Eddie Hobbs on the Euro Collapse via Italy’s soverign debt

“[The people], they don’t get it.  This is all about the banking system.  The bond market is a proxy for the banking system because banks hold bonds.  If the Italian bonds fall dramatically in value, that’s a quarter of the European bond market falling in value.  That puts huge strain on European banks, many of whom may not be rescuable by their own governments because those governments themselves are up to the limit on how much they can borrow to pour money into their own banking system.  So you may have a situation where you have a wave of bank collapses some of whom who are not deemed systemic, will be allowed to fail.  Now, that creates panic, a huge bank run across Europe, which will become a global financial event, which will dwarf what happened after the Lehman Brothers collapse.”

“The core problem underneath all of this, is that we simply are not getting enough growth in the developed world economies to pay our way out of the debts that those economies have built up by making promises that are undeliverable to public sector workers throughout the developed world, and other promises that cannot be met by the growth. So there’s a great rebalancing that needs to go on over the next decade.”

“Everybody wants this thing to not happen. The facts are that it will not go away.”

“There isn’t a solution. That’s why I am saying you need a plan B. And the plan B is to recognize that we are now at an elevated risk of the collapse of the Euro itself as a currency. That’s just a blunt statement of fact.”

“Italy is unsavable unless you get massive international intervention. And will it arrive on time? Because this is all about confidence, and confidence has been destroyed. Slowly. Because European political leaders have been behind the curve. Behind the pace of events…they have lost a grip on the situation. That’s quite clear. It’s now purely in the hands of markets and how markets read it.”

“So if you have any cash at all, you need to very seriously consider getting that cash out of the Euro and out of this jurisdiction.

“The ideal safe haven, despite its cost, is gold.”

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