paul.lengemann's picture

Rumblings of an Impending Global Financial Crisis

The markets are consumed with the Greek drama that refuses to be resolved. Everyone is angry with the politicians in Athens and their arrogant behavior. They have angered even their biggest supporters, including the IMF’s Christine Lagarde. Soon those fools will be given a tin cup and told to stand at a corner anywhere to beg for alms. 

More than likely the Greeks will call for new elections or recall one of their old-guard politicians, such as former Prime Minister Papandreou, who has made noises about wanting to work with the current leadership in some sort of coalition. This new combination may not work, but it could calm things down and prevent a full blown global financial disaster. 

Unfortunately, the problems with Greece are coming at a time where China looks like it is nearing melt-down status. The default by the Kaisa Group Holdings Ltd. on a dollar-denominated loan is a serious development that could easily develop into a full-blown financial disaster. If this default is not cured quickly it could infect other property firms that are teetering on the brink. The central bank’s injection of cash over the weekend into the system is not likely to be enough to stop the whole system to go down the tubes. The long-term impact could be very serious for the global economy, just as it is climbing out of its long downturn. 

If this mess is allowed to worsen we will see USD parity with the EUR much sooner than anyone had thought, point being: stay long dollars.