Remember that whole credit crunch thing?

October 5, 2011 – The scariest thing about the market is how much it feels like it did in 2008. Everybody pretty much knows this in their bones, but only a few soldiers in the field are willing to say so. If you look at current events, it’s fairly easy to get an idea of how the problem is shaping up.

Greece? Never been. Hear it’s killer. Timely off-color humor aside, think of it this way. Huge European institutions like Societe Generale, UniCredit and Dexia are so swamped with bad Greek debt it threatens to sink the ship. Greece has already signaled the measures taken so far to keep the country out of bankruptcy aren’t enough and possible creditors in the EU are facing extreme political adversity in their home countries. It’s not good politics to bolster Greece. Something about the overly tanned, sunglass-eyed Grecian sitting on the beach doesn’t sit well with German manufacturers.

If, and the keyword is if, anything were to happen in Greece such as a major default those banks that are attached to it through their balance sheets will pay through the nose. A major failure in the area could trigger the debasement of the Euro as a currency and the European Union as a political base. Get it?

The shade of a possibility of this is causing banks all over the world to rein in the lines of credit to cover their potential losses, hedge their bets, and otherwise deal with the European problem. Remember that whole credit crunch thing? Money is thus getting sucked right out of the market, and importantly the futures market, which has partially caused the drop in gold and silver prices recently.

Shannon King

Senior Staff Writer –

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