2012-06-01sprott.com

Today, a mere two months later, Greece is back up to almost €400 billion in total debt outstanding (more than it had pre-bailout), and its sovereign bond yields are back above 29%. It's as if the March bailout never happened... and if you remember, that lauded Greek bailout back in March represented the largest sovereign restructuring in history.

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We're now at the point where a bank run in one Eurozone country could quickly seize up the entire system - not just in Greece or Spain, but throughout the entire Eurozone and beyond. Greek and Spanish banks are just like all the others; they operate with leverage ratios averaging 25x their equity capital. They are all so overleveraged that it takes very little in deposit withdrawals to cause instantaneous liquidity issues. This is why we'll likely see another ECB-induced printing program announced (with a new abbreviation, hopefully) before a broader bank run can take root.

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Nothing is really being solved here, and everyone knows it. We're essentially in the same place we were when the crisis erupted back in 2010, only now there's more total debt outstanding.


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