The Canary is Dead

Greek Riots

By Greg Hunter’s   

In the early days of coal mining, canaries acted as a warning that odorless poisonous gas was present.  If there was a dangerous gas build-up, the canary would be the first to keel over.  You can use the “canary in a coal mine” metaphor to describe the situation in today’s financial world.  Greece is the canary.  The poisonous gas is debt.  Greece has just keeled over, and the rest of the world is running scared.  That’s why the Dow was down 1,000 points at one time yesterday!  Oh yes, there was talk of “unregulated high frequency computerized trading” and “bad trades,” but make no mistake, the market is worried about massive amounts of sour debt at all levels around the globe.

In a nutshell, Greece borrowed way too much money, and does not want to drive old cars and eat rice and beans for years to pay it back.  That’s why you are seeing riots in Athens.  The problem with Greece is it cannot print money like the United States.  Its debts cannot be simply inflated away.  Bills have to be paid with big cuts to pensions and social programs, and it is not going over well.  That brings us to the other option, and that is to simply not pay the money back and default.

There is one other option, print money and bail out Greece.  Here’s how investment guru Monty Guild sums up the bailout scenario: “This is happening because if Europe does not support Greece, the government debt contagion that we have been discussing in recent memos will continue and spread. It will spread to Spain and Portugal and later to many countries in Europe including Italy and possibly France.  Because they fear the spreading contagion, Europe wants to stop the crisis as soon as possible.  In other words, Europe is getting a bailout, not just Greece.”  (Click here to read Guild’s full report.)   

Greece isn’t the only country to have a bad debt problem, just the first to fall.  America will also need a bailout, and the Federal Reserve has been doing just that by printing more money than the world has ever seen.  This is why gold has been on a steady uptrend.  The smart money already sees the yellow metal as, well, money!    

Economist Dr. Marc Faber appeared on Bloomberg yesterday to talk about the market plunge and said, “The governments are all bankrupt.  They can only survive by printing money (to pay debts), and they’ll print money and print money.  That’s why the price of gold went up today when everything else went down.”   

Are the Greek people any different than anyone else in the world?  I think not.  Just look at what is going on in the United States.  Americans everywhere are protesting budget cuts.  Is America in the same shape that Greece is in?  You bet, according to Jim Rickards, an investment banking pro and risk management expert.  He said earlier this week on CNBC, “I’m having trouble finding a Greek metric where the U.S. isn’t as bad or worse than Greece or will be shortly.”  Rickards also said, “The dollar is pretty much at the end of the line.”  Listen to the entire interview by clicking below:

So what is it going to take to “fix” the debt mess the world finds itself in today?  Well, first of all, there really is no “fix” because the debt problem is just way, way too huge.  According to the Bank of International Settlements, the debt ball in the world today is $600 trillion.  I wrote about this financial phenomenon in a post last year called “Can The Financial System Really Be Fixed? Some Say No.”  

This debt ball is made up of complicated financial instruments called derivatives.  There are plenty of these instruments in places like Greece and around the world.  These are private debt contracts between individual parties.  There is no public market for derivatives.  That means there are no rules, regulations or guarantees.  Without a public market, there is no way to objectively price this ball of financial crap.  Bob Moriarty of sums up the end game of this enormous mountain of debt this way, “. . . The derivatives market is going to go into a meltdown like nobody’s ever dreamed of because nobody but me and the other nine guys actually understand exactly what $600 trillion dollars is. It’s 10 times the size of the world economy, and it’s been blowing up since June 2007 when those Bears Stearns funds went under. . . . You talk about “if” we have financial collapse. I talk about “when” because no other alternative is possible. Nobody and nothing is going to stop it from happening. It is as absolute as the time and tides.”  (Click here for Moriarty’s complete interview)  

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  1. David Conrad

    Wow. I am afraid you are correct, Greg. Hold on!

  2. Tom

    Here’s an interesting take on the situation: “Senate Votes To Stay The Norm…” at I was unaware the senate was voting on TBTF last night. That guy has probably latched onto the real reason for the fireworks yesterday.

    • Greg

      Interesting!! Thank you.

