Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

How Europe Will Help Gold Shine Again

Commodities / Gold and Silver 2013 Jun 27, 2013 - 12:14 PM GMT

By: Money_Morning

Commodities

Martin Hutchinson writes: The Good News: The euro crisis has failed to explode in the last three years, in spite of repeated predictions that it would. Many commentators now rejoice that the problem is solved.

The Bad News: Don't believe it. While a few of the countries have made steps toward recovery, there are still several that haven't, and, by and large, those that haven't are larger than those that have.


As always with European crises, the summer should be a quiet period as everyone puts aside these dire economic issues and goes on holiday. But there will be more fireworks after September's German election, when tough decisions will be made.

And that's why gold (and select emerging markets) remain strategic holdings in smart investors' portfolios.

Europe's Rogues Gallery

Greece is the worst basket case, and will almost certainly need bailing out again.

In spite of a drop in GDP of a full 25% since the start of the crisis, it is STILL expected to run a balance of payments deficit this year. That's worrying.

If you push an economy into a giant recession, you expect it to have trouble balancing its budget because government revenue declines and welfare spending increases. The Economist magazine's panel of forecasters expects Greece to run a budget deficit of 5.3% of GDP this year.

However, the balance of payments works the opposite way - a giant recession means domestic consumers can no longer afford foreign goods, while exporters can cut wages and the cost of supplies and make themselves more competitive.

In 2008-09, Latvia suffered a brutal recession while its currency was linked to the euro - but its current account swung from a deficit of 15% of GDP to a surplus of 10% of GDP. Latvians, unlike Greeks, are good at austerity, but the recession itself helped them solve their balance of payments problem.

Greece's failure to solve its own problem indicates that the economy is truly a basket case and that new debt is very unlikely to be repaid.

Cyprus, Greece's little brother, is still descending into the maelstrom following its banking crisis. Judging by the Greek example, there will be further crises here also.

On the positive side, Spain and Portugal both have sensible governments, which have done much of what they need to do. They have had bad recessions, and even 2014 is projected to show flat GDP in both cases, but both countries' balance of payments has swung positive, and the 2013 budget deficits are below their peaks in spite of the recessions.

Provided both countries' volatile electorates don't do anything stupid, and state spending cuts are extended into 2014, both countries should be growing again and stable by the second half of next year.

Italy's electorate, on the other hand, already did something stupid by electing the socialists in February, with a strong showing for a comedian who has refused to join any coalition.

The current account is about in balance, but unlike in Spain and Portugal, spending restraint was pretty conclusively defeated. (Mario Monti, the austerity candidate, got 8% of the vote.) What's more, Italy will almost certainly have another election within the next six months - where almost anything could happen.

Finally, France is locked into a government that is bitterly opposed to austerity and wants to tax its most productive citizens at rates which, taking income tax and wealth tax together, exceed 100%.

Already, the state absorbs more than 55% of GDP and that proportion is rising. Naturally, both trade and budget balances are negative and getting worse. Yet the bond market still does not recognize the problem; 10-year French Treasury bonds "OATs" still yield less than British or U.S. Treasuries.

There are two possible routes to the next Euro crisis.

One: An economic crisis in one of the staggering euro members, probably France or Italy after the German election (any crisis before then will have money thrown at it by the European Central Bank).

Two: A general tightening of credit, which appears to be beginning in the United States and could easily spread to the world as a whole, as confidence in central bank bailouts disappears.

In that case, problems in the Eurozone that are now simply chronic will become immediate, as finance for the weak sisters will no longer be available. That route to disaster is unlikely in 2013, more likely in late 2014.

One way or another, the Eurozone has not finished with crisis, and the most likely outcome remains a breakup of the euro.

For us, Asia, the better parts of Latin America and even Africa look better than ever, as does gold.

Need more income investments in your portfolio? Martin Hutchinson has uncovered the "secret" double-digit income stocks that Wall Street doesn't want you to know about...

Source :http://moneymorning.com/2013/06/27/how-europe-will-help-gold-shine-again/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 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