by Michael Snyder
May 28, 2012
When it comes to the financial world, it is
important to listen to what the "smart
money" is saying, but it is much more important to watch what the
"smart money" is actually doing.
The ultra-wealthy and those that run the biggest
financial institutions on the planet are far more "connected" to what is
really going on in financial circles behind the scenes than you and I could
ever hope to be.
But if we watch their behavior we can get clues
as to what they think is about to happen. As is the case with so many other
things, if you want to figure out what is really going on in Europe, just
follow the money. And right now, money is rapidly flowing out of southern
Europe and into northern Europe.
In fact, some large corporations are now pulling
the money that they make in Greece during the day out of the country every
single night. It is becoming increasingly clear that the upper crust of the
financial world considers a Greek exit from the euro to be "inevitable" and
that it also considers much of the rest of southern Europe to be a lost
Unfortunately, a financial collapse across
southern Europe is also likely to trigger another devastating global
recession. Even though all the warning signs were there, very few people
actually expected to see the kind of financial crisis that we saw back in
2008. But it happened.
Now very few people actually expect another "Lehman Brothers moment" to
happen in Europe although the warning signs are all around us.
Sadly, most people never want to believe the
truth until it is too late.
The following are 25 signs that the smart money has completely written off
Lloyd's of London is
publicly admitting that it is
rapidly making preparations for a collapse of the Eurozone.
According to the
New York Times, top global law
firms are advising their clients to withdraw all cash and all other
liquid assets from Greece...
So their advice is blunt: Remove
cash and other liquid assets from Greece and prepare to take a
short-term hit on any other investments.
“My personal view is that it is
irrational for anyone, whether a corporation or an
individual, to be leaving money in Greek financial
institutions, so long as there is a credible prospect of a
euro zone exit,” said Ian M. Clark, a partner in London for
White & Case, a global law firm that has a team of 10
lawyers focusing on the issue.
to CNBC, large numbers of wealthy
Europeans have been moving their money from banks in southern Europe
to banks in northern Europe...
Financial advisers and private
bankers whose clients have accounts too large to be covered by a
Europe-wide guarantee on deposits up to 100,000 euros
($125,000), are reporting a "bank run by wire transfer" that has
picked up during May.
Much of this money has headed north to banks in London,
Frankfurt and Geneva, financial advisers say.
"It's been an ongoing process
but it certainly picked up pace a couple of weeks ago We
believe there is a continuous 2-3 year bank run by wire
transfer," said Lorne Baring, managing director at B
Capital, a Geneva-based pan European wealth management firm.
The President of the Federal Reserve
Bank of Philadelphia, Charles Plosser, says that the Federal
Reserve is advising money market funds to
reduce their exposure to Europe...
The Fed and regulators have tried to
stress to money market funds, for example, to reduce their
exposure to European financial institutions.
The yield on 10-year Spanish bonds
is rapidly moving toward the very
important 7 percent level.
Many multinational corporations that
operate in Greece are now pulling their funds out of the country
on a nightly basis.
Juergen Fitschen, the co-CEO of
Deutsche Bank, has publicly proclaimed that Greece is a "failed
The head of the Swiss central bank has
admitted that Switzerland is developing an "action
plan" for how it will handle the collapse of the Eurozone.
The European Commission
has urged all member states to
develop contingency plans for a Greek exit from the euro...
Last week, the European Commission
said that it has asked member states to make plans to deal with
a potential Greek exit, ahead of a second round of Greek
elections on 17 June.
PIMCO CEO Mohamed El-Erian says that a
Greek exit from the euro "is
Spanish stocks continue to
drop like a rock.
The percentage of bad loans on the books
of Spanish banks has reached
an 18 year high.
Late on Friday, the Spanish government
announced that banking giant Bankia is going to need a
19 billion euro bailout.
Standard & Poor's downgraded the credit
five more Spanish banks to junk
status on Friday.
Moody's downgraded the credit ratings of
16 Spanish banks
back on May 17th.
