Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Why the Euro Is a Doomed Currency

Currencies / Euro Feb 26, 2016 - 04:04 PM GMT

By: Casey_Research

Currencies

By Doug Casey

For a long time, I’ve advocated that the world’s governments should default on their debt. I recognize that this is an outrageous-sounding proposal.


However, the debts accumulated by the governments of the U.S., Japan, Europe and dozens of other countries constitute a gigantic mortgage on the next two or three generations, as yet unborn. Savings are proof that a person, or a country, has been living below their means. Debt, on the other hand, is evidence that the world has been living above its means. And the amount of government debt and liabilities in the world is in the hundreds of trillions and growing rapidly, even with essentially zero percent interest rates. This brings up several questions: Will future generations be able to repay it? Will they be willing to? And, if so, should they? My answers are: No, no and no.

The “should they” is one moral question that should be confronted. But I’ll go further. There’s another reason government debt should be defaulted on: to punish the people stupid enough, or unethical enough, to lend governments the money they’ve used to do all the destructive things they do.

I know it’s most unlikely you’ve ever previously heard this view. And I recognize there would be many unpleasant domino-like effects on today’s overleveraged and unstable financial system. It’s just that, when a structure is about to collapse, it’s better to have a controlled demolition, rather than waiting for it to collapse unpredictably. That said, governments will perversely keep propping up the house of cards, and building it higher, pushing the nasty consequences further into the future, with compound interest.

With that in mind, a few words on the euro, the EU and the European Central Bank are in order.

The economy of the European Union is a constipated, sclerotic, malfunctioning entity that only registered real economic growth of 0.2% in the recent quarter—assuming you can credit their numbers at all. The continent is a giant monument to socialism, where everyone believes they can live at the expense of everyone else. As a result, the average European sees his government as a magic cornucopia, a source of unlimited wealth. When something goes wrong, Europeans look to their governments to “do something.” With this in mind, European Central Bank President Mario Draghi made the front pages by saying he is “ready to act” with a “whole menu of monetary policy instruments.”

This is central banker speak for “I’m willing to print an incredible amount of money in my attempt to keep my job and stimulate the economy by making people think they’re richer than they really are.”

Draghi’s money printing is a disastrously misguided attempt at creating prosperity. It will create bubbles, and cause people and companies to do all manner of things they’d never consider without the false economic signals he will send. If printing money were the path to prosperity, Zimbabwe and Venezuela would be the richest countries on earth instead of economic basket cases.

Traders who take positions based on the words of a central banker are naïve, and just asking for losses. Not only does the ECB believe printing money is a good thing, but they’re forced to do more, to keep the system from collapsing. This will send the value of the euro much lower; the currency will accelerate its descent toward its intrinsic value, namely zero.

The euro is a sure bet to join the ranks of many hundreds of defunct paper currencies. Not one currency in today’s world is backed by a commodity (like gold); they’re backed only by confidence (which can vanish like a pile of feathers in a hurricane). And, of course, the ability of governments to steal from the people. But the euro doesn’t even have that going for it. The European Union doesn’t have the power to tax. Right now, the Eurocrats in Brussels really only have the power to regulate. I’ve long said, “While the U.S. dollar is an ‘IOU nothing,’ the euro is a ‘who owes you nothing.’”

The EU itself is a completely artificial and dysfunctional union. The Swedes are very different from the Sicilians, and the Portuguese very different from the Austrians. These people have little in common besides a history of fighting with each other. Force them together into a phony union and they’ll become mutually resentful, the way the Germans and the Greeks now are. The EU was put together partly to avoid future wars, but it may turn out to be a war incubator.

The European Union itself makes no real sense. Its sole good aspect, the abolition of internal barriers to the free passage of goods and people, could have been had simply by dropping barriers. Setting up another huge, costly bureaucracy in Brussels was idiocy.

Incidentally, people think of these countries—Italy, France, Germany and so on—as though they are fixtures in the cosmos. But they aren’t. In their current forms, they’re all newcomers on the stage of history.

The average person doesn’t realize that the country we know as Italy today was only created in 1861, a consolidation of many completely independent and very different entities that had been separate states since the collapse of the Roman Empire. Germany was only unified in 1871, out of scores of principalities, dukedoms, baronies and whatnot. Both unifications were very bad ideas; World Wars I and II are just at the head of a long list of reasons why that’s true. Even today, there are separatist movements in big Western European countries, like the Basques and Catalans in Spain, and the Scots in the United Kingdom, who wish it weren’t quite so united. There are many others.

Centripetal force will eventually tear it apart, with the EU as a whole disintegrating long before its individual parts—France, Italy, Germany the U.K., etc.—fall apart. The colors of the map are always running.

The European continent reminds me of that poorly managed cruise ship that sank off the coast of Italy in 2012. It is dying financially, with all the debt bankrupting governments, businesses and individuals. It is sinking economically, weighted down with stifling regulations and taxes. It is being strangled demographically, with birth rates far below replacement. Except among African and Muslim immigrants, who are not integrating. And now, millions of migrants, who seem to expect free food, shelter, clothing and money to hang around coffee houses all day to complain. Europe has long been a hotbed of religious, ethnic and race wars—quite frankly, I see the next one building up right now.

So, I think the euro will reach its intrinsic value long before the dollar does. The euro, in anything like its present form, will likely cease to exist within a decade, and probably far sooner. If I had a lot of my wealth in euros, I would get it out ASAP. As it is, I’m short the euro, mainly via selling naked calls.

My favorite alternative for protecting wealth, of course, is precious metals: gold and silver. Draghi, who deserves the same fate meted out to Mussolini, is acting in a completely predictable manner. If you’re not out of the euro yet, get out as soon as possible.

Editor’s Note: In truth, central bankers are the primary cause of most of the harmful distortions in the economy.

Think unlimited money printing, interest rate manipulation, the boom/bust cycle, propping up “too big to fail” institutions with bailout funds, the War on Cash, cronyism in the financial industry and negative interest rates…just to name a few.

Central bankers are the biggest threat to your financial well-being. Period.

They are playing with fire and inviting a currency catastrophe.

Most people have no idea what really happens when a currency collapses, let alone how to prepare…

How will you protect your savings in the event of a currency crisis? This video we just released will show you exactly how. Click here to watch it now.

The article Doug Casey: Why the Euro Is a Doomed Currency was originally published at caseyresearch.com.
Casey Research Archive

© 2005-2016 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

Catching a Falling Financial Knife