The Greek Tragedy Is Just
a Sneak Preview of What's Coming to Washington
Ron Holland
May 21, 2010
"The current European debt crisis
likely will not end until the euro collapses as a currency and
takes the entire European Union with it."
-Dennis Gartman, hedge fund manager and writer of The
Gartman Letter.
I was just in Greece, where the stupidity
and venality of the political class are in full view.
The coming repudiation of Greek debt and the credit contagion
that will spread among the weaker members of the European Union,
including the UK, will ultimately slop over onto the U.S. But
while we wait, the process will bring us the answer to a long-simmering
question. Will the European Union be a supra-state ruling the
formerly independent nations of Europe or will it be a confederation
of quasi-independent sovereign nations?
The Eurocrat elites want a union of European nations with one
central bank, one currency and just one flag that really matters,
all molded to fit the American model. I believe Europe would
be far better off as a confederation of sovereign states that
allows competition among individual national currencies. Some
countries might even revert to backing their national currency
with gold. It's amazing how responsible institutions become when
they're forced to compete.
Even with national currencies, there still would be room for
the euro, which the European Central Bank might make convertible
into gold. Remember, Germany knows more about the catastrophe
of runaway sovereign debt and currency collapse than any other
nation in the West, and today they lead Europe and the European
Union.
Although the euro has lost 16% of its value in the last 120 days,
I expect it to survive the sovereign debt crisis. But the euro
zone may shrink as Greece and the other fiscally weak governments
replace the euro with national currencies that they can inflate
whenever convenient. That would leave the euro as the currency
of choice for a few strong, wealthy and fiscally conservative
nations like Germany the countries most likely to welcome
a gold-backed currency.
We are now living through the violent end of the age of fiat
paper money and thoughtless government debt. In the future, the
desire for a secure store of value and medium of exchange is
going to force currency competition. Even the U.S. dollar, following
hyperinflation and a run on our American national debt, could
be reborn as a gold-backed currency.
But the transition will be full of hazards that could touch you
in a very painful way. Where will bankrupt Washington get the
gold to provide a credible cushion for a new currency following
a hyperinflationary collapse? The special hazard for American
citizens is that the government will get the gold it needs by
taking it from them.
But between now and then, prepare for some tough times, and expect
periods of dollar strength vs. the euro and even the Swiss franc.
There is no official link between the franc and the euro, but
the euro tugs on the decisions of the Swiss National Bank, since
Switzerland trades predominately with the EU countries. The Swiss
franc won't move as violently down and up as the euro's big swings,
but it will track the general direction.
Americans should use their recently stronger dollars to add to
holdings of Swiss francs, of securely stored offshore gold and
of mining shares, along with some Asian investments. With trillions
in unfunded liabilities for Social Security and Medicare, Washington's
debt load is far greater than the burden that is now crushing
the governments of Greece and the other PIIGS countries. The
dollar's current strength will prove transient.
Eventually the sovereign debt crisis will also come to the U.K.
and then to the U.S., with disastrous results. The tragedy in
Greece today is just a glimpse of what will happen to the sovereign
debt of the United States. It will come to America, and it will
come on its own schedule, so be prepared.
###
email: ron.holland@bfi-consulting.com
website: www.ronaldholland.com/
Ron Holland is a long-time advisor
to international investors seeking secure, legally compliant strategies
to protect and grow wealth. He currently serves on the Board of
Advisors of a major Swiss wealth management firm and is co-editor
of the successful financial report Mountain Vision.
He is a strong
proponent of global investment diversification outside U.S. markets
and the dollar as protection from America's exploding national
debt.
Copyright ©2010
Ron Holland
321gold Ltd
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