4 Reasons Why a Repeat of the 'Crash of 2008' Is Unlikely

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Bullion Bulls Canada) -- With many investors now having descended back to full-fledged panic mode, it is obviously the perfect time to explain why 2011 could never be another event like the "Crash of '08." In distinguishing 2011 from 2008, many of the distinctions involve the degree of collapse which is possible/probable. Thus, I am not rejecting the suggestion that we are on the brink of another "crash," but rather pointing out that the nature of any such crash would be remarkably different.

While most sectors of the economy (and most markets) are in worse shape than when the Crash of '08 commenced, there are a couple of sectors which are quite clearly much stronger than in 2008. When we explore this dichotomy, it will quickly become obvious why events could not repeat the scripted "crash" of 2008.

Much less leverage in commodities:

Though there are many significant differences between 2011 and 2008, I will argue that none are as significant as the dramatically different dynamics which exist in commodities markets today versus the summer of 2008.

In 2008, commodities markets were more leveraged (on the "long" side) than at any other time in the history of the global economy (and by a wide margin). Not only is this (arguably) the largest/strongest "bull market" for commodities in the history of the global economy, but it is the first commodities boom since the explosion in the "hedge fund" gamblers. These reckless speculators amplify volatility, risk, and leverage in any/every market they touch.

It is important to understand that there was absolutely no reason for commodities markets to crash in 2008 (just as there is absolutely no reason today). There is no plausible economic scenario in the future where the world economy will have sufficient amounts of most commodities. We are headed unequivocally toward a future of chronic commodities shortages.

The collapse of commodities in 2008 was nothing less than an "assassination" -- an assassination which was only possible because of the unprecedented levels of leverage which existed in those markets. The obvious parallel is the silver market.

By any "fundamental" basis, the price of silver should already be in excess of $100/oz today . Yet in May, the anti-bullion cabal was able to manage a ruthless and signficant take-down of the silver market -- despite the fact that inventories are exhausted , "market sentiment" has never been more bullish, and silver was still grossly under-priced at $50/oz.

How was this possible? Via leverage. In the case of the silver market, the "excessive leverage" had to be "manufactured" (artificially) through the five, rapid-fire increases in "margin requirements" by the CME Group. Even though this leverage was totally artificial, the banksters were able to take down the market of the world's most undervalued commodity by over 30% in a matter of days.

In the summer of 2008, not only was all of the commodities leverage very, very "real," but it was at a level which dwarfed what existed in the silver market in May of this year. As a result, the Crash of '08 saw plunges in commodities prices which roughly ranged from 50% to 75%. More leverage means greater manipulation is possible. Period.

In the summer of 2011, leverage in commodities markets is much, much lower than in the summer of 2008. For this, we can thank the propaganda machine and the banksters themselves. Ever since commodities began their inevitable bounce-back, beginning in 2009 we have had a farcical (and very public) "debate" about literally "inflation versus deflation."

Since deflation is unequivocally bearish for all commodities (but not gold and silver as "money"), the relentless propaganda in never allowing this "debate" to die down for even a single minute has not only greatly reduced the ratio of "longs" versus "shorts" (compared to 2008), but those who are long are much more cautious than their 2008 peers.

In 2008, we had a massive, uninterrupted "run" in commodities markets more than two years in duration. Since 2008, every time there is any sort of "spike" or "froth" in commodities markets, the deflation "Chicken Littles" start their shrieking and the banksters start another shorting "operation." The result is much, much less overall exposure. Less leverage means less "crash potential" -- a lot less.

Weaker financial sector:

With Asian economies (and other "developing markets") still in the early stages of their own "industrialization," the commodities complex is still in the early stages of the longest/strongest bull market in history. The same cannot be said about the financial sectors of Western economies.

In 2008, the reckless Ponzi schemes of the compulsive gamblers in Western banking had just begun to implode. They had not (yet) emptied out government coffers in bankster welfare. They had not (yet) destroyed much of their own businesses -- through scamming countless victims with blatant acts of fraud. Thus with a handful of blank checks and a few, convenient "slush funds" these fraudsters were able to avoid instantly vaporizing themselves.

However, $trillions in unrealized losses from their scams remain on their own books -- despite best efforts to offload it all onto the balance sheets of sovereign governments, and/or Ben "I buy anything" Bernanke. Fraudulent accounting rules may allow these banking Oligarchs to hide their crippling losses, but the invisible "albatrosses" remain around their necks.

Compounding their folly, having avoided even token efforts at "regulation" these compulsive gamblers immediately reverted to placing more massive, leveraged bets in equities markets and their own "casino" (the derivatives market). Give a cocaine addict $100 and he will run to the nearest "crack house." Give a compulsive gambler $100 and he will run to the nearest casino. Our servile governments and central bank "facilitators" fronted these gambling addicts $trillions more (of our money). And now, in any "crash" scenario, those bets will also implode -- and add to their existing, hidden $trillions in losses.

