We live in complicated times with many messages reaching us throughout the day, the largest number of them misrepresentations of facts. To finally face where we are and where we need to go, we need clarity. With each country preparing for the worst, hoping for the best, it lately comes with a greater price. As governments tinker with cash flow chaos, and with defaults threatening both sides of the globe, we are experiencing a paper war no other time in history. There is a reason to be concerned when seeing the whole picture of 420 banks calling for one currency.
With no change in the debt ceiling as it goes into its last stages, the Gang of Six calls for temporary debt limit increase. While it’s only a plan nothing is solved, heads or tails bailouts continue in Europe. The EFSF (European Financial Stability Facility, a special purpose vehicle agreed by the 27 member states of the European Union), has agreed to a ‘selective default’ for Greece. This means, the EFSF will accept some Greek debt while delaying others. These will further apply to the other Eurozone nations such as Ireland and Portugal. However, the question remains how will Greece ever grow enough to pay off this latest loan of 70 billion Euros? Going into large amount of debt and monetization EURO is growing, who will then fund EFSF? The situation seems to become even more bizarre, because Greece wants to default but the French and Germans keep forcing money into their hands to keep them afloat. With less and less promises of any payback being given. But, the chieftains blocking the default is a necessity they say, to avoid the creation of carnage in the world markets. The ECU would become insolvent, the banks nationalized, there would have to be new currency redenomination, Ireland and Portugal would walk away form their own debts, and Germany and France loses. All that would remain in Greece is the cleanest sea water and empty beaches.
Unfortunately, this second bailout will only be a temporary band-aid that will come off again and the bleeding will be worse. End result, it accomplishes nothing but keeps the Euro afloat, which is the worst thing to happen to Europe. While the demands for Greek goods have not increased, the debt may be put off, but then what happens when the underlying problem in a declining economy is unsolved? The EU cannot create a growing economy out of thin air. An extension granted again for a few days to recharge the nations’ credit card will head the country right back down. While bond funds only work on discounted cash flows, currency fluctuation will repeatedly jeopardize a default mechanism. The ECB prints their/Greece/EU way out of insolvency just like the Fed and will end up in more of a mess then present. The fact is that Greece is actually defaulting, affecting all the global economic market networks. All world economy is so interconnected–that sink or swim the countries are tied together and depend on each other. However, there has never been a time in recent history when the population felt as helpless as this. These are not just a paper debt issues, but a currency and political issues.
Ultimately, it may happen that leaders end up saying, we need only digital money because then one cannot transfer the virus by cash money. That will come much later when the world currency becomes digital. Over the long haul gold will be the asset to go higher, depending on the shaky fate of the US dollar and the state of the US deficit. The US holds 9,000 tons as reserve. At $1500 per ounce that is less than $4.4 trillion. In fact all of the gold ever minded (165,000 tons) is worth only about $8 trillion at today’s prices. As a global reserve asset—gold will probably go much higher—“maybe $3,000-5,000 per ounce.”
Gold is the only true store of value these days. “The facts are impossible to dispute; gold is not only in demand but it has acted as a safe-haven and oasis in a financial world of uncertainty,” says Regal Assets Team of Analyst. And, dips are good. The U.S. and Europe have repeatedly shown that they are both unwilling and unable to take the difficult steps to really deal with serious and catastrophic debt issues. That is why China is putting dollars into commodities and hard assets should the dollar crashes. No wonder they’re buying gold with the slowly collapsing dollars owed them.
Source: http://goldcoinblogger.com/bizarre-global-economics/#more-3294
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