Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Will US Government Shutdown Cause The Stock Market To Crash? - 18th Dec 18
The Coming Financial Storm - 18th Dec 18
Jeff Gundlach thinks that a Stocks Bear Market has started. Is he Right? - 18th Dec 18
Gold’s Not An Investment – You Won’t Get Rich - 17th Dec 18
Stock Market At Medium-Term Lows, Which Direction is Next? - 17th Dec 18
This Stock Will Drive America’s 5G Buildout - 17th Dec 18
Stock Market Turn In The Tide - Have a Happy Bear Market! - 17th Dec 18
How A NASA Scientist Could Trigger The Next Cannabis Boom - 17th Dec 18
iShares Russell 2000 IWM Leading Stock Market Decline - 17th Dec 18
Where is the Dow Stock Market Santa Rally? - 17th Dec 18
With Weaker Climate Consensus, Expect Elevated Climate Change - 16th Dec 18
SMIGGLE Advent Calendar 2018 UK Contents - What You Get Look Inside Review - 16th Dec 18
Is there a Lump of Coal in Santa's Stock Market Bag? - 16th Dec 18
This Market Will Drive Gold in 2019… - 16th Dec 18
Gerald Celente:Central Banks Can’t Stop a 2019 Debt Disaster - 16th Dec 18
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

The Euro Is Screwed, Investors Seek Gold Safe Haven

Currencies / Euro May 01, 2010 - 04:44 AM GMT

By: David_Galland

Currencies

Best Financial Markets Analysis ArticleKevin Brekke and David Galland, The Casey Report write: On April 22, Eurostat, the statistical arm of the European Union, released figures on EU member states’ government deficits and debt for 2006-2009. The European Commission requires member states to report certain data every April.


The timing of the report's release could not be more problematic for Greece, which has been in discussions with the IMF and other EU states over possible bailout assistance. In a note to the report, Eurostat expressed reservations about Greece's accuracy in its numbers from last year, saying:

Eurostat is expressing a reservation on the quality of the data reported by Greece, due to uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps. Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with the Greek Statistical Authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt. [emphasis mine]

If these "reservations" prove correct, it will catapult Greece into the debt-to-GDP leader at 122.1%, leap-frogging Italy, which is currently at 115.8%.

But perhaps most telling is the report's title, "Euro area and EU27 government deficit at 6.3% and 6.8% of GDP, respectively." Recall that the EU's Stability and Growth Pact mandates a budget deficit ceiling of 3.0%, and we see that the 16 euro area members are, in aggregate, in gross violation of the pact. Even more alarming is the rate of change in the aggregate budget deficit figure from 2008 to 2009, growing 230%.

And lastly, the aggregate euro area debt-to-GDP ratio climbed from 66.0% in 2007 to 78.7% in 2009, a stunning rise. If this annual rate of growth continues, the euro area debt-to-GDP ratio will zoom past 100% in two years, a level at which many think it begins to exert significant strain on fiscal budgets and spending.

The report, on the whole, paints a picture of an experiment in currency sharing and cross-border "normalization" of fiscal order that has gone terribly wrong. The old saying that a camel is a horse designed by committee seems to be underway here. It will be amusing to watch into what sort of "animal" the EU morphs in the coming years.

As one would expect on reading news that is less than cheery for the eurozone, the U.S. dollar has been moving up, sending gold lower. So, perversely, you have gold and the euro moving together.

While the current rebound in the dollar may be discomfiting to some gold investors, especially in that gold has been facing headwinds again, in our scenario of a broad-based crisis in the global fiat currencies, the major currencies will come under pressure individually before coming under pressure collectively.

Today, safe-haven seekers reflexively run from the euro to the U.S. dollar, which in turn sends a signal to the trading community to sell gold for no better reason than the historical inverse connection between the dollar and gold. This is only temporary, as you can see in the following chart plotting the euro against gold over the last troubled year.

1-Year Gold Price in Euro

This is all just part and parcel of the secular trend that will lead to the end of the fiat currency experiment as the world wakes up to the full implications of the institutionalized monetary abuse engendered by a fiat system. As is so clearly evidenced in the drama now playing out in Greece, when a government is forced to solve its debt problem by issuing more debt, the end is nigh.

With the global economy still in the tank, concurrently layering on yet more taxes in order to try and keep the whole mountain of cards from blowing its top like Iceland's Eyjafjallajökull* volcano will only prove counterproductive in the extreme.

This is no time to be complacent, or cavalier, about your financial affairs. Now is the time to be both cautious and, selectively, opportunistic. Because along with risk, big market moves also bring big opportunities.

And analyzing imminent, big market moves is the forte of David Galland, Doug Casey, and the other editors of The Casey Report. Every month, they investigate economic trends in the making and find the best investment opportunities arising from them. Learn more about their accurate predictions and how you can profit– click here.

© 2010 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules