Greetings!, Henry Kissinger once remarked that Germany is too big for Europe but too small for the world. It is becoming clearer that Germany may be both too small AND too large for Europe as well as irresponsible toward the rest of the world. I bring this up because of the teetering of the euro zone. The question of what will happen to the eight European countries (of 17 total) now in recession has taken center stage in the world economic theater. Greece today said it is essentially bankrupt. France sent its retirement age back down to 60 from 62, creating more future obligations. Expectations of European Central Bank stimulus pushed gold up in European trading and then it just as quickly slid down to modest gains in New York. The E.U. interest rate will hold at 1%. Germany, along with France and the Netherlands, controls the purse strings. It is, in essence the central banker for the E.U., if not in fact, than in leadership spirit. Imagine, if you will, the U.S. federal government not stepping in directly or indirectly to help a bankrupt Mississippi, or Ohio, or Florida. Unimaginable. Yet, Greece, Portugal, Spain and Italy face a parallel prospect. Germany believes in frugality, certainly an important component in righting the economic ship of Europe. However, it is next it impossible to solely cut your way to prosperity. And so, Europe stumbles on. That is driving the flight of money to the U.S. dollar and the yen as safe havens, and is surely the biggest factor in preventing gold from going toward the $1800 or even $2000 level. But, at some point, Germany will have to give in, or we will see defaults, more uncertainty and a Europe mired in a second Great Recession. Inflation has been bottled up for years now, and I believe, perhaps because I am an unapologetic gold bull, that it is damaging the world economy. At some point, all the U.S. treasuries, all the renminbi paper, and all of the euro bonds will have to enter the market. Inflation pressure is building. Gold is waiting. As always, wishing you good trading Executive Producer |