  3. MarkM

    Hello Greg,

    I read your article and watched the video. I kept hearing Margaret Thatcher say in a continuous loop: Socialism is fine untill you run out of someone else’s money to spend (paraphrased).

    This really is “8th grade” math.

    On a lighter note, the BLS stats are out and stimulus money combined with fed gubmint employment growth is fueling the so-called “recovery”. Every metric that is up can be attributable to the gubmint spending printed money. The drug addict has his fix.


    • Greg

      Good one. . . Again!!

  4. Vess

    The “$600 trillion” number is a red herring. This is the total NOTIONAL value of all the derivatives.

    First of all, it is counted twice (if party A bought from party B some CDS controlling $100k of bonds, both parties’ involvement is counted resulting in a number like $200k).

    Second, it is not the actual amount of money/debt but the amount controlled by the derivative. For instance, if an option (which is a kind of derivative) on a $100 stock trades for $1.10 and you bought one option contract (100 options) for $1.10 * 100 = $110, your derivative has a notional value of 100 (options) * $100 (price of each share controlled by each option) = $100.000, despite the fact that there is really only $110 of real money (well, US dollars; it pains me to call that “real money”) involved.

    Third, many of those derivatives will cancel each other.

    If all these things are taken into account, we’re talking only about $3.1 trillion “real money” in derivatives – which is still quite a lot, but nothing like the “ten times the world’s GDP” that some incompetent morons are touting.

    The real danger of derivatives lies elsewhere. Since their market is not transparent, nobody really knows who owns what and how much they stand to lose if the SHTF. As a result, when (not if) the SHTF, banks and other financial institutions stop trusting each other. No trust = the whole con(fidence) game falls apart and the next thing you know, we’re driving horse buggies and growing our own food again… Unless we decide to trust some Dear Leader who comes and says “There, there, just give me enough power and I’ll make it all alright again.”

    • Greg

      With all due respect I think your explanation is a load of crap for many reasons. Here are a just a few. Why would the BIS call a $3 trillion market $600 trillion? Famed investor Jim Sinclair and others say the derivatives market would be more than $1 quadrillion if the BIS did not use an accounting scam called “value to maturity.” By your own admission you say,” Since their market is not transparent, nobody really knows who owns what and how much they stand to lose if the SHTF.” Could you please tell me how this crap gets valued without a public market? No public market means no price discovery in a “Bid/Ask” trade execution. If someone wants to sell a derivative they have to get on the phone or email and find somebody to sell it to. Also, what makes a “good derivative?” Well, since there are no standards, no guarantees and no regulations, the answer is “anything you can get S&P, Moody’s and Fitch to throw AAA on.” (my quote) This is a mess far beyond $3 trillion. If all this was just $3 trillion we would not have spent or committed more than $13 trillion in the U.S. alone. The U.S. Inspector General Neil Barofsky said in the middle of last year that year that, “The total potential federal government support could reach up to $23.7 trillion.” Barofsky is the special inspector general for the Troubled Asset Relief Program. His comment was made in regard to the government’s efforts to fix the financial system. If was just a $3 trillion problem it would have been over by now and it is far from over! Thank you for your comment but I respectfully disagree.


  5. dick hertz

    Derivitives can be understood by anyone who has graduated from 8th grade math.There is no need to confuse yourself.The subject you fail to address is the quanity of assets held by our collective governments.If taxes only account for 1/3 of revenue,how is the remainder earned?The Annual Financial Reports show a value much larger than the debt.

    • Greg

      With no standards, regulations or guarantees how much can they be worth? I bet a lot less than sold for. Thank you for weighing in on this subject.

  6. OTE

    As goes Greece, so shall the world.

    Even if our benevolent government were to outlaw derivatives and nullify all derivative contracts, the economy will fail. Inflation will postpone it for awhile, but once confidence in the dollar fails everything goes down the tube.

    Our national problem is the loss of market-share for produced goods. We have been taking in one another’s laundry and calling it income.

    Our number #1 export is licensing and royalties. We have virtually no manufacturing base and our resource extraction industries have been crippled by onerous regulatory systems that can’t and won’t cooperate. Couple all of this with the probability that even once a business involved in manufacturing or resource extraction gets the permits in hand, the environmental groups will keep the business in court for years.

