This is not good. Lloyd's of London, which is a gigantic and ancient insurance company that insures everything and anything, from spacecraft to a starlet's breasts, pulled it's support from European banks.
They have lost faith that the European bankers are going to solve the debt crisis they face. Whereas the Americans have managed to kick the banking crisis down the road, replacing it with a massive government debt crisis that will explode within the next five or six years, the Europeans don't seem to have that option.
Which means they will confront their failures sooner. The end of the Euro? The end of the European Union? Hard to say for sure, but there will certainly be unpleasant consequences for the Greeks and others who have borrowed far more than they earn.
This is yet another blow to the free flow of money. It will drive up rates which will drive down economic activity which will drive down tax revenues which will drive down the European welfare state and their economy in general.
Will this affect America? You bet it will. The number one threat to America right now is that we will default on our Treasury bonds. Anything even remotely resembling a default by the US Treasury will rock the world at its foundation.
We are already treading on thin ice, because we have already printed over $2 trillion to bail out the banks. If the banking industry needs further assistance, in any form, we run the risk of devaluing our currency to the point that we spark hyper-inflation.
What do you do to protect yourself?
First of all, get rid of your cash. Cash is trash.
You want to own gold, which you can easily get by buying GLD or IAU. You want to own gold mining companies located in the United States, Canada, Australia and South Africa.
And you want to own dividend paying stocks from large multinational companies -- particularly those that make a good portion of their money outside of the United States and Europe.
You don't want bonds right now -- they are too expensive and their yields will not keep up with inflation. Since their value will revert back to par at maturity, you will lock in a loss on your capital equal to the rate of inflation, which might be dangerously high.
Finally, now is the time to buy real estate. If you have a lot of money, look for farmland that you can lease for at least a break-even annually. The value of that land will skyrocket in the next ten years.
If you have less, look for a three to five unit apartment complex that you can rent. If you can't turn an annual profit now, don't buy unless you can predict cash flow working for you within the next five to ten years.
If you have even less, and little or no time, find any house in practically any condition that you can buy for cash. Hire an exterminator to protect it from termites and mold, and rent it out as-is to a former homeowner. If he has lousy credit, as most everyone does these days, rent it month-to-month. Take the rent he pays you and put it into gold or into luxuries for yourself.
We're in survival mode here.
