Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Spanish Election Sets Precedent: More Debt, and Inflation

Politics / Spain May 27, 2011 - 06:01 AM GMT

By: Dr_Jeff_Lewis

Politics

Unbeknownst to most investors in the North American markets, the Spanish went to vote over the weekend.  Their votes proved that there will be no end to the European debt crisis.

When the markets opened early for Asian trading, the results of the election were immediately priced into paper currencies, especially the Euro, as well as real currencies, gold and silver.  Commodities took a dive with the Euro, which was largely to do with institutional investors waking up to the sad reality of a continental banking system: you can’t please everyone.


Over the weekend, Spanish voters showcased just how much they hated the concept of fiscal conservatism and austerity.  Politicians who had fought government spending in entitlement programs and social “butter programs” were thrown out of office.  To take their place is a new crew of politicians who knew all too well how easy it is to buy a vote.  This new wave of political winners won’t be fighting social programs any time soon; instead they’ll continue spending to solve a crisis that started first with debt.

Spain’s election takes crisis to a new level

Spain isn’t Ireland, nor is it Greece.  Those two countries hardly register in the list of the largest economies of the world, but Spain is massive.  In fact, it’s the 12th largest economy on the planet, and the 5th largest in Europe.  For all intents and purposes, Spain is just as important to the Euro as Germany and France, given its size.

When the people of Spain vote against austerity and for further unpaid for spending, the result is surely to be disastrous.  Germany, by far the dominate force in the European Union, remains strong in asserting that there will be no future bailouts and no further easing with interest rate policy.  Instead, Germany and others want Spain to solve its problems with its own money and its own cuts to its own programs.  Why should Germans bear the burden for Spain’s misallocation of resources?

The reality is that the Euro is in decline, both in terms of value and concept.  Less than a decade after the Euro went full-circle to include most of Europe, the concept of a continental currency has been a demonstrable failure.

Rattling the Markets

The Euro’s meltdown will only stand to worsen volatility in the commodities markets, which are priced in dollars.  When the Euro declines, commodities fall, as the dollar strengthens in the selloff.  When the Euro advances as it had for months until recent developments, the commodity markets rise.

Of course, in the long term, nothing has improved; instead, the outlook for the Euro and fiat currencies has worsened.   Those in the market for a paper profit are sure to make billions in these intraweek movements, but the race to the bottom in currency values is still on, even if one fiat currency gains against another fiat currency.

Silver investors should remain in their place.  While the European debt crisis is giving strength to the US dollar, the reality is that all things eventually find value at their intrinsic worth.  For the dollar, a 2.6x6.1 inch piece of paper, this intrinsic worth is just about zero.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2011 Dr. Jeff Lewis- 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Manuel
27 May 11, 08:53
Not so Sure

that's BS everyone knows that's Germany who's in charge in Spain Ireland, Greece and Portugal, whichever party has the power they will have to follow what Angela Merkel wants.


Post Comment

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

6 Critical Money Making Rules