Global Finance events

[nmap]

There are interesting developments in the UK as their banking system enters into a crisis. Below is an article by Ambrose Evans-Pritchard which suggests problems on the horizon.

More problematic is information that suggests that the CDS (credit default swap) rate for RBS (Royal Bank of Scotland) after the 70% takeover is the same as the rate for UK sovereign debt. This indicates that trades regard the risk of default by the bank as equivalent to that for the UK. Both rates are high compared to historical levels. This is not reassuring.

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The slide in sterling has turned "disorderly".

We can argue over whether or not the first phase of devaluation acted as a shock-absorber for a badly mismanaged economy, providing a cushion against debt deflation and the housing crash. But the latest dive has a very malign feel.

For the first time since this crisis began eighteen months ago, I am seriously worried that British government is losing control.

The currency has fallen five cents today to $1.39 against the dollar. It is now perched precariously on a two-decade support line -- the levels tested in 2001 and 1992. If it breaks that line, traders may send it crashing down towards dollar parity.

The danger is blindingly obvious. The $4.4 trillion of foreign liabilities accumulated by UK banks are twice the size of the British economy. UK foreign reserves are virtually nothing at $60.6bn. (on this, more later in a piece I'm writing today)

If the Government is forced to nationalise RBS and perhaps Barclays with their vast exposure in dollars, euros, and yen, it risks being submerged. It is one thing for a sovereign state to let its national debt jump in a crisis -- or a war -- perhaps even to 100pc of GDP. It is another to take on foreign debts on such a scale with no reserves. Yes, the banks have foreign assets as well to match the debts. But how much are these assets really worth?

This is the moment when the "rubber hits the road" -- to borrow from American argot -- the moment when the reckless debt experiment of our economic and political leaders comes back to haunt.

We cannot even do what Iceland did to save its skin. Reykjavik refused to honour the foreign debts of its buccaneering banks. It let them default, parking the losses in Resolution Committees. Small islands can do that. Iceland has fish instead, and lots of metals.

Britain cannot follow suit. The debts are too big. If London takes such disastrous action it will set off global panic and lead to an asset death spiral, drawing the entire world into deep depression.

What have our leaders wrought? The reckless conduct of City, the fiscal incontinence of Gordon Brown (3pc deficit at the top of the cycle), and the pitiful regulation of the UK housing boom have all combined to bring the country to the brink of disaster.

England has not defaulted since the Middle Ages. There is a real risk it may do so now.

And no -- just so there is no misuderstanding -- it would not have been any better if Britain had joined the euro ten years ago. The bubble would have been just as bad, or worse, as Ireland and Spain can attest. We have our disaster. They have their disaster. When the dust has settled in five years we can make a proper judgement on the sterling-EMU issue. Not now.

The Baby Boomers have had their moment in power. The most spoilt generation in history has handled affairs with its characteristic hedonism. The results are coming in.

The blithering idiots.

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LINK to article

[nmap]

Another item with a similar tone:

LINK

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They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious.

Yesterday marked a new low for all involved, even by the standards of this crisis. Britons woke to news of the enormity of the fresh horrors in store. Despite all the sophistry and outdated boom-era terminology from experts, I think a far greater number of people than is imagined grasp at root what is happening here.

The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.

The political impact will be seismic; anger will rage. The haunted looks on the faces of those in supporting roles, such as the Chancellor, suggest they have worked out that a tragedy is unfolding here. Gordon Brown is engaged no longer in a standard battle for re-election; instead he is fighting to avoid going down in history disgraced completely.

This catastrophe happened on his watch, no matter how much he now opportunistically beats up on bankers. He turned on the fountain of cheap money and encouraged the country to swim in it. House prices rose, debt went through the roof and the illusion won elections. Throughout, Brown boasted of the beauty of his regulatory structure, when those in charge of it were failing to ask the most basic questions of financial institutions. The same bankers Brown now claims to be angry with, he once wooed, travelling to the City to give speeches praising their "financial innovation".

Does the Prime Minister realise the likely implications when the country joins the dots? He has never been wild on shouldering blame, so I doubt it. But Brown is a historian. He should know that when a nation has put all its chips on red and the ball lands on black, the person who made the call is responsible. Neville Chamberlain discovered this in May 1940 with the German invasion of France.

