- Gold and silver bugs have been hit quite hard these 2 weeks. But the fact of the matter is: nothing has changed. All the problems that existed before are still around and are getting worse. The Illuminist banksters and their complicit MSM are telling us that a €2 Trillion bailout fund will solve the problem. How does more debt solve a debt problem? The stronger countries: France and Germany will be burdened with more debts and become insolvent like the PIIGS. The solution is in effect worse than the sickness! Gold and silver will resume their upwards climb soon. Do not be afraid.
Greek Default, Eurozone/Bank Crisis and the Effect on the Gold, Silver prices
By: Julian D. W. Phillips, www.GoldForecaster.com
We agree with Professor Rogoff that Greece should have defaulted some time ago. Despite all the current efforts, Greece will default and that contagion will result in a global, banking crisis. Even if we’re wrong, the mountains of money that will be created and poured into the debt hole will benefit the gold and silver prices. The Greek debt crisis is about stemming the spread of bank runs, the breakdown of the other PIIGS countries debt situation, and potentially the fragmentation of the Eurozone. We’re on the brink.
In the last week, we have seen global market confidence buckle in the face of slowing growth and what may already be a recession. This is not the time that poorer nations can use falling cash flow to repay mountains of debt. Talk of a 50% haircut on Greek debt should be lifted to as high as 60% to 70% for the Greeks to be able to manage its remaining debt in light of future, Greek cash flows.
To get a handle on the Eurozone debt crisis we have to imagine that each nation is an individual. If an individual is bankrupt an offer of compromise is made that usually is 50% for the debt to be written off. It’s not a ‘haircut’ of 50% of the debt with the remaining balance to still be repaid. But such a haircut is a ‘managed default’. The banks that have to take a haircut see their balance sheets drop by this amount, often making the ratios by which it has to maintain too. This reduces the amount it can lend and often puts it in a dubious financial position, bringing its own creditors down upon it. With the global banking system so interwoven, the spread of such fears reaches far and wide. We saw this last week in the downgrade of Societe Generale and Credit Agricole, two of France’s largest banks, because of their exposure to Greek debt. If the Eurozone crisis finds other nations following Greece, then expect much more of this type of downgrade.
What’s happening to Confidence in Currencies?
At this stage it doesn’t matter which way the crises go. Confidence has fallen worldwide in government debt situations and the banking industry, with fears of more to come. The very fact that the developed world is in the financial state it is, has caused the fall in confidence. If the Greek situation leads to a convincing bailout, the weaknesses in the Eurozone will still remain. Confidence in the euro has fallen and won’t return to the previous year’s levels. With money fleeing the Eurozone, it only found the dollar as an alternative. The Swiss Franc and the Yen have ceased to be safe-havens because their central banks have intervened to weaken those currencies. This left the ‘tree trunk’ of the currency system, the U.S. dollar, as the only really liquid place to go. This was not because of any value that could be retrieved, but because it’s the only remaining currency that remains standing under pressure. Right now the euro is gaining against it, as the world hopes that Greece will get a sufficient bailout. But tomorrow it could weaken again. As to the dollar, its debt crisis is more severe, but not as immediate.
Now stand back a pace and ask… “Can we have confidence in the value of the Dollar, the Euro, the Yen, the Swiss Franc or the British Pound?”
…. for the full article click here!