Germany Can't Sell Its Bonds... The Collapse is Almost Here

It's all falling apart, folks.  Get ready.  Germany tried to auction some of its sovereign debt today.  These would be the German equivalent of the 10 year U.S. Treasury Bond.  Germany is one of the strongest economies on the planet, and it is certainly the strongest economy in the Eurozone.  Basically it's Germany's deep pockets that have kept the Euro from imploding.  Everyone was looking to Germany to backstop their plays and bail out the rest of Europe.

The Germans were only able to sell about 2/3 of their bond offerings at auction today.  Bond buyers do not want German debt.  This is unprecedented.  And bad.  Very, very bad.

If the bond buyers don't want German sovereign debt, then they don't want the Euro, which means they don't want Europe at all.  Which means Europe collapses and disintegrates.  Which means the rest of the world goes down with it, thanks to our interconnected, derivative-happy world monetary system.

As one analyst said,

“This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale,Florida, said by e-mail. “If the strongest nation in Europe has this kind of difficulty raising capital, one shudders concerning the upcoming auctions in other European nations.”

The deflationary collapse is happening right now.  Can the politicians and the banksters stop it?  It's extremely doubtful that they can put a temporary stop to it.  It's certain that they cannot put a permanent stop to it.

What will happen?

1.  Everyone will flee to the U.S. dollar.  Every other class of asset will plummet.  Gold and silver will get whacked pretty hard.  Stocks will plunge.  Bonds (other than U.S. Treasuries of a very, very short term maturity) will be worthless.  The only thing that's worth holding right now is cash.

2.  The whole banking system will be disrupted.  There will be bank holidays and banks going belly-up.  It's entirely possible that the FDIC's deposit insurance fund will be overwhelmed by demand for funds from the bad banks.  The ATM's will not work for awhile, and neither will your credit card.  You need to have cash money somewhere safe that you can get to it.

3.  There will be panic buying for necessities, and the transportation and distribution infrastructures will be disrupted at least temporarily.  We've been here before, in 2008.  The whole system almost came tumbling down.  It was within hours of doing so.  The government suddenly found itself in the midst of trying to figure out how to feed several million people.  Hopefully they've learned from that experience and are ready this time, but you cannot count on it.  One thing is for sure.  New York City will get help before Western South Dakota (and places like it) do.  So keep your gas tank full.  Keep some fuel in your gas cans in the garage.  Have some non-perishable staples on the pantry shelf.

Now is not the time to play around with your family's wellbeing.  And really, what's the downside if I'm wrong?  Put the gas from the gas cans in your car, drive to the bank and redeposit your money, and then go home and eat the canned green beans.

Now, this probably all seems A) a bit surreal and unbelievable, and B) quite frightening.  Sorry, there's not much I can do about the surreal and unbelievable part.  If you've never experienced something it's pretty difficult to avoid that surreal and unbelievable feeling.  However this sort of thing has happened before.  It happened to the whole world in the 1930's.  It's happened in various countries around the world.

Which leads me to the quite frightening part. This is not the end of the world.  We will get through this.  There will be discomfort, and adjustments, but we will get through this, and things will be better again someday.  This is the time for neighbors to band together and help each other.

Most of all, it's a time to trust God.