We're some way from a similar event. But do not underestimate the gravity of the emergency and potential for disgrace.

The Government's bail-out of the banks in October with £37 billion of taxpayers' money was supposed to have "saved the world", according to the PM, but now it is clear that it has not even saved the banks. Our money kept the show on the road for only three months.

As the Liberal Democrats' Treasury spokesman Vince Cable asks: where has the £37 billion gone? The answer, as Cable knows, is that it has disappeared down the plug hole.

It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. Unfortunately, the Treasury is pledged to honour those
liabilities because it has guaranteed not to let a British bank go down. RBS has liabilities of £1.8 trillion, three times annual UK government spending, against assets of £1.9 trillion. But after the events of the past year, I wager most taxpayers will believe the true picture is worse.

Meanwhile, the assets are falling in value. This matters, because post-nationalisation these liabilities are now yours and
mine.

And they come piled on top of the rocketing national debt, charitably put at £630 billion, or 43 per cent of GDP. The true figure is much higher because the Government has used off-balance sheet accounting to hide commitments such as PFI projects.

Add to that record consumer indebtedness and Britain becomes extremely vulnerable. The markets have worked this out ahead of the politicians, as usual, and are wondering what to do next. If they decide our nation is a basket case, they will make it so.

The PM and the Chancellor , both looking a year older every day, tell us that for their next trick they will buy more bank shares, create a giant insurance scheme for bad debt, pledge to honour liabilities without limit, cross their fingers and hope it all works. The phrase "bottomless pit" springs to mind for a reason: that is what they have designed.

In this gloom, the Prime Minister has but one slender hope: that somehow, by force of personality, the new President Obama engineers a rapid American recovery restoring global confidence, energising the markets and making us all forget this bad dream.

Obama is talented but he is not a magician. Instead, Gordon Brown's nightmare, in which we are all trapped, is going to get much worse.

[nmap]

Notice the part about Jim Rogers - he suggests avoiding UK investments.

LINK

Jan. 20 (Bloomberg) -- The pound dropped to a record low against the yen and breached $1.40 for the first time since 2001 as the U.K.’s second bank-bailout plan in three months raised concern the financial crisis is deepening.

The British currency had its biggest drop against the euro in a month after the government of Prime Minister Gordon Brown said it will spend an extra 100 billion pounds ($142 billion) to support the nation’s banks and increase its stake in Royal Bank of Scotland Group Plc. The euro weakened against the yen as a German survey showed investors remained pessimistic about the outlook for the European economy.

“Worries about the banking crisis are leading to more risk aversion,” said Antje Praefcke, a currency strategist in Frankfurt at Commerzbank AG. “The market isn’t convinced, for the moment at least, that there’ll be a light at the end of the tunnel.”

The pound slid to 125.96 yen as of 6:44 a.m. in New York, from 130.71 in London yesterday, after earlier trading at an all-time low of 125.86. It weakened to $1.3954 from $1.4420, after breaching the lowest level since June 2001. The pound was at 92.94 pence per euro, from 90.59 pence. The yen strengthened to 117.06 per euro from 118.47, and 90.26 per dollar from 90.64.

Lloyds Banking Group Plc slumped 42 percent to trade at the lowest level in at least two decades and Barclays Plc slid 9.8 percent as shares dropped after Merrill Lynch & Co. said it has too little capital and will struggle with funding and bad assets. The benchmark FTSE 100 Index lost 0.2 percent.


Rogers’ Call

Yesterday’s British government package to stabilize the financial industry followed October’s 50 billion-pound bank recapitalization program. U.K. debt may now be greater than the government forecast on Nov. 24, said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia, which cut June forecast for the pound today to $1.50 from $1.60.

“I would urge you to sell any sterling you might have,” Jim Rogers, chairman of Singapore-based Rogers Holdings, said in an interview with Bloomberg Television. “It’s finished. I hate to say it, but I would not put any money in the U.K.”

Rogers correctly predicted the start of the commodities rally in 1999. In January 2008, he advised investors to sell the U.S. currency. The Dollar Index traded on ICE futures, which tracks the greenback against six major trading partners, rose 6 percent last year.

The pound weakened versus all of the 16 most-active currencies as a government report showed the inflation rate fell in December to the lowest level since April, giving the Bank of England more room to cut interest rates. U.K. consumer prices rose 3.1 percent from a year earlier, the Office for National Statistics said today. Inflation is tumbling as the U.K.’s first recession in 17 years curbs price increases.


