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Thursday, October 13, 2011

Jim Rogers on CNBC

We're Fast Approaching the Lehman Event in Europe (Greek Default)

So nationalization is now the name of the Game in Europe. Indeed, we've now seen three European banks nationalized in the last few days... and France has announced a plan to nationalize 2-3 banks "just in case."

If you'll recall, we tried similar plans in the US with Fannie and Freddie, AIG, and other firms in 2008. That situation didn't work out too well. Indeed, looking back on it, thingsreally started to implode right around the time we started nationalizing companies.

Meanwhile Sarkozy and Merkel continue to make "plans" for what to do... The reality is they have no plans other than throwing money at Europe's banks and the PIIGS.

All they're doing is playing for time while they prepare for a Greek default. Indeed, German officials recently told the Telegraph that a "hard" default for Greece is coming which will feature investors taking a 60% "haircut" on their investments in Greek bonds.

In plain terms, we're fast approaching the "Lehman" event for 2011. However, this time around, instead of a bank going under, it's going to be Greece's sovereign debt.

Consider the Belgian bank Dexia which just went under... it only had 5.4 billion euros' exposure to Greek debt.

Well, French, German, UK and US exposure to Greece is north of $165 billion. And those same countries have $2.6 TRILLION in exposure to PIIGS debt in total.

So suffice to say that when Greece defaults (and it will) we're going to enter a very very interesting time. Indeed, this will be the Crisis to which 2008 was just the warm-up.

You see, 2008 was caused by toxic debts on private bank balance sheets. Today, thanks to US Federal Reserve and other Central Banks' moves, these toxic debts have moved onto the PUBLIC's balance sheet.

So this time around, the market collapse is ALSO going to feature the bond bubble bursting, sovereign defaults (including eventually the US), MAJOR bank failures (Bank of America?), bank holidays, government shutdowns, civil unrest, and food shortages.

Zero Hedge

Rubino: Civil Unrest and economic chaos