Pre-Avalanche

As big institutions get wind of the paper chase collapsing, there will be a rush to hard assets--and hard currencies backed by hard assets (China and Russia come to mind).  Their currencies may soar, while other fiat currencies tank.  Of course, this will hurt their economies also, as Chinese exports become too rich, so they will devalue in blowback fashion--in what Jim Rickards penned a currency war.

This is the pre-avalanche phase.  It only takes one snowflake to trigger the avalanche, but no one knows which flake will cause it.  Is it China vs. Japan over the Senkaku islands?  Is it Israel vs. Iran?  Or China/Russia rushing to the defense of Iran, while the US defends Israel?  What about Syria?  Yemen? Libya? Sudan? Saudi Arabia?  Spain?  Greece?  Italy?  France? the UK?  Germany exiting the Euro?  or JAPAN?  Percentage-wise, Japan's public debt is 10 times worse than Greece's.  I'm going to bet the yen is about to lose its safe haven status.

With an increasingly complex and fragile global banking system, anything can trigger a cascading collapse.  It was subprime mortgage bonds securitized against some tranche of homes in California, Nevada, Arizona, or Florida that triggered the last crisis.  While there are multiple crisis points globally, the catalyst could be some catastrophe in some unexpected place like South Africa, Tunisia--or Egypt.

"It was the best of times, it was the worst of times; it ws the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way." - Charles Dickens