Brown Popularity

Worsening economic indicators have stoked concern among voters about Brown’s leadership, both as prime minister since Tony Blair stepped down in 2007 and as finance minister for a decade before. An Ipsos-Mori survey today showed the opposition Conservative Party 14 points ahead of Brown’s Labour Party. An election is due by June 2010.

“The realization that the banking sector is in an even worse state than previously thought, and the significance of that sector to the U.K. economy, is really hurting the pound,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International.

The Bank of England reduced its benchmark rate to 1.5 percent this month, the lowest in the bank’s history. Policy makers will probably cut the rate to 1 percent at their Feb. 5 meeting, according to a separate Bloomberg survey.

Surplus Currencies

At a time when interest-rates are sinking toward zero around the world, the biggest currency traders are recommending countries that have the largest trade surpluses, led by Japan, Norway and Switzerland.

BNP Paribas SA, the best currency forecaster in a 2007 Bloomberg survey, says the yen will strengthen about 14 percent against the dollar by June. Goldman Sachs Group Inc. made Norway’s krone one of its top 2009 picks, with possible gains of 17 percent versus the dollar. Bank of America Corp., the largest U.S. lender by assets, says the Swiss franc will advance against every major currency.

“When the dollar-yen breaks 85, the Bank of Japan would be in the market to intervene” to sell the yen, Eisuke Sakakibara, a former top currency official at Japan’s Ministry of Finance, said in a Bloomberg Television interview. “This is just an indication of the fact that Japanese authorities are afraid of an abrupt appreciation of the currency at the time when the Japanese economy is in recession.”

Euro’s Drop

The euro declined to the lowest level in almost six weeks against the dollar, falling to $1.2967 from $1.3069 late in London yesterday. It touched $1.2921, the weakest level since Dec. 10. The ZEW Center for European Economic Research said its index of investor and analyst expectations was at minus 31 in January, from minus 45.2 the prior month.

Europe’s single currency declined for a second day versus the yen after the Brussels-based European Commission said yesterday the region’s economy will probably shrink 1.9 percent in 2009 and grow 0.4 percent next year.

“We still believe that these estimates are likely to be surprised on the downside,” analysts led by Hans-Guenter Redeker, global head of foreign-exchange strategy at BNP Paribas in London, wrote in a research note yesterday. “We expect the euro to remain under pressure.”

The euro will decline to $1.20 and to 94 yen by the end of June, BNP Paribas forecast.

[Razor]

The euro will decline to $1.20 and to 94 yen by the end of June, BNP Paribas forecast.

According to XE.com, its at $1.29 right now. Scary stuff.

[Foots]

HOUSE PLANS VOTE WEDNESDAY ON STIMULUS BILL
Facing rapidly dwindling GOP support, the House plans a vote on Wednesday on their version of the stimulus bill. The Senate Finance Committee released the text for the tax portions last week calling for $275 billion in tax decreases.

The stimulus package is criticized from all sides. The GOP says there aren't enough tax cuts. Democrats want more spending and increased taxes. Some question the effect of the stimulus, especially some of the proposed spending such as funding for contraception. Economists say something big needs to be done fast. The package is almost too big to even summarize, but should Congress pass or defeat the stimulus bill?

[Peregrino]

Instead of printing more Monopoly Money and taxing the productive elements of the economy to shore up a "house of cards", how about giving tax PAYERS $875B of tax relief? I feel reasonably certain we can inject enough of the savings into the economy to get things moving again. I'm positive we can do it with greater impact and "justice" than the porkmeisters in Congress.

[afchic]

Originally Posted by Peregrino

Instead of printing more Monopoly Money and taxing the productive elements of the economy to shore up a "house of cards", how about giving tax PAYERS $875B of tax relief? I feel reasonably certain we can inject enough of the savings into the economy to get things moving again. I'm positive we can do it with greater impact and "justice" than the porkmeisters in Congress.

I agree in concept, but I think the problem would be that a great deal of the tax rebates, etc would go to those who do not pay taxes in the first place. I will never understand how a person who doesn't pay them gets a tax return check at the end of the year.

