Are we about to see the collapse of the EURO? This is an extract from an article by Dr Pippa Malmgren, Senior Advisor to USB, PREI and Advisory Board Member of Indiana University and SOAS.
From her September 2011 Policy and Markets Commentary:
“News to expect in the coming days and weeks:
- Greece defaults
- Germany protects German Banks but other countries cannot do the same thus quickly provoking multiple sovereign defaults and or bank failures, all of which may easily lead to a payments crisis in the global banking system. Derivatives are particularly at risk in terms of operation and execution.
- The Euro falls in value especially against the US dollar
- The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.
- The Euro falls even more on any news that Germany is withdrawing from the Euro.
- Legal wrangling begins as to the legality of Germany’s decision. Resolution takes years.
- Germany insists that the Euro continues to exist even they do not use it any longer. They emphasize that European unification will continue and suggest new legal instruments to strengthen European Unification including new EU Treaties.
….The Vice Chancellor of Germany, Philip Roesler, gave a speech on September 11th in which he said there will be no more bailouts and any German politician who approves a single Euro for the debt problem of another European nation will not survive in office. This is consistent with a German poll over the weekend that shows more than 70% of Germans oppose any more transfer of German wealth to nations with debt problems.
Please note his specific language: Roesler told the Monday edition of Germany’s Welt Daily: “There should be “no limits to thinking” of possible scenarios of how to end the Euro crisis.”
The Germans have already concluded that if they are going to write any further checks then they are going to write them to their domestic institutions and protect their domestic investors. Necessarily, this means that many Eurozone countries will default on their debt. It now seems this will happen within a matter of days. Germany has, therefore, already announced its intention to ring-fence and support their own banks and only their own. This may ultimately involve the nationalization of some or even all the German banks. This is necessary because a falling Euro will further weaken the ability of the other Eurozone members to meet their commitments and thus increases the risk of multiple sovereign defaults. Eurozone countries that are going to default will do so virtually simultaneously rather than sequentially….
….If any doubts remain about the German inclination to return to the DMark then consider these announcements. Switzerland announces a peg to the Euro. It was crystal clear at Jackson that the Swiss leadership expected an historic event to occur which would culminate in a rush into Swiss Francs. They tested the water by announcing a “fee” which would be applied to all non-Swiss purchasers of their currency. Within a few days they announce the peg. In short, Switzerland knows what is coming and has just barred the door to anyone who might try to escape the demise of the Euro by leaping into Swiss Francs.
The statement by the central bank in Canada is similar. I happened to be in Canada when the statement was made. Canadians were deeply confused. After all, to paraphrase, the central bank said, “all the bad things we thought might happen, are now happening, so we are going to maintain a highly defensive position”. In other words, Canada is also gently warning the markets that it will do what it has to do to prevent the currency from suddenly accelerating in the event of a European currency implosion.”
The potential for a further increase in Financial Market Volatility cannot be ignored.
To read the full article go to: Principalis
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