"The Euro Is Finished"
From Mike Krieger of KAM LP
There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.
- John Adams
What lies behind us and what lies before us are tiny matters compared to what lies within us.
- Ralph Waldo Emerson
The Euro is Finished
To regular readers of my pieces over the last several years this may not seem like a particularly poignant statement. After all, I have referred to the Euro and the U.S. dollar both as worthless political toilet paper for years. The reason I bring it up right now is not to state the obvious long-term macro conclusion that the Euro is a foolish, unnatural creation that only political types twiddling their thumbs in a room could come up with. No, rather the reason I say it now is because I believe the Sword of Damocles is now hovering right over it.
The only question in my mind at the moment regards the specifics of how it will end. I would say that the majority of those that think there is a strong likelihood that the euro falls apart envision the PIIGS countries leaving or being thrown out. While I certainly think this is a possibility, especially if Greece just calls it quits and then successfully transitions to its own highly devalued currency since this would for sure start the ball rolling and before long many of the other financially weak nations would also bail. In such an event, I suppose what is left of the euro could be comprised of stronger Northern European nations and in that case what is left of the common currency could in fact strengthen materially versus other fiat currencies for which no such “restructuring” has occurred. However, I am not convinced this is what happens. The reason I am not convinced is because I don’t believe that the desired austerity measures will ever really go into effect in these nations and even if they did it would merely collapse those economies and the problem would not be solved. As many have stated over and over (including myself) there is no conventional solution to this crisis. There is far too much debt and there is no way real GDP growth can grow fast enough to counter this. The debt will be defaulted on via restructuring/default or a dramatic destruction of the purchasing power of fiat currencies. Nevertheless, the bureaucrats in Europe have such a deep love affair with their preposterous experiment they will turn a blind eye to all the transgressions of the PIIGS and continue to just pretend they have solved something with every new bailout scheme.
So that brings us to the other, and I think increasingly likely, outcome. That is namely that the ECB continues to transfer wealth from the prudent and fiscally more sound nations (mainly Germany) to the periphery until the populace of Germany snaps. I think that moment is very, very close at hand. Once that tipping point is reached there will be no turning back. The popular anger at the ECB and Euro will be so profound and so long festering that it will overwhelm all attempts to keep things together. Germany could leave the Euro. Or it could make it so difficult for the PIIGS that they are forced to leave. Either way, Germany is EVERYTHING. Nothing else in Europe matters right now besides the sentiment on the German street and it has become pretty clear lately which way that is going. I am 100% convinced that Germany will play nice until that crucial moment is reached where it really is put up or shut up (we are close). At that point, I have no doubt that Germany will do what is best for Germany. In the event that Germany was to leave, the Euro would be gone forever. It would become pure confetti overnight. This is not my base case but it could happen. Anything can happen right now.
The Fourth Turning is Global
All of this discussion about the euro brings me to a broader point. While for obvious reasons I focus my attention on the United States because this is where I live and what I know best it is imperative for me to clarify my view that this Fourth Turing we are in is global in nature. Remember, what really characterizes these shifts is the fact that the trends, institutions, political structures and parties, social mores, money systems, etc all die and are reborn during such episodes. The last to get this of course are the elites and the political class who are always in bed together and seemingly at the height of their collective corruption once the Fourth Turning hits. We see this everywhere at the moment, from the U.S. to the Eurozone to China. What makes me laugh more than anything else are all these political hacks and financial “analysts” who keep saying that the answer to the crisis in Europe is a fiscal union in Europe. That somehow this crisis will lead to the necessary resolve to form a fiscal United States of Europe, or some idiocy like that. Sorry folks, it’s not going to happen. This whole “problem, reaction, solution” playbook worked for the elite in the prior era but it will no longer work. The playbook is out there. It has been read and studied. We know the playbook. It’s not going to work this time.
Like I have said before, one of the key aspects of the new age we are entering will be a dramatic reversal of a lot of the unrestrained globalization that has occurred since World War II. Things are going to be more local everywhere. Such as the food we eat and the products we use. The lack of any breakthroughs on the energy front as we confront resource constraints demand that this be the case. This reality will change everything in every possible aspect of life on earth. Things in general will be much less “top down” on the political front. There is a “tide in the affairs of men” indeed and that tide will take the Euro and any ideas of a fiscal union out to sea forever. The key thing for everyone reading this to do is to get prepared for the new world as much as possible before it comes suddenly. This has always been the idea behind my pleading to buy gold and silver. We will need new forms of money and exchange. It cannot and will not be a fiat SDR or any ridiculousness such as that. That notion represents the past trends and the already failed dreams of our parents generation of central planners and free lunches.
Quick Thoughts on the Swiss Franc
While the move by the SNB to basically link its currency to the dying Euro was shocking and will send shockwaves throughout the global financial systems for months to come, in many ways it was inevitable. The central planners are still in control and they are getting increasingly desperate. Part of their desperation manifests itself in acts to prevent markets from sending out signals to investors and the general population. This is why Central Bankers print money and buy government bonds. This is why the ECB is buying worthless PIIGS debt. This is why the SNB decided to destroy its currency. After all, if they agree to destroy the value of the Franc at the same pace as the Euro then it will become less clear to the currency market just how quickly purchasing power is being destroyed. Of course, you can always tell in the commodities sector. What the Swiss did is unfathomably bullish for commodities, in particular energy, food and precious metals. Every rich person with a Swiss bank account in Swiss Francs will be scrambling to turn that into the one hard currency left: GOLD. That is what the Swiss said to us earlier this week. They told every investor on the planet “we don’t want to have a hard currency.” If you want a hard currency you have once option now. Gold. When people really figure this out it is going to be a mad scramble for physical metal the likes of which no one alive has ever seen.
Peace and wisdom,
Mike
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i say the franc (as a safe haven at least) is finished
terminado
maybe that's what "they" want everyone to think....
maybe...but given the way the snb caved to the irs and their recent desperate attempt to depress the value of the franc by taking on unlimited amounts of worthless paper that they will eventually have to disgorge at massive losses i think the simpler explanation is that they (the snb) are idiots
Never expect a sound currency from a rampant socialism union. Mathematical impossibility.
Are you talking about Europe or the States?
Both.
When politicians are allowed to pint money at will the currency is doomed b/c you can be sure as heck it's being spent on unproductive activity that ruins the real growth opportunities and economy at the end.
Nah, Nah, Nah.....Don't you get it? Its all a fiendish plot.....!
I agree. I mean, think about it. The swiss peg the franc to the Euro, that means that gold will only go up (and faster) as the euro collapses, and swiss has a lot of gold. When the time is right they can depeg whenever they want to. Plus as the euro continues to fail it will make Swiss products (not just financial instruments) more attractive. Switzerland is used as a final assembly location for much of europe because of low taxes.
myTPisUSD,
< and swiss has a lot of gold>
For a small country they do, as for the toatal they own, NOT so much.
Since they went off the Gold Std
"...and swiss has alot of gold.." STOLEN by Nazis. :-)
.
Another simplistic article that does nothing more then say "Buy Gold". No insight hear into the intricacies of the EU, the ECB, the SNB and the political realites of all the EU countries. Just blah, blah buy gold
Funny how the ECB is way more hawkish then the Fed yet they say the Euro will hyperinflate first.
Pretty God Damn Article in my book ! We'll see how you blah blah when shtf...
"kaput" ...as in "not working as intended." "finished" connotes a failure of the intended purpose...yet you claim this is exactly what policy makers want. Therefore the "euro is kaput." this is very important to know this too. You see "you laugh but kaput is not funny." ....haha...i see you are laughing again.
They will continue to issue debt . . .
. . . until nobody will accept their debt anymore.
And then they will try to take what they want by force.
Until they are stopped by force.
.
agreed. The Euro is a debt prison pure and simple.
What is wrong with the Euro at the moment is what is right with it.
Only an ill-informed individual with no understanding of national identities in Europe would spout such nonsense. Other than not being the Fed, the ECB has nothing going for it.
By buying bonds from governments and providing cheap credit to banks around Europe in a bid to stem the debt and bank crisis, the Eurosystem which underpins the ECB has become hugely leveraged. With only €81.187 billion in subscribed capital and reserves, compared to €1.895 trillion in assets, the ECB is now leveraged 23.4 times.10 In contrast, strong central banks such as the Swedish Riksbank, the Norwegian Central Bank and the Swiss National Bank, are leveraged only 4.7, 5.9 and 6.3 times respectively. Meanwhile, the average hedge fund is leveraged around four or five times.