[nmap]

Originally Posted by afchic

I agree in concept, but I think the problem would be that a great deal of the tax rebates, etc would go to those who do not pay taxes in the first place. I will never understand how a person who doesn't pay them gets a tax return check at the end of the year.

My understanding of the underlying theory is that people in the lower economic strata, especially those at the bottom who don't pay any taxes, have the greatest likelihood of immediately spending the money, and hence providing the greatest impact on the overall economy. In contrast, those who pay taxes are more likely to save part or all of the money, resulting in less effect on the greater economy. In essence, it is a form of transfer payments (welfare) that is conceived of (at least in theory) as contributing to the greater good. I hasten to add that I am not defending or promoting the practice, but rather I'm only mentioning my understanding of the underlying theory.

There are some who question whether the stimulus package has any value whatsoever. We are not spending our own savings; instead, we are borrowing from the rest of the world, especially China, and using the debt to purchase a basket of things that will not last nearly as long as the debt. Even if we initiated tax cuts, permitting the recipients to choose how they spent their own money, the result seems unlikely to stimulate automobile purchases from the current 10 million units per year up to 12 million units per year, thus saving the automobile industry in the US. Still worse, there is little reason to suppose that housing prices would stabilize at the current level. Instead, housing prices are likely to continue to revert to the historic mean of three times average income. We seek to stop an avalanche, and risk wider destruction.

One argument is that the stimulus package will help restore confidence, but this begs the question of what we lack confidence in, and why confidence has dissolved. Our financial institutions and banks are awash in bad debt on house mortgages, commercial real estate, and credit cards. Neither banks nor individuals know, nor can know, whether other institutions are solvent or not. Unless and until the bad debt is brought into the open, priced accurately (marked to the market) and written off to the degree necessary, there is no legitimate basis for confidence. We simply cannot know whether a bank is well capitalized, on the verge of insolvency, or hopelessly bankrupt. Presumably, the goal of stimulus is to increase the value of the underlying debt instruments held by the banking institutions in order to indirectly improve their capitalization. However, the amount of bad debt dwarfs the stimulus package. It may be that the strategy is fatally flawed.

We as a nation face the risk that our deficit spending, no matter how the proceeds of the deficits are spent or invested, will reduce global confidence in the integrity of our own sovereign debt. Should that occur, suspicion would impede additional borrowing and interest rates would escalate to compensate creditors for the risk undertaken. We do not (and cannot) know where the tipping point is; however, we are engaged in an experiment that may determine it. Such an occurrence might have unpleasant consequences.

[afchic]

NMAP I have another question. It seems part of the stimulus package is going to be used to "buy up" bad mortgages from the banks. I don't understand what this will do, other than take it off the banks financial statement and place it somewhere else. How does that help the economy?

[Team Sergeant]

Originally Posted by nmap

My understanding of the underlying theory is that people in the lower economic strata, especially those at the bottom who don't pay any taxes, have the greatest likelihood of immediately spending the money, and hence providing the greatest impact on the overall economy. In contrast, those who pay taxes are more likely to save part or all of the money, resulting in less effect on the greater economy. In essence, it is a form of transfer payments (welfare) that is conceived of (at least in theory) as contributing to the greater good. I hasten to add that I am not defending or promoting the practice, but rather I'm only mentioning my understanding of the underlying theory.

And this is exactly what the banks and lenders are currently doing, holding onto the monies the taxpayers gave them resulting in very little impact on the current economy.

As I see it the banks fell like dominos, I fear soon "countries" will fall like banks, like dominos.

[nmap]

Originally Posted by afchic

NMAP I have another question. It seems part of the stimulus package is going to be used to "buy up" bad mortgages from the banks. I don't understand what this will do, other than take it off the banks financial statement and place it somewhere else. How does that help the economy?

The idea here is, as you say, to take the bad debt off of the banks' balance sheets and transfer it to the taxpayers. In theory, the public takes debt instruments that are temporarily distressed and gives the banks treasury securities or other instruments that will no longer impair their financials. With renewed capitalization, the banks will be able to lend money to individuals and businesses, confidence will be restored, and economic activity will return to its robust levels. If the impaired debt instruments actually recovered, then the scheme would work, the taxpayers would lose little or nothing, the banks would be saved, and all would be well in the world. However, such recovery implies that price distortions in the housing and other markets would continue indefinitely, and even increase. But this is in contradiction to economic history. Prices return to mean values, and distortions inevitably correct.

