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Eurozone Debt Crisis Goes Totally Looney Tunes!

Interest-Rates / Euro-Zone May 18, 2010 - 12:01 PM GMT

By: Graham_Summers

Interest-Rates

Baguettes Vs. Bratwursts - The situation in Europe has officially passed “crazy” and gone into total Looney-Tune-ville. Let’s review how this once great economic entity has shifted from producing anything of value to an economy primarily involved in the production of insane headlines that look like something from The Onion or some other satirical newspaper.


December/ January: Greece virtually defaults on its debt. The markets dive and the Euro comes under fire.

January/February: Various Greek “officials” announce imminent bailouts, various German “officials” say it’s a load of hogwash.

February/ March/ April: Greece brings up German war crimes, threatens EU if it doesn’t get a bailout (try figuring that one out), then begs for a bailout, then acts as though it doesn’t need one.

Greek politicians condemn the evil “speculators” who are destroying their country, only to find that said speculators are in fact mainly Greek state owned banks. Meanwhile, Greek protestors re-enact “The Clash of the Titans” with various public and private buildings in Athens.

Throughout this period, Germany plays hard to get, then acts as though it will help if the IMF does, then pulls out, then throws in the towel and helps. France, who in this tragic-comedy is Germany’s less attractive cousin (from a fiscal standpoint) pretty much follows Germany policy wearing a “I’m with Germany” t-shirt.

Meanwhile, the IMF, which in reality is the US, says it’s happy to throw Dollars the problem. And Ben Bernanke has a special second “Print” button made to celebrate his new “Double Handed Dollar Dump ” approach to Dollar Devaluation.

May: After five months of failing to fix the problem, Greece implodes and the Euro collapses. The stock market in the US disappears for 30 minutes, and then comes back. CNBC and Bloomberg reporters blink and miss it.

Europe, which was largely opposed to bailouts, suddenly announces the largest bailout in recorded history. The Euro bounces for one day, before traders realize that “bailing out yourself,” doesn’t solve a debt problem if you’re already broke. The Euro breaks down again.

The most interesting development is that France has apparently gotten sick of playing second fiddle to Germany and is discussing breaking away from the Euro completely and re-instating the Franc.

At this point the whole thing reads like a WWE plotline. All we need now is for German Chancellor Angela Merkel to challenge French President Nicolas Sarkozy to a Cage match to be titled the “Baguettes vs. Bratwurst Beatdown.”

The only clear thing from this whole process is that the Euro as a currency is finished and the markets are likely to collapse. The reason for the collapse is that the Dollar is rallying strongly which kills the carry-trade most financial institutions have been using (borrow in Dollars and invest in something else like stocks or Brazilian bonds, etc).

If this continues to unwind look for another round of Deflation to hit markets across the board. This means pretty much everything falling as the Dollar rallies. How Gold holds up will determine if the precious metal is now completely a standalone currency.

Good Investing!

Graham Summers

http://gainspainscapital.com

PS. I’ve put together a FREE Special Report detailing THREE investments that will explode when stocks start to collapse again. I call it Financial Crisis “Round Two” Survival Kit. These investments will not only help to protect your portfolio from the coming carnage, they’ll can also show you enormous profits.

Swing by www.gainspainscapital.com/roundtwo.html to pick up a FREE copy today!

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2010 Copyright Graham Summers - 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.

    Graham Summers Archive

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