    Then the dirty little secret is that all taxes are paid by the consumer/employee. Does someone actually think corporate taxes are paid out of thin air and not the consumer? Well, yes yes they do.

    Ignorance of reality will not alter reality. Debt must be paid or go bankrupt. Few countries in the world can avoid going bankrupt, damn few.

    Forget horse and buggies. Forget growing your own food. The horses will be eaten and few people have the knowledge, experience or land to grow their own food. Couple this problem with the eventual lack of security and any attempt to live a basic subsistence lifestyle will be uncertain at best.

    The only option will be martial law. It will fail. As long as an entitlement belief exists, conflict will continue. Communitarianism is the beginning of the end. We are all in this together, but just try to tell the ant that the grasshopper is entitled to the ant’s hard earned resources. Look forward to anti-hoarding legislation. Already, even here in rural Alaska, the “enlightened” are getting government grants to inventory community assets. The assets being inventoried are individuals and their private resources.

    Uh, maybe you had better delete this rather than let it be posted.

    • Greg

      This is a perfectly fine comment based in logic! Thank you.

    • Suzanne

      “Ignorance of reality will not alter reality.”

      A fundamental truth, a law of nature! But it is amazing the lengths to which people will go to try to change that law of nature, isn’t it?

  7. BLT

    So, if the dollar crashes, would those of us still in debt have to pay these scam artists in gold watches and chains?? How long do u think it will take to crash? Does it make sense to pay your creditors when the dollar will be useless?

    • Greg

      I don’t know. The world has never been here before (financially speaking). Would anybody like to answere this question?

      • BMin

        Borrow the max and invest in hard assets, and plan to pay the debt off with cheap paper when the printing press runs 24/7. Get
        ready to start borrowing and buying.

        • Greg

          The best investment is a paid for investment. This is very risky but I like your soul.

    • mogar

      Prior to a currency crash the currency usually hyper inflates, at least historically that has been the case. When that happens creditors are ruined, they get paid back in trash paper. Anything of any real value will bring a great deal in the nominal sense. You could have a garage sale and pay off the mortgage. As Greg says we have never been here before, with the whole world up to its neck in debt and using debt based fiat currency as a store of value. I for one intend on sticking to the letter of the mortgage. I will pay them back in fancy pieces of paper and if they try to change the rules on me I will go after them on the street.

      • Greg

        Good plan.

  8. Sandy

    Greece cannot print her own money. The U.S. can print, baby, print. Therefore, hmmm, … now tell me, which is better?

    • Greg

      Good point!

  9. Publius

    If I’m not mistaken, VK. Durham holder and signatory of the Durham Trust offered to help Greece out of this mess, but the corrupt leaders of Greece rejected the offer and she (VK Durham) would have given a very low interest rate much lower than anyone else would have and the terms of the Trust is the trust gives loans with Gold & Silver and expects payment back in Gold & Silver. I know the citizens of Greece don’t even know anything about this and political system does not want it known ether or all hell could cut lose.

    • Greg

      Thank you for the comment.

  10. Stephen Clifton

    Another colorful explanation from the media pundits about why the Dow dropped 1,000 points in 15 minutes. It was a “transposition”. Reminds me of Kevin Bacon in Animal House screaming, “ALL IS WELL! ALL IS WELL!” when there was a riot going through the downtown.

    The fact that people now invest in the market are essentially betting on whether their funds/stock or whatever will go up or down. They are not investing to earn dividends which to me should negate the term “investment” from actually being used. They are betting on the market going up or down (depending on their position) which is straight up gambling. Even more absurd is the notion that this is not only acceptable but encouraged as the “responsible” thing to do. Pre-20th century when most people could care less about Wall Street how did they retire? They had no debt and they SAVED!!!!! Wow, what a concept. They produced and exported thereby bringing new money into the economy. The debt ridden, leveraged serviced economy brought about by Keynesian economists will surely bring about our demise. Needed to vent.


    P.S. I heard you on Brad and Britt this morning. You were 100% correct that people who have been in the market for the last 10 years would have been better off putting their money under their bed.

    • Greg

      Thank you for your comment and support!

    • Scott

      “Would have been better putting their money under their bed”.

