While the ECB has been busy using LTRO to capitalise european banks in preparation for a Greek default, are they sure that the contagion can be contained. One thing is for sure and that is nobody knows for sure. Keith Barron gave an interview on KingWorldNews and spoke about the insurance of these Greek bonds and explained potentially a Greek default could be disastrous.

“There are basically three times the amount of bonds out there, existing in contracts, to insure those bonds.  Now you have to remember that a lot of these contracts were signed when all of these bonds were considered AAA rated.  People didn’t believe they would default.

So their is huge exposure in these dangerous contracts.  There was one contract I saw that was going to pay 500 to 1 for the loss.  These things are incredibly toxic contracts confronting the system right now.  We don’t know who the counterparties are, and in many cases it’s hypothecated two or three times and it’s something that’s worldwide.

We are looking at financial Armageddon.  This is just awful, Lehman times 1,000.  This is why they are going to all of these crazy extremes and calisthenics to make it seem like Greece is not defaulting so the bond insurance doesn’t kick in.  They are trying to call it ‘an organized settlement.’  But a default is a default.  This will ultimately end up in the courts.  

 Based on Barron’s experience of watching currencies collapse, he added

You have to consider that if Europe is going down, then the euro is going to turn into Monopoly money.  It’s going to be rubbish.  I would avoid anything that is euro denominated like the plague.  The Americans could be left holding the bag with a lot of this.  The current administration in America has doubled the money supply since taking office, but that’s nothing compared to what’s going to happen.

You have the potential here to see multiple Weimar type hyperinflations.  People may say I’m alarmist or crazy talking about this, but I’ve lived in many countries in South America and I have seen various currencies go to zero.  I’ve seen it many times.  I was in Russia when they re-stamped all of the currency from one to one hundred.  In Kazakhstan I saw the same thing.  I saw the Brazilian cruzeiro become worthless.  I watched the Argentinean currency go to zero.  This is something that can happen.

It’s extremely important to have physical gold in this environment.  It’s not good enough to own gold in an ETF.  You need to have something you can put your hands on.  You need to have gold and you need to have silver, something that will protect your wealth if the whole system goes down.

The bottom line is this may not happen.  But even if things get very stressed in the system, it will be incredibly difficult for people to get their hands on physical gold or silver.”