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Tuesday, May 29, 2012

Bear Trader Replies Re; Bank Holiday in a Digital Age

(Ed.note: "Bear Trader" is a "bear" on market matters and his thoughts are reflection, not market advice.) As far as European events are concerned, nobody, but nobody, knows what will happen to our derivative backed financial system ($600 Trillion notional and counting!). The European Central Banks are pretty sure they are ready for it, they say. Could be. I think they are whistling past the graveyard. Got to keep up public confidence, don't you know. One thing is for sure, the various Big Boys and Girls don't intend to be the ones that end up realizing the losses. There will be big hiccups in derivative settlement ranging from years of squabbling to years of inter-country fighting over who takes the loss. We could see finance retreating into national borders as in the Great Depression, and no 'return to normalcy' for generations if ever. Major war is, hopefully, not terribly likely. Greece is a small potatoes thing. The big problem is the debt and unfulfillable politician''s promises. Democracies can't handle telling the voters to go quietly away and starve somewhere else. The voters will vote in their local equivalent of Adolf Hitler. Plato and Aristotle both held that Democracy always ends sooner than you think, and ends with the election of a Tyrant. If you think the USA hasn't been moving in this direction for over fifty years then you haven't been watching. Economic progress has been halted, or more precisely, can no longer be the tide that raises all boats. We cannot live on Ipads, Ipods, or other toys. That is why you are seeing the rich get richer and the poor get poorer. As far as bank holidays in the USA, I think access to FDIC insured accounts of about $1000 a week maximum should be available after a few days, probably over a weekend. Business would halt until the bank clearance system is back on line. This is a fairly likely scenario. Suggestions for individuals interested in protecting their families? What follows should be seen as insurance, as a small expense today to hedge low probability but potentially catastrophic future possibilities. Call this "the Greek scenario". Some cash on hand could be useful. Do not stockpile hundred dollar bills as they attract too much attention. Stick to well used twenties. A little food storage, enough for about four weeks, no luxuries, only staples. Rice and dried beans store well. Don't worry too much about 'a balanced diet', the "informal" marketplace will provide. The wise can read between the lines. Consider electric power outages, maybe days or weeks long, and amazing gasoline prices. On 5/27/12, The Evansville Observer wrote: > Question for you Bear Trader-- > When FDR took office, he declared a bank holiday that took I think three > days. Then we went off the gold standard. > Soon, when Greece leaves the Euro, EVERY option spread involving Greece will > have to be restated or settled? In a world where everything is online, what > will the bank holiday look like?How will not this disrupt the LIQUIDITY of > the current banking system in the US and in fact all of our deposits? > I know not how much liquid cash you have on hand, but I would guess the > average American is not expecting a 4-5 day bank holiday where everything is > frozen. > Corporations are preparing for the Greek situation by moving money out of > greece every night to Britain and pounds...What do you see as practical > steps that every family can do to prepare? > If Jamie Dimon was wrong about the 2 Billion dollar trade that might be a > 5billion dollar trade, what about the millions of other trades out there? > Is not this too big to bail out?Give me your thoughts----thanks. >

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