"struggling European banks could be
seized and controlled by Brussels as part of secret plans being
The head of equity strategy at Societe
Generale, Claudia Panseri, is warning that European stocks
could fall by
as much as 50 percent if Greece
leaves the euro.
Economist Marc Faber is warning that
there is now a "100%
chance" that there will be another global recession.
There seems to be an increasing attempt
to pin the problems that Greece is now experiencing on the behavior
of Greek citizens. The following are some of the shocking things
that the head of the IMF, Christine Lagarde, said
in a recent interview...
"Do you know what? As far as Athens
is concerned, I also think about all those people who are trying
to escape tax all the time. All these people in Greece who are
trying to escape tax."
Even more than she thinks about all those now struggling to
survive without jobs or public services? "I think of them
equally. And I think they should also help themselves
collectively." How? "By all paying their tax. Yeah."
It sounds as if she's essentially saying to the Greeks and
others in Europe, you've had a nice time and now it's payback
"That's right." She nods calmly. "Yeah."
And what about their children, who can't conceivably be held
responsible? "Well, hey, parents are responsible, right? So
parents have to pay their tax."
to the Telegraph, an unidentified
member of Angela Merkel's cabinet has stated that Germany simply
will not "pour money into a bottomless pit".
This week the Bank of England is holding
summit" of global central bankers to address the European
The summit will be dominated by
central bankers including the host, Sir Mervyn King, Governor of
the Bank of England. Mario Draghi, president of the European
Central Bank, and Zhou Xiaochuan, governor of the People’s Bank
of China, have been invited.
to Zero Hedge, a major German
newspaper is reporting that a Greek exit from the Eurozone is a
"The Greece-exit is a done deal:
According to the German economic news from financial circles EU
and the ECB have abandoned the motherland of democracy as a euro
member. The reason is, interestingly, not in the upcoming
elections - these are basically become irrelevant.
The EU has finally realized that the
Greeks have not met any agreements and will not continue not to
meet them. A banker: "We helped with the Toika. The help of the
troika was tied to conditions.
Greece has fulfilled none of the
conditions, and has been for months now."
to CNBC, preparations are quietly
being made to print up and distribute new drachmas should the need
British banknote printer De La Rue
is drawing up plans to print new drachma notes in the event of a
Greek euro exit, according to an industry source with knowledge
of the matter.
The world's biggest security firm G4S expects to be involved in
distributing notes around the country.
Citibank's chief economist Willem
Buiter is warning that any new currency issued by the Greek
government could "immediately
fall by 60 percent".
Reuters is reporting that a
planning memo exists that suggests that Greece could receive as much
as 50 billion Euros to "ease its path" out of the Eurozone.
does leave the Eurozone, the cost
to the rest of Europe is going to be astronomical.
The following is
a recent article by John Mauldin...
The debate among very knowledgeable
individuals and institutions as to the future of Europe is
intense. There are those who argue that the cost of breaking up
the Eurozone, even allowing Greece to leave, is so high that it
will not be permitted to happen.
Estimates abound of a cost of €1
trillion to European banks, governments, and businesses, just
for the exit of Greece. And that does not include the cost of
contagion as the markets wonder who is next.
Keeping Spanish and Italian
interest-rate costs at levels that can be sustained will cost
even more trillions, as not just government debt but the entire
banking system is at stake. Not to mention the pension and
If the cost of Greece leaving is €1
trillion, then who can guess the cost of Spain or Italy?
As I have written about previously, a Greek exit
from the euro would cause the "bank
jogs" that are already happening in Spain and Italy to
The problem in Europe is not just government debt. The truth is that the
entire European financial system is
in danger of melting down. Unfortunately,
there are no more grand solutions on the horizon and so things are going to
continue to get worse for Europe.
As I have talked about so many times, the next wave of the economic collapse
is going to start in Europe, but it is going to deeply affect the entire
During the next major economic downturn, the official unemployment rate in
the United States will rise well up into the double digits.
Once that happens, perhaps many more Americans will finally figure out that
they should have been paying much more attention to what was taking place in