The real worry is that the PIIGS (Portugal, Italy
, Spain) will begin defaulting on their debt and we get an updated version of the Asian Contagion. Greece
is likely to do so first, but it won't be the last. The dollar and gold are both rising rapidly in a flight to (perceived) safety
in some sort of stealth run on Greek banks. The rub is that the world markets are totally inter-linked in real time now and more vulnerable cascading dominoes. A bizarre example of same was the breakdown of US markets yesterday with bots controlling around 75% of all trading. Some technical lines were violated and the computers
all went to sell with no buyers to be found. These High Frequency Trading computers
can each put out 10,000 discrete orders in the time it takes you to snap your fingers. Like on sailboats, complexity leads to vulnerability. But, no worries for the big boys, they got together and called a Mulligan
, cancelling trades. There's your free markets.
The dollar has been rallying for 6 months (15%) and will continue as long as the debt deleveraging continues from the worldwide debt bubble. All governments, including the US are technically bankrupt and must continue printing money
to pay bills. ergo, gold as currency or insurance
is prospering. I don't think we will get the runaway inflation tho' until another year or two of deleveraging = debt extinguish = money
destroyed = deflation. Creating debt is creating money, extinguishing debt is destroying money. That's what allows the FED to keep interest rates near zero, which itself creates more bubbles. It is hard to believe this will not end badly. Hopefully, not in another world wide war.