Watch Out! The Fuse On The Global Debt Bomb Has Been Lit

Phoenix Capital Research

Greece defaulted on a debt payment to the IMF last night at midnight.

Regardless of anything else, we have now seen a developed country “go over the cliff” in terms of negotiating debt payments. This will have global implications for other indebted countries in terms of negotiating tactics going forward.

As I write this, the markets are moving higher on news that Greek PM Tsipras is willing to accept the bailout offer that the IMF made before the default. The markets are misreading this. That bailout offer has expired even if the IMF allows such a deal, the damage has been done.

At the end of the day, the “Greek” issue is in fact a “debt” issue. And Greece is just a drop in the ocean of debt sloshing around the financial system.

Consider that Puerto Rico is on the verge of default. Again the issue here is not the individual region’s debt, but the DERIVATIVES based on the debt.

The VIEs are the off-balance sheet vehicles that triggered the massive chain of counterparty defaults which de facto collapsed the U.S. financial system in 2008.  The VIEs are where the credit default swaps and other nebulous forms of OTC derivatives bet slither around.

Global debt and gross derivatives outstanding are much bigger than in 2008.   And, except for the Plan B hyperinflation of the money supply, Central Banks are out of bullets.

            Source: Investment Research Dynamics

Puerto Rico’s debt alone represents billions in dollars worth of collateral for financial firms. It is no coincidence that the firms that insure this debt are imploding.

That moves looks an awful lot like the one that kicked off the 2007-2008 collapse.

The markets may be moving for Greece, but the fact of the matter is that the fuse has been lit on the global debt bomb. It’s now only a matter of time before the REAL explosions begin.

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Best Regards

Phoenix Capital Research