Default

[Trevor]

Well, no matter what, Greece is done for. I expect them to be in official default sometime early next year. Next will be Portugal, Iceland, and then Italy and Spain, and then the collapse.

One thing I am wondering is: why is this proceeding slower than the Depression? I have a couple ideas about that.

Even in the early 1930's, Germany was a major economy, among the biggest and they were the worst off. Greece is tiny, only being a small part of the Eurozone. We'll still get to the destination, but maybe not as quickly.

There also isn't the problems of reparations this time around, although we still have a bubble and added enormous, unsustainable amounts of government spending.

Even so, when we go under, I don't think there will be much of an effort to bail us out at that point. we're 1/4 of the world's GDP and nobody else will be in any shape to attempt it.

[John]

Yields (interest rates) on 2-year Greek bonds are 142.3%.

[Trevor]

Seems almost unimaginable. I've looked at Italy and they are where Greece is about 14 months ago. Portugal is about 6 months behind them, at least the last time I looked.

I admit, I don't expect the world war until a couple years after the financial meltdown, meaning I have a couple more years to live, but 2012 is promising to be a terrible, horrible, no good, very bad year for the United States.

[Marc]

I appreciate the insights, all, but I respectfully and personally (and hey, maybe this will cheer you up a bit, Trevor ) don't think that 2012 will be a "year from hell" for the United States. The reason I feel this way is I feel that there is still significant amounts of "can-kicking" that can be done, such as massive Fed backdoor bailouts for Europe via swaps, contingency loans, and so on. China may even help out Europe where it can out of self-interest. I do eventually see massive excrement hitting the fan in Europe and globally, but I guess I just see a bit slower timeline for it all to hit the fan — but others can disagree with me here. —Best regards, Marc

[Trevor]

I see 2012 as the year that the true panic sets in, when Greece defaults, affecting the rest of Europe and by extension, us. It'll accelerate the decline of the rest of the European states, and could motivate us to pass the 2012 version of Smoot-Hawley. Ironically, it's the only area where the two parties are working together. There's not much more can-kicking that can be done.

[Marc]

I was kindly thinking that the Fed could find, oh, a few trillion here and there to somewhat stealthily take care of Greece and even Italy if it had to, at least for a little while. That's why I was thinking that a big European financial implosion would occur sometime after 2012. (Also, there could be some desperate ECB backdoor money-printing, no matter how much Germany really doesn't like it.) But then again, I have no crystal ball; others could be more right than I am in regards to when Europe really goes down the commode. —Best regards, Marc

[Trevor]

We tried all this during the Depression and it didn't work. I don't see it working this time, either.

[Marc]

Hi, Trevor,

I'd have to be in alignment with you as well as John, in that the "solution" to the current global financial crisis is that there ain't no solution. I was just thinking that there was likely more "road to kick the can down" all through 2012 via some "big bazookas" (including some huge, stealthy Fed-facilitated ones for Europe), but again, I could be wrong about that. —Best regards, Marc

[Trevor]

I don't know how they can keep this up for much longer. Europe is imploding and we're not far behind them