Who Could Have Expected This?

From The New York Times:

IMF Reduces Estimates for Global Growth on Sharply Escalating Risks in Europe

Releasing quarterly updates of three reports on the outlooks for the economy, debt and global financial stability, the fund cut its estimates of global growth this year to 3.25 percent, from the 4 percent it forecast in September, on “sharply escalated” risks emanating from Europe.

 It is also calling on the European Union to expand its bailout fund to at least $1 trillion from its current capacity of 440 billion euros, or about $570 billion, according to a person with knowledge of the negotiations.

The I.M.F. did not change its growth forecast for the United States, however. Speaking with reporters, Olivier Blanchard, the fund’s chief economist, said that the “good and bad news” about the American economy were “more or less canceling each other” out:
But the fund made a stark warning about the safety of the American financial system. The fund said that “potential spillovers” from the euro area crisis might “include direct exposures of U.S. banks to euro-area banks, or the sale of U.S. assets by European banks.”

My view:

The day of reckoning draws ever nearer for our European friends.

Despite calls to raise the fund limits to $1 trillion Euros, the insolvency problem just does not want to go away.

A quick calculation so the reader can grasp the magnitude of the impact of one missed bond payment by Greece or any of the other nations in Southern Europe that are struggling.

On March 20, Greece needs to cough up 14.5 billion Euros.

European banks hold most of Greek debt.

European banks are leveraged at least 30 to 1.

Therefore the impact of this one payment on bank equity is potentially almost 450 billion Euros.
As the reader can see, if other payments are missed by the Greeks, or the Portuguese, or Spanish, or Irish, or Italians, the European banking system's capital is wiped out in very short order.

The American banking system is also linked to the European system through credit default swaps, hence the warning of "potential spillovers".

For those who have not yet bought precious metals, that form of money with no credit claims against it, your time is short and window of opportunity is narrowing.