Table 1: Spot the difference between the ECB and other central banks
(€m) Capital Reserves Assets Leverage C+R as %ratio of Assets
ECB 10,761 70,426 1,895,870 23.4: 1 4.25
Swiss NB 36,174 - 226,641 6.25:1 15.96
Sweden 110 7,235 34,757 4.73:1 21.1
Norges Bank 8,441 - 49,345 5.85:1 17.1
Source: ECB weekly financial statement 24 May 2011, SNB Balance sheet, Swedish Riksbank weekly financial statement and
Norges Bank Balance sheet April 2011
Not only did I 'up arrow' you, I now will give you a:
+1
Also.
Nice work.
Ehmmm...
Wait
The assets and ratios of CB's are only relevant for the DEFENCE of a currency.
Not the current situation, is it?
In a defensive I-have-to-keep-value situation RESERVES are what you need, FX and/or Au.
meaning they are (gulp) not that far from needing recapitalization....
When democracy is replaced by tyrany those with rifles will still get to vote.
yippee, I will get to vote 25 times!!
Yeah so? You can only fire one at a time chum......
"Those who vote decide nothing. Those who count the vote decide everything." - Joseph Stalin
Our overlords will continue to issue debt that no one wants, but which everyone will be required to purchase if they wish to see their banking licences unrevoked.
I'm very concerened that you are right about that.. sad times ahead.
Yeah, that's about right....couldn't have said it better myself.
Begs an interesting question: What is a successful transition out of the EU from Greece's point of view?
Basta!
Meh, transitory
Best line in the whole article 'This 'problem reaction solution' worked for the elite in the prior era but it will no longer work, we know the playbook now, it has been read and studied, its not going to work this time'.
Much appreciated Mike. Always enjoy your views.
The only way the EUR is saved (if even temporarily, as in kick the can for a few months/years, and losing 50% or more of its value over a very short peiod as the ECB cranks out the EUR trash fiat), is if German Politicians fall on their literal swords as they pledge current and two or three future generations of Germans' labor, savings, sweat equity and output in order to bail out the welfare PIIGS+France nation states that surround them.
And even if German Politicians fall on their literal swords doing this, it can all be undone when their successors are brought into office, and the former office holders have to literally seek exile for reasons of their personal security.
I've never before seen anything blown so far out of proportion by so many completely uninformed "experts".
And your defense of the EUR and EU is so thick with meaty, substantive statistics.
Do tell how Germany is going to stretch itself thinly enough to bail out PIIGS+France.
They commissars don't want anyone to leave, neither the rich nor the poor.
EU = Hotel California?
"According to the opinion of the EU-comission, the highly indebted Greece cannot be excluded from the Euro zone. "Neither voluntary departure nor exclusion are possible", the spokesperson for EU-commissar Olli Rehn said in Brussels on Thursday. The Lisbon treaty specifies that membership in the currency union is "irrevocable". The spokesperson specified that his was both a judicial as well as a political reply, and added "There will not be a discussion about this."
(Source: Topnews Dow Jones)
Them's fight'in words!
"Them's fight'in words", y'all!
http://en.wikisource.org/wiki/Consolidated_version_of_the_Treaty_on_European_Union/Title_VI:_Final_Provisions#Article_50
http://en.wikipedia.org/wiki/Withdrawal_from_the_European_Union
Perhaps these sources are outdated, but there explicitly IS an exit clause in the Lisbon treaty. If a country (esp. Germany) decides to withdraw, what is the EU going to do to stop it? Send in troops to prevent a humanitarian disaster?
For more detailed analysis:
http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf
Of course, you are absolutely right in that they want NOONE to leave.
I think J.C. "lie when it's really important" Juncker had a hand in crafting this statement...
How have we got into such a state that the fate of the world 'economy' rests on what a bald Jew fella has to say?
Oh yes, that's right, it's apathy that got us in such as state... and apathy is rife in the good old USA, more prevalent than ever.
At least the men and women of the middle east and parts of Europe got out of their chairs and put up a fight against the tyranny.
That's true but we already have a zog and they are ironically just starting one. If the UN and USA help liberate countries you can bet a Rothschild controlled central bank will appear. Then they can start thier lovely new lives repleat with ipads, wide-screen tv's and 7 credit cards each. That's not what I call liberation.
