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Ain't no Chairs

Bob Moriarty
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Nov 2, 2011

I came across an interesting quote recently in The Gartman Letter. Dennis Gartman quotes Charles Biderman of TrimTabs fame.

"European leaders are searching for a relatively quick and easy way out of the government debt bubble that has been building for decades and just started to burst a few years ago. Unfortunately, there is no quick or easy way out.

"Debt has to be reckoned with one way or another. It either has to be repaid, or someone has to bear the losses on what cannot be repaid, either through default or inflation and currency debasement. If it were otherwise, everyone could be rich.

"The bailouts proposed for the Eurozone do not solve the underlying solvency problem. Instead, they are little more than shell games to shift losses on bad debt from bondholders to taxpayers."

That of course is a variation of my very important concept that all debt gets paid, either by the borrower or by the lender.

Greece is a serial deadbeat and has not even the slightest intention of paying their bills. The EU can play games until the cows come home but the Greek debt is not going to get paid. Greece defaulted many months ago and the governments of the EU and the financial media keep pretending there is a solution. There is none.

Here are the facts. There is $195 trillion dollars of debt in the world but only $150 trillion in assets. That assumes there isn't trillions more of debt hidden in the $600 trillion in derivatives. I suspect the debt may be far higher than anyone anticipates today.

The debt cannot be paid, even if the entire load is dumped like bales of hay onto the backs of the taxpaying camels. The debt must be written off and governments, like corporations and families, must learn to live within their budgets. We cannot float in a sea of debt attached to an anchor of unpaid obligations.

No one in the United States has done the math on the obligations the Federal Reserve dumped on the backs of Americans since 2008 else they would be carrying pitchforks and hot tubs of tar to the local OWS rally. If you assume 330 million Americans and $16 trillion in loans from the Fed, that is $48,000 and change per every American. Will that ever be paid back? No.

I made the comment years ago that the $600 trillion in derivatives is like a game of musical chairs in a giant casino with people playing with Monopoly money. Well, the music stopped in September of 2008 and there ain't no chairs.

The world economy is in a minefield where each day another unforeseen mine explodes. The Dexia Bank, Belgium's largest, which passed the fake stress tests with the highest ratings, crashed a few weeks ago. I cannot help but be reminded of the failure of the Credit-Anstalt Bank of Austria that crashed in May of 1931 and led to a series of cascading bank failures and eventually to a total shutdown of all US banks in March of 1933.

I'm going to crawl out on a limb and suggest that 2012 is going to go down in history as the year of the bank failures. Every bank in the United States has been underwater since 2008 and the only reason the doors remain open is a mob psychosis insisting the King is indeed clothed. Well, he ain't and the banks will collapse.

We had a perfect example of surprise explosions proving market forces are far more significant than government manipulation with the sudden collapse of MF Global on October 31st. This is the biggest bankruptcy since the fall of Lehman Brothers in 2008 but was a total shock to the market.

November 1, 2011 brought yet another mine explosion with the release of news from Greece where Prime Minister George Papandreou announced that he would call for a referendum by Greek voters as to implementation of new austerity measures. Given that 80% of voters indicate they are against the measures and 70% are in favor of staying in the Euro (And why not? It's a Goodo Dealo.) Greece just blew the French/German bailout plan sky-high. The Greeks literally are caught between a rock and a hard place.

I want to make it abundantly clear that there are no good solutions in Europe, the Euro is doomed. Indeed there are no good solutions on our side of the water, our financial system is toast.

The AWA protests in the United States (Americans with an Attitude) have escalated to a new degree with the shooting in the head at point blank range of a Former Marine protester by a San Francisco policeman working in Oakland on October 25. It's interesting and noteworthy that a Federal Judge ruled that the demonstrators were there perfectly legally. Clearly Scott Olsen was peaceful in his actions and presented no threat to anyone.

Videos show a SFPD officer firing a tear gas grenade at Olsen at a range of about 10 feet. When Olsen collapsed and fell to the ground, other demonstrators tried to come to his aid. The same policemen pulled out a flashbang grenade and tossed it into the middle of the group.

If the United States were a nation of laws, that officer would be in jail on charges of attempted murder. But when the biggest criminals in the country are working on Wall Street and the Justice Department thinks that arming Mexican drug gangs is a great idea, we are long past the point where those in power obey laws. It's interesting that the Oakland PD says that it will take months to investigate the case. Yea, right.

I wasn't shocked over the protests in New York and spreading protests all over the United States. Frankly I've wondered since 2008 just how long it would take Americans to wake up and recognize the shafting they were getting from the government. Frankly I was shocked over the protests spreading to Canada.

Face it, the only thing Canadian have felt like rioting over in the last 350 year was ice hockey. For Canadians to recognize that maybe Big Government wasn't their best friend is a sea change in attitude. We are in the early days of a Global Revolution. It's going to be ugly, it's going to be bloody and no one today can even guess how bad things will get. The AWA demonstrators are demanding changes government will not make until the entire false edifice has burned down.

For months I have been suggesting that cash was the best investment you could hold and a better time for investment would come at the end of October. It was a good call in that cash was the best investment since May but I don't see a safe environment for investment now. It's time to stay in cash and head for the bunker. Times are about to get fugly.

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Bob Moriarty
President: 321gold
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