but the reality is:

1) The EFSF CANNOT raise the funds it needs to bail out Europe

2) Germany WILL NOT monetize the PIIGS' debt

3) Greece will stage an even greater default, as will the other PIIGS nations

The powers that be know it. Why do you think China is importing a record amount of Gold... because they believe in the Euro? Weren't they the ones who were supposed to save Europe?

The reality is that the powers that be (the Federal Reserve and ECB) are fast losing control of the system. Bernanke's already admitted he hasn't got a clue how to solve the financial system's problems. The Bank of England says we're facing the greatest financial crisis in history. Even the IMF has warned that we're heading towards a global financial meltdown.

Folks... these organizations don't issue warnings like this just for fun. They're the ones who are SUPPOSED to SAVE the system. Do you think they're issuing these warnings because everything is fine?

So ignore stocks. I know, I know, they've made a huge move to the upside. But that huge move was just 14%... and we had rallies of 17% and 20% in 2008. How did those work out? Were they a good time to buy stocks?

Again, the EU will be broken up in the coming weeks. When it is, this market rally will collapse. And the ensuing carnage will make 2008 look like a joke.

So if you've not already taken steps for what's coming, the time to do so is NOW before the real mess begins.

Labels: chaos, Euro crisis, Euro default

# posted by Generalfoundation @ 3:45 AM 0 comments

Labels: chaos, guaranteed income, guaranteed money, money from home

# posted by Generalfoundation @ 3:09 PM 0 comments