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Gold and silver prices are continuing to fall as more and more hedge funds conduct panic sales in a dash for cash.

Charles Gave is the French economist whose research firm GaveKal is fairly well known, and read in some hedge fund circles.

In his latest note, John Mauldin reports on a dinner he attended with several investors and experts, of which Gave was one. At the dinner, he predicted the Euro's imminent demise.

Risks of PIIGS Sovereign Debt Default

Joining Greece are the other european bankrupting nations to varying degrees that are collectively referred to as the PIIGS (Portugal, Ireland, Italy, Greece and Spain), though a few others such as Belgium should also be included in the list as the risks of actual default vary between nations of the Eurozone as the below graphic illustrates the probability of actual default within the next 3 years, though this does not mean that we will have to wait for 3 years for countries such as Greece that are permanently tottering on the brink of default

The mainstream press predominantly focuses on the bottom line numbers of by how much are each countries banks exposed to Greek government debt, without fully understanding the total exposure is about 100 times greater as a function of the $600trillion+ derivatives market that gambling prone British banks are more exposed to in terms of per capita then virtually any other nation on the planet.

Forget the official UK statistics of £1 trillion of public sector debt, total actual debt and liabilities are in excess of £11 trillion and the fools in Coalition Government are now contemplating Britain borrowing money in the name of UK tax payers to throw into the Greek black hole!

For instance the mainstream broadcast press smugly declares that British banks exposure the Greek government debt is just £2.5 billion. However throw in the derivatives exposure that also includes Portugal and Ireland and then the figure jumps to at least £350 billion with a figure approaching £800 billion or about 60% of GDP as the default contagion would not stop with Portugal as soon Spain and Italy would also follow their PIIGS brethren over the cliff, which would be enough to trigger a collapse of the global banking system as the earlier article ( Nov 2010 - Global Sovereign Debt Default Bankruptcy Bailout and Contagion Risk Analysis) illustrated the risk each country on its own posed to the global financial system if one were to default on their debts.

The November 2010 analysis treated Greece and Ireland as being on life support pending inevitable bankruptcy with Portugal not far behind that combined present a contagion risk factor to the global financial system of about 22%, an eventuality that the worlds financial system could survive, if only it could be halted to the peripheral euro-zone which it would not as soon Spain and Italy would join the collapse as their bonds are dumped sending interest rates soaring towards where Greece debt currently trades, which would be more than enough to bring about a collapse of the Euro-zone and within hours of which a collapse of the whole global financial system including that of the United States as all fiat currency is dumped for hard assets i.e. an hyperinflationary collapse event

“We should make no mistake here: the market turbulence surrounding the fiscal crises in Greece, Ireland and Portugal would pale beside the devastation that would follow a loss of investor confidence in the sovereign debt of a major economy,” the report said.

A crisis of confidence in a major economy would develop suddenly rather than as a gradual build-up because “either you enjoy the confidence of the markets or you don’t. Therefore, a loss of confidence in the ability and willingness of a sovereign to repay its debt is more likely to be characterised by a sudden change in sentiment than by a gradual evolution