By Greg Hunter’s USAWatchdog.com
Analyst/trader Gregory Mannarino says the recent Argentina bond default is a big deal and is a symptom of a much bigger global problem—debt. Mannarino explains, “I’ve been talking about the insurmountable debt problem for years now. It is the greatest threat to humankind—period. What really needs to be understood here is that it is not just a financial issue, but also a resource issue. We have been allowed through this mechanism of failing monetary system that pulls cash out of the future to acquire resources that we would not normally have. We have created an alternative universe.” Mannarino goes on to say, “Yes, Argentina is in default now, and we have at least 10 of 11 more that we know of. As an analyst, I look for common themes. What is the common theme here between all of these nations, including the United States of America? It’s very simple. It’s their debt to GDP ratio. Whenever you have a debt that exceeds your gross domestic product (GDP), the country begins a terminal decline. That’s it, period, the end.”
Think this economy can last? Think again, as Mannarino says, “We have all been hearing that the global debt is not sustainable. What does that mean that it is not sustainable? That means that we cannot continue this mechanism of pulling cash out of the future to live in this alternative universe. Mannarino says what makes this situation so “dangerous” is exponential leverage of derivative bets that are hidden in the system. Mannarino contends, “It’s in the quadrillions, and the thing about this is they are all off-the-books. No one knows what this number actually is when we are talking about derivatives.”
So, with the help of derivatives, can a big bond default, like Argentina, cause a daisy chain of default in the future? Mannarino says, “This is what we saw in 2008; but this time, it’s much, much worse because nothing was fixed back then. This issue with Argentina is going to trigger a credit default swap event. A credit default swap is an insurance policy that is purchased by another entity to insure the debt of another institution or, in this case, country. So, we just found out that the issue with Argentina is, in fact, going to trigger a credit default swap event. What that means is whatever debt is owed is the problem of another entity. And, if that entity can’t pay it back, it becomes the problem of another entity, and another entity, on and on. So, absolutely, boom, boom, boom, a cascade of events that will happen. This is not a maybe. We are going to watch this sweep the globe. We are going to see, at one point, an absolute failure and collapse of the financial system. 2008 was when the music stopped, and this is the terminal side effect. They are not done yet because they are going to do some more things to keep this whole system propped up. That’s really all they can do because the system is dead.”
The world added more debt to a debt problem in 2008, and Mannarino says, “That’s like pouring water on a drowning Man.”
Join Greg Hunter as he goes One-on-One with Gregory Mannarino of TradersChoice.net.
(There is much more in the video interview.)
After the Interview:
Mannarino told me he’s working on a new book that will explore what the world will look like after the next financial crash. He will give his take on the new global currency and what to invest in for the new global paradigm. Mannarino says it will be out next year. For free stock trading tips, please go to TradersChoice.net.