Leave the Jew stuff out of it... The Jews are our elder brothers and don't forget that.
Researching Criminal zionismSo is Ron Paul:
http://www.washingtontimes.com/news/2011/sep/8/perry-vs-paul-texas-sized...
"So is cheerleader Perry" ..there, fixed it for you.
Ron Paul is done being the nice guy perhaps. Wtf was up with Perry grabbing him onstage?
You mean the status quo, college cheerleader, bully neo-con, also known as Mr. "I'll keep safing the shit out of you and abusing executive powers" Perry?
http://news.yahoo.com/photos/texas-governor-perry-talks-during-break-rep...
According to a police officer friend of mine, Class B assault (for assaulting a public official).
Slick Rick should be facing charges.
paul can have a lot of fun with that one, there are pictures on the internet too....i heard it said he was thin skinned but please. you don't walk over and grab someone else by the arm during a debate..........good grief............ha ha ha ha .......where is rodent?
Get your Gardasil-soaked hand off MY PRESIDENT, you, you CHEERLEADER!!!
http://www.ronpaul.com/2011-09-08/force-vs-reason/
http://www.lewrockwell.com/politicaltheatre/2011/09/stop-telling-the-tru...
The internet has made the earth flat and created worldwide labor rates rushing toward the bottom. Today labor is worth $5/day w no benefits. Tomorrow $4/day. Developed countries EU/USA with massive social programs are going down.
Then developing countries with following as EU/USA consumption drops. It was all created by the internet.
Earth being flat, as you say, hasn't hurt ol' Tom Friedman none. ;-) - Ned
Ding Ding Ding, we have a winner (partially). GATT/WTO put an additional 1 billion (mostly unemployed) people into the global labor pool. The internet just greases the skids
of course, mike. good job.
many have heard the rumblings. few have scrambled to safety by buying gold.
Good stuff Mike, keep up the good work!
Here we go eur/$ 1.6000
As long as the US can make loans "off the books", the Euro will not "collapse".
I wouldn't put it past Bernake to screw the whole system with his mis guided good intentions.
What he fears the most will happen, the history books will blame him for the greatest recession on record.
I think Greenspan has that one locked up tight. No...I think he's worried as we all are about his job. Clearly he has helped make it safe for the Fed's to borrow without regard to math or science. And as we all learned lasr night from "the new kids on the Presidential block" that means "you're fired."
Here I always thought the Emerson quote ended differently. I thought it went, "What lies behind us and what lies before us are tiny matters compared to what lies right to our faces."
The power elite in Brussels will fight the exit of any members of the EUR currency zone with all means available until the entire continent lies in ruins. That includes tidal waves of QE by the ECB. If the EUR is to break up sooner, only the markets can do it. The German taxpayers and voters have as little influence under the current political parties as their counterparts in the US. For Germany to leave the Euro, a new political party will have to be created with someone like Marine Le Pen as its head and win a majority in 2013.
true and true.
Marine Le Pen throw false euros in the River Seine in Paris to protest against the new bailing out of Greece.
http://www.youtube.com/watch?v=GOWFGbWvhxs&feature=player_embedded
I've seen this film before and its now coming back like a broken record. People in glass houses....
Could not agree more. Very well written.
This wave is coming over us all.
V
Tipping Points
Everyone will flock to the Dollar. The gold market is too small and too volitile to be considered a safe haven investment.
Everyone will flock to the Dollar. The gold market is too small and too volitile to be considered a safe haven investment.
If that happens, the central banksters are screwed, remember the FED's first mandate 'trash the dollar', a rising dollar is total disaster for the FED and its 'holdings'. Theyll never allow the dollar to rise.
One other possibility yet discussed would be that as the Euro devalues and eventually becomes par with the dollah, the IMF in desparation mode steps in with the SDR as a world currency to prevent an eventual global monetary collapse.
Temporary measures at best, looooong PM's.
Yes the endgame is 1 currency under world bank govt control, I think theyre stuck as they see their old 'problem-reaction-solution' way of operating is no longer working so theyre not really sure just how theyll get there but yea thats the goal.
FREEGOLD bitchez
The Euro Zone mark to market gold price party aint even started yet.