      A better investment would have been to put their money into precious metals (gold, silver, etc.).

      • Greg


  11. Bud Wood

    The situation appears to be bearing the fruits of democracy. Specifically, benefits are given to voters in exchange for votes. You may recall the phrase, “Spend, spend, elect, elect”! Expecting any outcome other than paying for votes is illogical.

    So, politicians of years past are happily living on their pensions as the crises which they created, damages
    the economies of the Western world. As we were told, the important thing is that we all voted. The majority voted for handouts because that’s what democracy became – a mechanism for getting handouts from OPM.

    • Greg

      Good comment Bud!

  12. ManAboutDallas

    I’ve been an IT professional for nearly 40 years now. I’ve worked for banks and brokerages, and written software for one of the leading vendors of bank and brokerage software.

    Yesterday’s “accident” was no accident. There are too many edits, screens, filters and other logic built into order-entry systems to allow an error as large as was claimed yesterday to occur.

    A THREE ORDERS OF MAGNITUDE data entry error was allowed to enter the system, pass through the system, and become a live order? Specious rodomontade and pixilated twaddle.

    Yesterday’s “accident” was PLANNED and EXECUTED for the proverbial “Somebody’s” benefit. A financial “false flag” operation, if you will.

    There’s a Pulitzer Prize waiting for the Woodward and/or Bernstein who tracks this one back to the smoking gun and fingers the triggerman. If they’re allowed to live, that is.

    • Greg

      Thank you for your professional insight!

  13. ManAboutDallas

    As for Greece, not only is the canary dead, but somewhere Socrates, Plato, and Aristotle are all taking hemlock again, after having barfed their brains out watching what their progeny have wrought.

  14. mark q

    Those in debt would repay their debts with increasingly
    worthless dollars. That’s the good news. But if you have too
    much debt and lose your job in the contracting economy, well then
    you lose your house or car. So a moderate amount of debt and
    government funded employment would be one way to play the game.
    Thanks Greg, for your insight, and the polite way in which you
    present your ideas. mark

    • Greg

      Thank you for the comment.

  15. MarkM

    Hey Greg,

    With the exception of Vess, the posters on this thread are bringing up some great points! I enjoyed reading their posts.

    OTE wrote: “The only option will be martial law. It will fail.”

    OTE’s scenario is not a certainty, but it is a possibility.

    Wow, over the last 6 months a similar opinion keeps popping-up in my head. I keep asking myself, am I being paranoid? I don’t think I am. OTE’s opinion is entirely possible. I wish I could prepare for that scenario; however, to do so makes you a whack-job in the minds of so many, including most of my family.


    • Greg

      Thank you for pointing this out.

  16. Dennis Fechner


    Love your articles and your comment “I don’t know as the world has never been here before”.

    That comment alone shows real intelligence!! I have read Sinclair, and all the others you mention plus everyone else. What I really have is experience to offer at the age of 67: Forget trying to decide how the end will happen because the only end result will be a rising price of gold.

    Actually we have been here before, way back when the Italian bankers flooded the world with derivatives. What followed was the “Dark Ages.” I believe it lasted for 100 years. That would certainly solve he energy crisis.

    The only thing that the politician’s will do is to try and take my and your money to finance all those public employees who voted for him. That is a given until people have had enough of this nonsense. But American’s, who like to think of themselves as “educated” are probably the least sophisticated in the world when it comes to economics. The common Mexican is knows more about what is coming to the US than most Americans do.

    We live in an age of destruction. There are many reasons for this the main one being that the “old order” is dying and the “new order” is rising. The old order does not want to give up power so it fights a losing battle destroying every thing in it’s path. Like Vietnam: “we had to destroy the town to save it”. Such is the mentality and spirituality of the old order: it is BANKRUPT.

    The old order will not survive. The 20 year old’s know more about what is the truth of the matter than the 50 to 60 year olds. The baby boomers are a dead lot because they only “played” the system and caused it’s demise. They are owed nothing which is the value of their contribution to society.

    The Universe is just.


    • Greg

      You are painting with a very broad brush but thank you for the comment.

