As many of you know, my primary forecast regarding Europe is that the EU will be broken up and/or collapse within the coming months. The reasons for this are financial, monetary and political in nature [with much of the latter dependant on what happens in Germany. Let me explain.] Words: 516
So says Graham Summers (www.gainspainscapital.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Summers goes on to say, in part:
Those financial, monetary and political reasons…are:
1) France is about to elect a hard core Socialist. This will greatly alter political dynamics in the EU and will weaken Germany’s push for austerity. [Read: D-Day is Coming: A Financial Crisis is Brewing in France – Here’s Why]
2) Spain’s stock market and banking system are on the verge of collapse. The markets are flashing major warning signs here both in terms of technical developments in the markets as well as Spanish sovereign bond market yields. [Read: Graham Summers: Spain Has Brought Europe to the Point of NO Return – Here’s Why]
3) The ECB’s interventions in the European banking system are now politically toxic (the markets punish those banks relying on the ECB for aid) as well as monetarily impotent (the positive effects of spending hundreds of billions of Euros are only lasting a month at most).
4) The US Federal Reserve’s Operation Twist 2 Program ends in June. Currently there are not new monetary programs planned at the Fed and it is unlikely they will launch anything before the U.S. Presidential election in November (unless forced to by a Crisis).
In simple terms, we have a confluence of negative factors hitting this month and the next. Now, nothing in the political or financial worlds is static and we could see any number of changes made to the above items (for instance, France’s soon to be President Francois Hollande might backtrack on some of his more aggressive socialist policies).
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Having said that, while individual changes to the above items might temporarily delay the collapse I’ve forecast, said collapse is coming and will hit before the year-end. [Read: Graham Summers: Collapse of Europe is Guaranteed! Here’s Why]
The reason for this is that we have reached the End Game for Central Bank intervention: the time during which Central Bank interventions either result in negative consequences that far outweigh their positive benefits (inflation/ increases in the cost of living vs. a rise in “good” asset prices such as stocks) or have negligible impacts….
The relationship between Germany and the ECB is deteriorating as the former finds its push for austerity counteracted by the latter’s monetary profligacy. Indeed, Germany is now facing its most dreaded consequence of the ECB’s money printing: the possibility of inflation (although it continues anchored around two percent and actually slowed in April), with German labor leaders urging May Day demonstrators to fight for big pay rises after a decade of restraint that had seen wages in crisis-hit southern Euro zone nations soar….
The core driving force in European policy-making is politics and Angela Merkel is facing re-election in 2013. If inflation is already becoming a political issue in Germany now Merkel is going to be highly incentivized to get it under control by appearing even more pro-austerity/ anti-monetization and, if things get truly ugly, she could even publicly threaten to pull out the Euro.
*http://gainspainscapital.com/?p=1714 (To access the articles please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
“The real risk for the euro zone now is not Greece, but France,” says a top French finance boss. Nicolas Baverez, a commentator who foresaw the country’s looming debt problems in a bestselling book of 2003, agrees: “I’m convinced that France will be the centre of the next shock in the euro zone.” [below their views are substantiated with some alarming and disturbing facts about France;s financial situation and how their politicians are failing to address the brewing crisis.] Words:740
Spain is a catastrophe [of major proportions and] to fully understand [why that is the case] we need to understand Spain in the context of both the EU and the global financial system. [Once you read what I outline below you will more fully understand why] I believe that the EU in its current form is in its final chapters. Whether it’s through Spain imploding or Germany ultimately pulling out of the Euro, we’ve now reached the point of no return: the problems facing the EU (Spain and Italy) are too large to be bailed out! Words: 1345
On the surface, Spain’s debt woes have many things in common with those of Greece – bad age demographics and a toxic bank system – but you’ll note that, as we tackle each of these, Spain is in fact in far worse fiscal shape than Greece. [Let’s take a look.] Words: 700
Spain is an absolute disaster on a level that [it seems] few, if any, analysts can even grasp. [Let me try to.] Words: 428
I continue to see articles in the media claiming that Europe’s problems are solved. Either the folks writing these articles can’t do simple math, or they don’t bother actually reading any of the political news coming out of Europe [so let me present 3 data points that guarantee Europe will collapse at some point in the near future]. Words: 722
In this article I lay out precisely why the coming Crisis in Europe will be THE Crisis I’ve been forecasting for the last 24 months, why it will have dire consequences on the U.S. and why the Fed can do absolutely nothing to stop it this time round. Words: 1334
On the surface things may appear to be calm, but I don’t think the European crisis is anywhere near its conclusion. Losses still have to be taken from Ireland, Spain, Portugal and possibly even Italy…There are a number of ways out of Europe’s problems. One of them is higher inflation…[which] is going to be very positive for gold… because the central banks will be under pressure to print.
When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival…[Let me explain this further by reviewing the 7 major problems facing the U.S. (and thus the world) and how they all will lead to problem #7 – devolution.] Words: 1520
The European economic situation is explained very simply in the illustration below. Take a look.