There is a further problematic issue. During a period of economic decline, most people prefer to decrease debt instead of increasing it. In addition, those eager to increase debt may be unable to repay it. Therefore, those who could sustain more debt may not wish to borrow at the same time that those who are not worthy of additional credit seek to borrow more. A bank faces a dilemma when it attempts to decide to fund loans that may constitute a further risk to capital. So the banks have to answer a very practical question about whether they should make the loans that the government wishes them to make. If any government continues to fund loans that are likely to default, the process is sure to end badly.

There is a saying that demographics are destiny. Right now, the baby boomers are approaching retirement age. They have just seen their stock portfolios devastated, their home values in decline, and the yield on their savings accounts reduced to nearly 0. Even a robust recovery will require years to make up the money they have lost. Predictably, their reaction will be an increase in savings rate. The problem is, when they shift money from consumption to savings, they no longer contribute to the exceptional economic growth we have enjoyed. The people who have purchased McMansions are likely to continue purchasing such large houses, thus reducing the demand and hence the market price of such structures. This means that the Federal Reserve and the U.S. Treasury are fighting a very big headwind.

Originally Posted by Team Sergeant

And this is exactly what the banks and lenders are currently doing, holding onto the monies the taxpayers gave them resulting in very little impact on the current economy.

As I see it the banks fell like dominos, I fear soon "countries" will fall like banks, like dominos.

Team Sergeant, I believe you're right. Iceland is in the news, but a great many countries are showing signs that the quality of their debt is declining. Standard & Poor's has reduced Spain's credit rating to AA+ from the previous AAA. A great many other countries are at risk, and I have provided links below to three resources that may be of interest. Perhaps most disturbing is that the UK is being pulled down by the combination of declining real estate values and bad debt. The Royal Bank of Scotland (RBS) seems to be an evolving train wreck.

Country Default Risk

Country Risk 2

Spain

UK worse credit risk than McDonald's

[frostfire]

Originally Posted by nmap

Country Default Risk

thank you for the links, nmap. The same site put this chart
Scariest Chart
hehehe, more gloom and doom

Well, the source of the chart, and putting it in perspective with better/more pragmatic discussion is here
http://eastcoasteconomics.wordpress.com/

[GratefulCitizen]

Wasn't sure which thread would be best to append.
This one seems to have the most talk about the "stimulus" package.


There seems to be a great deal of money going to deferred spending (infrastructure and such).
This delay (and various other facts) effectively undermines the whole idea of "stimulus".

So, other than a liberal pork wish list, what are they trying to do?

The "infrastructure" spending got me thinking.

Whenever the federal gov't tries to strong-arm the States in various areas outside of federal authority, what is there preferred technique?
--They withhold highway funds (or other similar funds).

The congress is setting aside a nice big piggy-bank for bribing the States into compliance.

[Defender968]

Originally Posted by GratefulCitizen

Wasn't sure which thread would be best to append.
This one seems to have the most talk about the "stimulus" package.


There seems to be a great deal of money going to deferred spending (infrastructure and such).
This delay (and various other facts) effectively undermines the whole idea of "stimulus".

So, other than a liberal pork wish list, what are they trying to do?

The "infrastructure" spending got me thinking.

Whenever the federal gov't tries to strong-arm the States in various areas outside of federal authority, what is there preferred technique?
--They withhold highway funds (or other similar funds).

The congress is setting aside a nice big piggy-bank for bribing the States into compliance.

Grateful if you look most of B0's so called stimulus are things he campaigned on long before anyone outside of the banking/financial sector knew there was a problem, so either the new savior is/was psychic and all knowing (and I'm sure there are many Dims who will say he is omniscient) or this bill is nothing more than a huge hock of pork meant to repay those who supported the dims and got them into office, all at you and I's expense. Leading from the center my ass, but he an Nancy are doing a great Jedi mind trick that seems to be working for the majority of the country.

[nmap]

The title smacks of odd little conspiracy theories, doesn't it? However...this is from MarketWatch, which is an affiliate of Dow Jones News Service.

A question they do not address is sovereignty. If a nation does not control its own currency, is it still sovereign? Perhaps the EU is suggestive; national policies are subordinated to those of a higher level of government. If that is so, what are the implications for our constitutional government?