While bankster losses are set to hit new, record levels, these ultimate parasites have already emptied out the Treasuries of literally every government in the Western world (and Japan). They have also totally exhausted the tolerance of the "little people" living in these nations. Through first scamming them ruthlessly with their acts of fraud, and then forcing them to cover the banksters' gambling losses -- and now facing punishing "austerity" so that our governments can (supposedly) pay down the added debt from those $trillions in bankster handouts -- there will be no more public bankster welfare. What the corrupt (and unaudited) central banks do privately (via their printing presses) is another matter entirely.

With much larger losses, and much less potential for mooching handouts, the banker parasites will not be able to induce another "crash" in 2011 without wounding themselves far more severely. As a reminder, in the world of these reckless gamblers losses far in excess of 100% are not only possible, but likely. The 30,000% loss suffered by Morgan Stanley in a credit default swap "bet" with Citigroup is a good example. The banksters are sitting on tens of trillions of dollars of these bets, in credit default swap markets alone.

Much more insolvent Western governments:

Of all of the changes between 2008 and today, none is as large, obvious and frightening as the collapse of Western solvency. Between the $trillions doled out in bankster welfare, and the $trillions in "emergency" payments to the banksters' victims, there has never been such a large and simultaneous explosion in sovereign debts in history -- with the vast majority of this increased debt being piled onto Western economies which were arguably already insolvent.

At the same time that Western debts (and interest payments) have soared exponentially, Western revenues have fallen off a cliff -- the worst "revenue crisis" in the history of our economies. It comes from a combination of taxing the very wealthy at the lowest rates in history, while having already squeezed dry everyone else.

Thus, in any 2011 "crash scenario" Western governments would be looking at the following parameters:

1) A further collapse in revenues.

2) A massive increase in interest payments on debt as soaring total debt and rising interest rates hit these governments with a double whammy.

3) A massive increase in the need for "emergency" transfer payments from their shell-shocked populations.

4) No one (anywhere in the world) who is prepared to lend another dime to these spendthrift Western governments.

What this means is that in any crash scenario there are two (and only two) possibilities for Western governments:

a) Massive public and private defaults (on tens of trillions of dollars in bad debts), something never before collectively experienced in the global economy.

b) Hyperinflationary money printing, as governments with no revenues, no creditors and massive spending requirements have no source of "funding" except the banksters' printing presses.

Understand what is really being implied by these scenarios. We will either experience first (a) and then (b) -- or else our governments will simply skip ahead straight to (b). Either way, it is 100% certain that most Western currencies would plunge to near-zero which (naturally) implies the same thing for the tens of trillions of dollars in Western "bonds" which are denominated in those currencies. If a $1,000 bill is worthless, then so too will be any $1,000 bond denominated in the same, debauched currency.

Gold and silver much, much stronger:

The Crash of '08 denoted the final death of a treasured, bankster myth: that gold and silver no longer represented "safe havens" as asset classes -- epitomized by the bankers' ridiculous cliché that gold was now "a barbarous relic."

Upon bouncing back from the orchestrated take-downs of commodities, gold and silver have emerged unequivocally as the two superior asset-classes. Relentless buying of gold and silver has re-emerged around the world -- everywhere except in the world of Western bankers, and their "insulated" (i.e. brainwashed") populations.

Despite this decade-long bull market, gold and silver collectively account for little more than 2% of global financial assets -- far below previous, historic levels. While frightened sheep ran away from gold and silver in the Crash of '08, they would obviously be running toward those glittering metals in any future market collapse.

With not enough metal to "wedge" many more investors into the gold and silver sectors, I have argued strenuously that gold and silver miners (racking-up "record profits" quarter after quarter) will soon decouple from all other classes of equities -- as those who cannot get their hands on bullion will be forced to settle for the next-best thing.

As I continue to acknowledge both publicly and privately, we cannot "rule out" a severe (total) collapse in our economies, suffered as the result of a systemic debt default scenario -- and massive public and private bankruptcies. Those in charge of our governments have absolutely no idea about either what the real problems are in our economies, or what to do about those problems.

I simply remind investors of two realities: all investing represents betting upon "probabilities," and the most obvious probability is that the banksters and politicians will continue to attempt to "solve all their problems" with their printing presses. This would mean all paper assets reversing higher, commodities doing better still, and gold and silver (and the miners) doing best of all.

The other reality is that both gold and silver bullion (and the shares of the miners) have already proven they could withstand such a crisis (in 2008) -- and in any future "crash" they would be universally preferred by investors (either before or after "cash" goes to zero.

There are two very divergent scenarios looming before us. Fortunately there is one strategy which will suffice in all worlds.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.