Banks fail, governments give them free money.

Governments fail, banks put their prices up.

Welcome to the Global system of capital finance.

The 2007/8 Crash was caused by idiotic bank lending – itself driven by a combination of the Greed-Targets culture. The global financial system was saved by Sovereign State money….aka $23 trillion of taxpayers’ money.

The 2010 Crash will occur because (a) all governments spend more than they earn – especially in the EU; and (b) the Sovereign States who hocked themselves up to the eyeballs in order to bail out the global financial system cannot service the consequent debts any more.

The fact that those States are borrowing off the very financial system they bailed out may have passed you by. Yet that is at least 50% of the reality. It would be hard to imagine a more insane situation, but the EU runs it a close second….as top Wealth Managers Full Circle put it last week:

‘Providing more loans to countries who can’t afford to service their existing loans is not a solution, it is a delaying tactic. You can’t increase the creditworthiness of a nation by extending more credit’.

But here’s the scary part: while in 2007 there were Governments to bail out the banks, who will now bail out the Governments?

This is the inevitable and ultimate end of an economic philosophy which dictates that ‘The market must decide’. It was always bollocks. Over the next few months, we are about to learn just how painful a kick in the bollocks it’ll be for all of us.

Will no more than seven or eight institutions now decide the fate of most of the world’s developed nations? Unbelievably, that seems highly likely. Don’t be too certain they will use that power wisely. And don’t expect the Chinese to do any more than is absolutely necessary for the maintenance of their own markets.