LINK

The article suggests "See Minyanville column" several times. Here is the LINK

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TODD HARRISON

How realistic is a North American currency?

Commentary: Uniting U.S., Canada, Mexico money could result from crisis

By Todd Harrison

Last update: 6:12 a.m. EST Jan. 28, 2009"World, hold on. Instead of messing with our future, open up inside." -- Bob Sinclair

NEW YORK (MarketWatch) -- Thomas Jefferson once said: "When you reach the end of your rope, tie a knot in it and hang on." As the global financial system pushes on a string, investors are desperately trying to hold tight.
The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar. See MarketWatch column on New World Order.

The Minyanville mantra is to provide financial news you need to know before you know you need it. That's a fine line to walk, as foresight often flies in the face of mainstream acceptance.

In 2006, it seemed counterintuitive to forecast a "prolonged socioeconomic malaise entirely more depressing than a recession." See Minyanville column.
For years, the notion of an "invisible hand" was conspiracy theory until we learned that the Working Group on Financial Markets was a central policy tool. See Minyanville column.

And now, as we gaze across our historically significant horizon, we must open our minds to thoughts and ideas that may seem foreign to folks conditioned by the past and stunned by the present.

Currency crossroads

As governments take on more risk -- as they price assets on behalf of the market and transfer debt from private to public -- the common denominator, or release valve, becomes the currency.

If our economic condition is allowed to take medicine in the form of debt destruction, the greenback will appreciate, and asset classes as a whole will deflate. If we continue to inject drugs that mask symptoms rather than address the disease, the likelihood of a seismic readjustment increases in kind.

The deflationary forces in the marketplace are pervasive, and the "other side" of our current equation, hyperinflation, may be years away. Given the magnitude, breadth and pace of the global financial epidemic, however, we must explore each side of the twisted ride.

Years ago, the Federal Reserve wrote a "solution paper" regarding the need to combat zero-bound interest rates. The concern was the flight of capital from the U.S. and an option discussed was a two-tiered currency, one for U.S citizens and one for foreigners.

Canadian economist Herbert Grubel first introduced a potential manifestation of this concept in 1999. The North American Currency -- called the "Amero" in select circles -- would effectively comingle the Canadian dollar, U.S. dollar and Mexican peso.

On its face, while difficult to imagine, it makes intuitive sense. The ability to combine Canadian natural resources, American ingenuity and cheap Mexican labor would allow North America to compete better on a global stage.
Experience has taught us, however, that perceived solutions introduced by policy makers and politicians don't always have the desired effect.

Unintended consequences

I've long contended that, much like the Internet prophecy proved true -- but not before the tech crash -- so too would globalization, albeit not without painful-yet-necessary debt destruction.

To get through this, we need to go through this. If we're not allowed to go through it, foreigners will seek alternative avenues. Remember, for holders of dollar-denominated assets, seeds of discontent have been sowing under the surface for years, with the greenback off 30% since 2002.

More likely than not, global leaders will watch how our new administration attempts to tackle the financial crisis before taking drastic steps. They understand that co-dependent risk exists as a function of the derivatives that interweave our financial infrastructure. If they could disassociate from our economic ecosystem without inflicting massive damage on themselves, they would have done so long ago.

If forward policy attempts to induce more debt rather than allowing savings and obligations to align, we must respect the potential for a system shock. We may need to let a two-tier currency gain traction if the dollar meaningfully debases from current levels.

If this dynamic plays out -- and I've got no insight that it will -- the global balance of powers would fragment into four primary regions: North America, Europe, Asia and the Middle East. In such a scenario, ramifications would manifest through social unrest and geopolitical conflict.

This particular path isn't something one would wish for, but the cumulative imbalances that steadily built in our finance-based economy must be resolved one way or another. Therein lies the critical crossroads we together face as our wary world attempts to find its way.

Scary? Yes. Probable? Not so much, at least for the time being. Possible? Certainly, although I'll again offer that it could take years before the pieces of this prickly puzzle fall into place.

Effective money management dictates weighing the entire probability spectrum of potential outcomes and factoring them into our decision making process. While the notion of a seismic currency shift may seem obscure, we must respect the possibility long before it becomes front-page news.
For if we've learned anything through the last few years, proactive thought provocation is a necessary precursor to effective preparedness.