Two of 2011's Surest Bets
Stock-Markets / Financial Markets 2011 Jan 15, 2011 - 07:57 AM GMTBy: DailyWealth
Porter Stansberry writes: When I talk about "The End of America," I don't mean the end of our political union (although I won't rule that out). I'm talking about the end of the U.S. dollar as the world's reserve currency.
So how will it unfold? That's what people keep asking me.
My answer is: The collapse of the global fiat money system is already underway.
Gold has gone up for 10 straight years. Gold is the counterbalance to fiat (paper) money. For 10 years in a row, investors around the world have been favoring gold. This trend is going to continue, and it will not stop until serious actions are taken to put a floor under the value of the world's major paper currencies: the euro, dollar, and yen. And that can't happen because the governments backing these three currencies are all bankrupt. The euro will die first. Just look at the numbers...
Greece, Ireland, Spain, Portugal, and Italy have all made the same mistake. They responded to the collapse of real estate prices and debts by guaranteeing the private obligations of their banks with their country's treasury. (America is doing the same, by the way.) The problem is, the debts are vastly larger than the governments can afford to repay... far larger.
So for example, when Anglo Irish Bank failed, it announced it required $35 billion. That's equal to 25% of Ireland's GDP. And that's only one of Ireland's failed banks. Ireland will never be able to afford these obligations.
As a result, Germany, France, and the other euro nations have put together a bailout plan. All of the European treasuries will act to save any member state.
Total debts owed to foreign investors in the so-called "PIIGS" countries are $2.6 trillion. The bailout package that's been assembled totals $1 trillion. That sounds pretty good... at first.
But Italy and Spain have pledged $130 billion to the bailout. Where will they get that money? Greece has pledged $12 billion. Ireland, $7 billion. Portugal, $11 billion. Only about half this money will ever be raised and almost all that can be raised will come from France and Germany. Sooner or later, the taxpayers in those countries will say "enough" and the whole thing will unravel.
It will happen suddenly. And very, very soon.
Even if you pretend Europe can raise that size of a bailout fund, that figure isn't nearly large enough to bail out either Spain or Italy. And both are likely to suffer a default if either Greece or Ireland defaults. That's why interest rates in Ireland and Greece are back to crisis levels, despite the bailout promise. That's why the euro continues to fall. And that's why shorting the euro is one of 2011's sure bets.
The collapse of the euro will cause all kinds of big problems this year and almost surely lead to a huge correction in commodities and a rise in the dollar. Does that mean the U.S. dollar's problems are just a mirage? Nope. Sooner or later, the U.S. will face a stark choice...
If we let the euro fail, there will be terrible short-term consequences. So the Fed will crank up the presses yet again. Quantitative easing 3 will be another $1 trillion effort, this time focused on buying European sovereign debt. The Fed must become the lender of last resort not only for the U.S., but for the world.
That's the last step before its eventual collapse. After that point, people will no longer flee to Treasurys when a crisis erupts. They will flee to gold.
Good investing,
Porter Stansberry
P.S. One final reminder... We're not "headed" for a currency crisis. We're in one right now. It's very important you know the implications of this crisis and how to ensure your family's financial security. You can learn how by watching this video. Click here to get started.
The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.
Customer Service: 1-888-261-2693 – Copyright 2010 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Daily Wealth Archive
|
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
