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As banks reel in the lines of credit to cover their losses and hedge their bets, they are partially pulling that money from the futures markets and the price of gold suffers.

October 5, 2011 – The closest I’ll ever get to Greece is reading The Odyssey, and these days, the epic is a sitcom compared to reality. For those who don’t know, The Odyssey details the travels of a hero trying to get back to his wife, blown off course again and again by the Gods. Sound a bit like the state of the markets? Yes, there was a technical reason for the allusion. We have never received definitive proof that we’ve landed since the storm began and most people in the market recognize that, currently, things are looking and feeling a lot like they did in 2008.

Land, ho! Greece! Banks, notably Societe Generale, UniCredit, and, the latest, Dexia, are holding so much bad Greek debt on their balance sheets it threatens to sink the ship. Just the threat is enough to get banks almost everywhere shaking in their boots because a major default associated with the Greek problem could debase the Euro and undermine the political stability of the European Union. Pretty scary, right?

The result is a conservative credit crunch. We don’t quite see it just yet, but it’s been going on behind the scenes for a few months now at least. As banks reel in the lines of credit to cover their losses and hedge their bets, they are partially pulling that money from the futures markets and the price of gold suffers.

A lot of people may have misunderstood the dynamics of the market in the past month and done something irritatingly stupid, like, oh, sell their gold coins for far less than they could have. Other investments might look a little shinier than a gold coin, briefly, but if the house burns down I’m not betting on paper. A gold coin in a storm is worth ten in fair weather. Remember that.

Kevin Johnson

Senior Staff Writer – GoldCoin.net

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