Why Cyprus is a Real Wakeup Call

If you are at all in touch with the macroeconomic picture, you have undoubtedly heard about the insane things happening in Cyprus. For such a small part of the world it sure has made a big splash. It is the Euro’s desperate attempt to send a message without letting chaos spread like wildfire. The goal for them is to “contain” it into just this one incident. However, this is not what I want to write about.

Though the problems throughout the world are in very high numbers, we tend to forget that we are not immune to such events like the Cyprus fiasco. I want to make it very clear that something exactly like that could easily happen in the USA.

Those of you who know me well know that I am an optimist, but the current situation is simply impossible to ignore. It is a very complicated set of problems we face, but when you look at it in its most simple terms it breaks down easily. Various companies and branches of the government go to Obama and ask for money, Obama goes to the Fed to “print money” (really just selling bonds to ourselves) and then the money gets distributed with nothing really backing it.

We have been off the gold standard for a very long time, but now it has truly become a “zero gold” standard. In other words, all of the money we are printing is simply just paper. You would think that this would flatten the dollar, but other countries have been wildly printing as well. The “weakening” dollar set aside, we have the same problem as Cyprus. If everyone went to the bank right now and demanded to withdraw their money, the bank simply couldn’t do it – it doesn’t have it.

The Fed goes to Obama and says we need more money. Obama says okay, let me make a phone call…. the cell phone in the pocket of the guy asking for the money starts to ring…. What happens then? I only hope that this situation never occurs.

The main reason I am writing some of this is simply to make anyone who will listen aware that we are not immune to any of the disastrous scenarios.
While I am waiting for the collapse to happen, the long butterflies have proven to be a great income-generating vehicle.

I hope this finds you well. And please note that I will be first in line to trade the collapse.