With the European End Game now in sight, the primary question that needs to be addressed is whether Europe will opt for a period of massive deflation, massive inflation, or deflation followed by inflation.
Indeed, with Europe’s entire banking system insolvent (even German banks need to be recapitalized to the tune of over $171 billion) the outcome for Europe is only one of two options:
1) Massive debt restructuring
2) Monetization of everything/ hyperinflation
These are the realities facing Europe today (and eventually Japan and the US). Either way we are talking about the destruction of tens of trillions of Euros in wealth. The issue is which poison the European powers that be choose.
Personally, I believe we are going to see a combination of the two with deflation hitting all EU countries first and then serious inflation or hyperinflation hitting peripheral players and the PIIGS.
In terms of how we get there, I believe that in the next 14 months, the following will occur.
1) Germany and possibly France exit the Euro
2) ALL PIIGS defaulting on their debt
3) Potential hyperinflation in the PIIGS and peripheral EU countries
Regarding #1, we are already beginning to see hints of this development in the press:
DEATH OF THE EURO: SECRET PLOT TO WRECK THE CURRENCY
Ministers are understood to be deeply concerned that French President Nicolas Sarkozy and Germany’s Chancellor Angela Merkel are secretly plotting to build a new, slimmed down Eurozone without Greece, Italy and other debt-ridden southern European nations.
Well-placed Brussels sources say Germany and France have already held private discussions on preparing for the disintegration of the Eurozone.
FRENCH AND GERMANS EXPLORE IDEA OF SMALLER EURO ZONE
German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller Euro zone, EU sources say.
“France and Germany have had intense consultations on this issue over the last months, at all levels,” a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.
“We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don’t want to be part of the club and those who simply cannot be part,” the official said.
With no one willing to foot the bill for the EFSF the markets are hoping Germany will step in and save the day. However, the German constitution forbids Germany from backing Euro-bonds.
German EconMin: court verdict rules out Euro bonds
German Economy Minister Philipp Roesler said on Thursday the constitutional court’s ruling on Euro aid made it clear that joint Euro zone bonds were not an option.
Addressing left-wing opposition parties in the Bundestag lower house of parliament, Roesler said: “You continue to talk up Euro bonds although the constitutional court yesterday made it clear that as transfer union such as the one you propose on the left will never be possible, never be allowed.”
“We don’t want it politically, either, and we will not let the German taxpayer be obliged to pay for the debt of other countries,” he said in a parliamentary budget debate.
Moreover, Germans will simply not permit the monetization of debt. Weimar’s hyperinflation happened in the early 1920s and is still fresh in the memories of the German people (those who lived through it undoubtedly told their children and grandchildren about it). So the German people will not tolerate price instability in any form.
Germany is not alone in having little or no desire to attempt to backstop the system. Indeed, NONE of the G20 countries wish to support the EFSF from a monetary standpoint (yet another sign that the bailout game is ending).
No new Euro zone money for debt crisis at G20
The Euro zone won verbal support but no new money at a G20 summit on Friday for its tortured efforts to overcome a sovereign debt crisis, while Italy was effectively placed under IMF supervision.
Leaders of the world’s major economies, meeting on the French Riviera, told Europe to sort out its own problems and deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.
“There are hardly any countries here which said they were ready to go along with the EFSF (Euro zone rescue fund),” German Chancellor Angela Merkel told a news conference.
So… everyone claims they want to support the EFSF… but no one wants to commit the money. Moreover, Germany’s constitution forbids the backing of Euro bonds… and the EFSF itself has failed to stage even a three billion Euro bond offering under normal market conditions.
Again, the bailout game is ending. Under these conditions, I believe Germany and France will push to either:
1) Leave the EU
2) Draft legislation that allows countries to leave the Euro but remain in the EU
3) Propose kicking out the PIIGS from the Euro
Whichever one of these options Germany opts for, the Euro will collapse. Indeed, the primary reason the Euro has been rallying since October is due to French banks and others selling assets (buying Euros) to recapitalize themselves.
Put another way, the Euro rally is in fact NOT a sign of currency strength. Instead, it is a sign that the major players are moving to cash (Euros) in an attempt to lower their exposure to PIIGS’ debt.
Indeed, if we look at the bond or credit markets, it’s clear we’re into a Crisis far greater than 2008. Forget the stock market rally. Stocks ALWAYS get it last (just like in 2008). And before the smoke clears on this mess we’re going to see sovereign defaults, bank holidays, riots, and more.
Many people will lose everything in this mess. Yes, everything. However, you don’t have to be one of them. Indeed, I can show you how to turn this time of collapse into a time of profits.
Few people on the planet can match my ability to return a profit during times of Crisis.
To whit, my clients MADE money in 2008, outperforming every mutual fund on the planet as well as 99% of investment legends.
We also outperformed the market by 15% during the Euro Crisis of 2010. And since the latest round of the Euro Crisis began in July 2011, we’ve locked in not 10, not 20, but 30 STRAIGHT WINNERS including gains of 12%, 14%, 16% and 18%,
So if you’re looking for a guide to get you through the coming disaster, I’m your man.
I’ve been helping investors, including executives at many of the Fortune 500 companies, navigate their personal portfolios through the markets for years.
I can do the same for you with my Private Wealth Advisory newsletter.
The minute you subscribe to Private Wealth Advisory, you’ll be given access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio reports telling you precisely which steps to take to prepare your loved ones and your personal finances for what’s coming.
You’ll also join my private client list in receiving my bi-weekly market updates outlining what’s really happening behind the scenes in the markets and which investments will profit in the coming months.
And when it’s time to pull the trigger on a given investment, I’ll send you real-time trade alerts.
All of this is yours for just $249 per year.
In fact, if you subscribe now, you’ll receive my latest issue of Private Wealth Advisory hot off the press when it’s published tomorrow evening after the market closes.
In it I detail six investments that are poised to produce enormous profits in the next month when the next leg down begins…
The time for dilly dallying is over. Europe is literally on the eve of systemic failure. Even the IMF has warned we’re facing a global collapse.
To take action to protect yourself… and insure that the coming weeks and months are a time of profit and safety, NOT losses and pain…