  17. Marc

    When the power of love conquers the love of power, there will be peace in the world.
    Jimmy Hendriks

    • Greg

      “Excuse me while I kiss the sky!” Thanks man!!

    • Marrabella

      Love without power produces the weakling.

      Power without love produces the brute.

      Sorry to disagree, Marc.

      You to develop both love and power.

  18. Roger

    I gotta love the video clip. I grew up on a farm, so hearing the analogy “the best looking horse in the glue factory” that can only buy you another couple of days until you are glue.

    An equally frightening statement is the five thousand paper dollars to one dollar of actual gold. No doubt the rocks around Reno NV can provide a better ratio than that; I mean today for a blind prospector. Not enough gold there to make decent soup.

    No clear cut answer shows up on my crystal ball either.

    • Greg

      Thank you Roger

  19. skulb

    I think it has to be said that the people of Greece can`t beheld responsible for these toxic debts their governemnts have contracted. First of all the derivatives in question is junk paper that`s been certified through insider scheming between Goldman Sachs and the regulators and government agencies. This has then been handed out as triple A to countries around the world. But it`s crap and therefore this practise is fraud.
    It seems inappropriate to me that the victims of fraud be held responsible and not the people engaging in the fraud. I think this whole situation shows how rigged the entire market is through the “plunge protection” mechanisms, the IMF, the World Bank and the major hedgefunds and brokerages. This gang of insider traders and shcemers control the flow of markets, supressing real assets and commodities while bloating their fictituous paper swindles like credit default swaps.

    If anybody should pay these mountains of nonsensical debts it`s these guys. Certainly not the Greeks.

    • Greg

      Good points.

  20. Mike P in Tennessee

    Here’s the deal. This is all a big lie based on more lies. Complicated Financial Derivatives artificially created by Big money assholes and now the whole deck of cards will crash? This is smoke and mirrors, Sure there is consumer debt and lots of it but boys and girls this a set-up.

    • Greg

      Good stuff!

  21. OldSchool

    Hey Greg,
    Looks like the canary is on the death bed now, especially with the highly illogical EU/Greece bailout. The first thing wrong with this picture is that for some reason, Wall Street takes a huge nosedive every time another country has financial problems, showing a complete interdependence on foreign currency and internationalism. From what I can understand, JP Morgan was one of the flagships to introduce ‘derivatives’ to the global financial system. I’m quite sure Goldman is a charter member of this legal scam, along with pounding its chest as a ‘too big to nail’ entity. Too many international conglomerates have developed a Borg mentality, leaving a wake of bankruptcies and buyouts worldwide. As an example of the unbridled power Goldman holds, here is a short quote from the article at this link

    Markets were roiled further on Thursday, when the U.S. stock market suddenly lost 999 points, and just as suddenly recovered two-thirds of that loss. It appeared to be such a clear case of tampering that Maria Bartiromo blurted out on CNBC, “That is ridiculous. This really sounds like market manipulation to me.”

    Manipulation by whom? Markets can be rigged with computers using high-frequency trading programs (HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique. Matt Taibbi maintains that Goldman Sachs has been “engineering every market manipulation since the Great Depression.” When Goldman does not get its way, it is in a position to throw a tantrum and crash the market. It can do this with automated market making technologies like the one invented by Max Keiser, which he claims is now being used to turbocharge market manipulation.

    Goldman was an investment firm until September 2008, when it became a “bank holding company” overnight in order to capitalize on the bank bailout, including borrowing virtually interest-free from the Federal Reserve and other banks. In January, when President Obama backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall Act that would separate investment banking from commercial banking, the market collapsed on cue, and the Volcker Rule faded from the headlines.

    • Greg

      You make some great points!

  22. SilverMoon

    If anyone thinks that printing more money will help Greece or the EU then I hope they are voted out of office. My fear is that the US Congress is going to print more money & give it to the IMF.

    • Greg

      Lots will get the ax this fall. Thank you for the comment.

  23. Will

    Anyone else notice the comment (at 1:15) in the video that (paraphrasing)

    “When people buy they don’t think fundamentals, they think government policy.”

    Therefore, the government is defacto controlling the market.

    Most, if not all, of us here realize this but to hear finance types admit it (albeit a back door admission) is eye opening.

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