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Financial Armageddon I was in 2007. Financial Armageddon II was
in 2008. Is Financial Armageddon III in 2010 or early 2011 because of the EU
bond crisis?
While financial markets try to digest whether inflation can be
rekindled along with stock markets, the escalating EU debt crisis is
spiraling out of control. The USD rallies along with gold, although gold is
also reacting to market sell off pressures and is not as high as it might be.
The fact is, with Germany and France resisting investor
bailouts, investors are selling all manner of EU bonds, and Spain, Italy,
Ireland bond rates are rising daily, even the day after the latest bailout of
Ireland, which caused a brief respite that lasted all of half a day Monday.
This shows that the roughly 1.2 trillion Euro rescue package created
during the Greek crisis months ago is not working. The EU pledging another
$110 billion worth of aid for Ireland has little if any effect.
We hear brave statements from Spain (I commend the bravery) that
they will not be forced into more trouble by the bond markets who don’t
believe the EU is solvent as a whole.
Yeah but France and Germany wanted a weaker Euro?
Funny thing is, France a year ago used to complain about the
strong Euro, but now with the Euro breaking down, France and Germany are in a
quandary of what to do. If they agree to more bailouts, investors barely
yawn. Then the selling begins anew.
If the EU decision makers, including Germany especially,
don’t do more bailouts, and try to get investors (laugh) to take
losses, then the bond markets dump the troubled countries’ bonds.
Germany and France and the EU proponents are in an impossible situation.
What is that situation and how bad is it for the Euro?
We need to remember that in Fall and Winter 2007, then a year
later in Fall 2008, the general bank crisis spreading first in the US banks
with the Bear and Lehman failures led to two almost total world bank
collapses. We are facing round 3 of that challenge now. I am wondering about
the similarity in timing comparing the evolution of the Bear debacle over 6
months that led to Financial Armageddon I in 2007.
Was Greece like a little Bear Stearns, and maybe 6 months later
another massive crisis that Bear revealed growing, Greece in this case months
ago? (IE did the Greek crisis presage the much larger and same crisis
breaking now in the EU with Spain perhaps?)
So … after a brief recovery after March 2009, markets are
now facing their worst sovereign debt crisis, centered in the EU, since WW2
ended. In fact, the IMF and other authorities are saying they are facing many
of the same bank and credit collapse situations they faced in the 1930s. IE a
banking and solvency crisis.
The EU is in a broad sovereign debt crisis now which is
escalating.
Also, in spite of new US QE of $600 billion coming online, the
USD is rallying and rallying stronger than even gold was.
And, gold and the USD are rallying together, and this
combination accompanied the buildup to the last two bank crises of 2007 and
2008, and also during the Greek crisis of 2010, thought initially to have
been brought under control….
Is this flight to safety in the USD and gold warning of another
imminent EU bank crisis where banks are threatened with flight withdrawals?
That combined with rising bond spreads in the EU will force the
EU to the wall. It is at the wall now and facing a day of reckoning.
In any case, Prudent Squirrel subscribers were warned of the
latest turn on the USD and commodity markets when we told subscribers we
thought the USD had bottomed several weeks ago. That turned out to be a
prescient call.
The Prudent Squirrel newsletter is our financial and gold
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We have anticipated many significant market moves in the last
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We have also made a number of good calls on big currency swings, such as with
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We invite you to stop by and have a look.
Chris Laird
Prudent
Squirrel
Chris Laird has
been an Oracle systems engineer, database administrator, and math teacher. He
has a BS in mathematics from UCLA and is a certified Oracle database
administrator. He has been an avid follower of financial news since
childhood. His father is Jere Laird, former business editor of KNX news AM
1070, Los Angeles (ret). He has grown up immersed in financial news. His
Grandmother was Alice Widener, publisher of USA magazine in the 60?s to 80?s,
a newsletter that covered many of the topics you find today at the preeminent
gold sites. Chris is the publisher of the Prudent Squirrel
newsletter,
an economic and gold commentary.
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