Article right to say buy gold but IMO, gold to the moon will SAVE the euro not end it. The nuclear option as FOFOA rightly highlights in
http://fofoa.blogspot.com/2010/05/open-letter-to-emu-heads-of-state.html
Well said Mike. Beautiful.
The Germans should "just say no" to more bailouts. Greece and other PIIGS may then choose to default or to exit the EZ and debase their currencies. It doesn't make any difference to their creditors, since either way they won't get paid.
Time for us to do the same. The best way to beat these crooks is buy and hold physical Silver. Do some research and I think you will come to the same conclusion.
The musical chairs game with currency is coming to an end. The only chair left is gold, but there's not enough to go around, not at these prices anyway.
Mike, you continue to amaze me.
Most of your stuff is regurgitated pablum. But when you say things like 'we are going to be sourcing locally, growing food locally, etc' it confirms that you don't have the foggiest clue about business economics and the drivers of production.
Here's a career hint for you: Stop writing about stuff and go make stuff. Write once you get an education on how things work and stop pandering to dullards that anyone can whip up by saying things like 'elite', 'powers that be', blah blah blah
So do you run a business, if so what size? what have your margins looked like for the last two years? I can tell you that, where possible, we have started looking for local solutions. It is called margin compression. When are these ivy-league fucknuts going to get hung? I think things will run much better after that. They can't do, so they teach. Crash the system already so that compensation can find its way back to folks that are actually worth a shit. Hint for you; go run you own business with your own capital, not taxpayer's dollars.
I do run my own businesses. Size would be in the small business classification. And margins, they are stable. They have to be. I learned a long time ago, with my own money, btw, that one exits low margin efforts when at all possible (I understand loss-leader concepts and needing to sometimes provide certain products or services as hooking events, so there are exception, -- but, by and large, low margin = exit). Local .vs. Regional .vs. National .vs. supra-national are choices that everyone always makes, what the current energy landscape looks has LITTLE to do with those choices. You going to wait for someone to make cordless dril locally or are you going to buy a DeWalt or Makita or Festool? Did energy enter in that equation? Your local farmer going to supply you with tomatos, corn, wheat, hogs, cattle, chicken year round? Really? And let's talk about energy and how it mighjt drive the process. Maybe bigger is better if resources are constrained - regardless of what resources we are talking about. Large scale farming is less energy intensive than many local farms doing the same thing (think about that for a minute). Maybe it's better that there are only a few LARGE companies that manufacture cars, batteries, windows, jars, pottery etc because they use LESS resources that lots of little, 'local' companies all pursuing the same thing.
Local DOES NOT EQUAL less resource use -- it is usually the other way around. Instaed of going into a class tirade, or an 'Ivy league' bashing tirade, you might want to reflect on what is being said by the likes of 'Kruger'. He has an agenda (don't we all). As for your asinine comment about my capital .vs. taxpayer dollar, etc - you're a dope.
>But when you say things like 'we are going to be sourcing locally, growing food locally, etc' it confirms that you don't have the foggiest clue about business economics and the drivers of production.
That scenario could happen if energy and transportation costs rise abruptly: the global division of labor would suffer.
But energy futures suggest such a crisis is unlikely. It's just the quantity of clownbux that's causing prices to rise.
Doctor A, I submit that scale offers a better utilization of scarce resources .vs. the intuition pump of 'do things locally'. As a matter of fact, that is how small companies became large companies at the expense of 'local choices' in the first place. Also, many large scale players in lots of different spaces are practicing a think National - operate - regionally strategy. One has only to look at a package from Amazon to see that they have many regional warehouse to facilitate shipping at advantageous rates.
What may happen is that people may need to drive less, consolidate vehicles, consolidate shopping trips, etc. That will eliminate alot of 'waste in the system' IMHO....
When will we be using Free and unlimited energy ??? because it does exist ! so let's stop about those big companies making bucks and let's get down to real stuff..as I said in an previous post, I have serious concerns about those Big companies making money...legally
What??? the USA is the United Socialism of America???
This is another ridiculous article. How does the author explain the soaring yen even in the face of the biggest industrial accident in history? Obviously we already have the energy alternative "and it ain't nukers + mystical battery packs." i let u all figure it out since it's totally obvious.
If your thesis is correct and the Euro is finished, then parts of Europe are facing civil war...
No. We have that eventuality fixed as well. Move along...
We're all facing war, far sooner than most think.