Europe Will Devalue Or Dissolve - Welcome To The Currency War
Interest-Rates / Eurozone Debt Crisis Nov 27, 2016 - 05:16 PM GMTBy: John_Rubino
No rest for the wicked. With the shockwaves from Brexit and President Trump still reverberating around the world, the established order is bracing for more bad news. Next up is a December 4 Italian constitutional referendum that might end the reign of centrist prime minister Matteo Renzi and replace him with a bunch of anti-euro iconoclasts from the Brexit/Trump part of the spectrum.
And not long after Italy takes its shot at the status quo, France will go to the polls for a run-off presidential vote pitting far-right François Fillon and extreme-right Marine Le Pen. Check out the latter’s rhetoric:
Brexit: Check. Trump: Check. Marine Le Pen: ?
“I think that the elites have lived too long among themselves. We are in a world where globalization, which is an ideology, has forgotten, and put aside the people, the people’s interests, aspirations, and dreams,” National Front party leader and French presidential candidate Marine Le Pen told CNBC following Trump’s election victory.“They have acted like carnivores, who used the world to enrich only themselves, and whether it’s the election of Donald Trump, or Brexit, the elites have realized that the people have stopped listening to them, that the people want to determine their futures and in a perfectly democratic framework, regain control of their destiny. And that panics them, because they are losing the power that they had given themselves,” Le Pen went on to say.
The major tenets of National Front’s ideology include nationalism, protectionism, and right-wing populism – with strong stances against immigration. A once obscure political party that had no real weight in French politics, the National Front is now a major player.
Envious of the U.K.’s Brexit referendum, Le Pen wants France to leave the European Union. In campaign stops across her country she has championed for more immigration restrictions and has been vocal against radical Islam – very akin to the way Donald Trump carried his campaign. Much like the president-elect’s foes, Le Pen’s critics have relentlessly labeled her a racist and a fascist.
It’s hard to overstate the threat posed by these two votes to the EU — the world’s largest economic entity — and by implication to the rest of the global financial system. Italy is the third biggest country in the EU, and France is the second. Let either pull out and the result might be dissolution and the end of the euro. Trillions of dollars of euro-denominated bonds would suddenly be converted to lira or francs, forcing the holders of those bonds to take big losses and impairing bank capital across the continent, leading in turn to derivatives blowing up pretty much everywhere, and so on until the whole house of cards is threatened.
So what does a fiat currency/fractional reserve banking Establishment do when confronted with such a looming catastrophe? What it always does of course: Cut interest rates and ramp up money creation in order to devalue the currency.
Put another way, the only way to ease the burden the common currency places on inefficient countries like Italy and France is to cut the value of the euro to the point where French wine and Italian cars are screaming buys around the world. Those industries grow and hire more people, who in turn are more open to preserving the status quo.
Now combine a massive euro devaluation (which, by the way, is already in progress)…
…with a trillion-dollar US infrastructure program financed with borrowed money, and the result might be a world awash in unprecedented amounts of liquidity. If that’s not paradise for precious metals then it’s hard to imagine what would be.
By John Rubino
Copyright 2016 © John Rubino - All Rights Reserved
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