Both restructuring and monetization are equivalent to a default. The total outstanding stock of debt (Government + private + commercial) is so huge (~60 Trillion), the carrying cost is like a millstone tied around the economy's neck. At an average interest rate of 3% - over 12% GDP goes to cover interest costs, alone. Ron Paul is right. A massive deleveraging that shrinks total money supply needs to happen. This is what's meant by, 'clean out the bad debt'. Western economies naturally want to contract and deflate to correct for the overinvestment and indebtedness accumulated during the housing run-up. Private credit demand isn't there to offset the loans being paid back now (simply because individuals and corporations borrowed too much to begin with!). It's really a debt ponzi scheme and it's done. Popped. Holding it up with Government borrowing only hastens a currency demise which implodes the savings of the bottom 50% and reduces to poverty everyone who isn't fully vested in stocks and real estate. I would wager that's roughly 70% of the population. What's better? A hardcore, 1930's style depression for 2 years? Or Argentina? Mass civil unrest, rioting, gangs on the streets and a rollback to 2nd world living standards? There's no easy solution at this point. Wallstreet and their media apologists tout Keynesian fixes when Keynesian economics hasn't been practiced since the late 70's, under Volker. Keynes advocated low rates and deficit spending during recessions and high rates and surpluses during booms, to moderate the business cycle. Instead, politicians and bankers perverted Keynes and never allowed high rates to clean out the malinvestment from the prior boom. So what we have now are a legion of banks and home owners, desperately clinging to Government deficit spending to keep their underwater balance sheets afloat, that otherwise simply shouldn't exist. All this debt ought to be liquidated. Wrote off. Destroyed. Money sustains business and when that credit evaporates and ceases to exist, the businesses dependent on that credit meet the same fate. This is the natural course of things and needs to happen. Otherwise, we'll end up propping up useless finance guys and burger flippers in their mansions until the dollar implodes, and then we'll all be toast. What's the point of that? Better to sacrifice the useless fuckers now then let them take down the Dollar....and us with it. Look at Greece. They destroyed their drachma. If they get kicked out the Euro, their pain will be incredible, albeit short(er) lived (2-3 years). If Bankers and their apologists get their way and force a run on the dollar to save their ass, America gets turned upside down. Realize, all this talk of inflating debt away, only helps the Bankers and finance guys. This is the only monetary avenue that will save their own ass. The alternative - credit destruction and deflation - wipes out >70% of the FIRE industry (Financial, Insurance, Real Estate). That's why Bankers, finance gurus, Wallstreet types, and their media apologists tout debasement and debt inflation all day long. It's us or them. Sacrifice the Bankers and take our licks. Or blow apart the dollar, throw the masses into the caldron, and let the Bankers rule over us. That's what it comes down to.
achilles might have a point there. Having read all of the articles saying "Greece won't be contagious" i'm still unsure what to expect. You guys think the EUR.USD is going to keep sliding down? I don't ever ask for "opinions" on ET of all places, but there's so many contradictory strong opinions now, i myself am 51/49 in favour of Short EUR. Italy and Spain bonds are still at 6%, I'm seeing the EUR.USD going down to 1.0 during the year as a possibility. The ECB forced the institutions to buy bonds, hoping they'll "play nice" but if this gets out of hand, i'm not sure counting on bankers honesty is such a good idea, plus the panic. Thoughts?
A few scenarios: 1) PIIGS remain in the EURO, unable to roll-over debt > huge French and German bank losses > ECB monetization 2) PIIGS are booted from the EURO > outright default > huge French and German bank losses > ECB monetization 3) PIIGS are booted from the EURO > restructure debt > large French and German bank losses > ECB monetization Finally, and most unlikely 4) PIIGS are booted from the EURO > all debts are monetized in their original currencies > French and German banks are made whole > Lira, drachmas etc collapse in the global market and Greece/Italy/Spain etc descend into turmoil. #4 is a pipe dream. Portugal or Greece will have zero political or financial will to make good on their debts by debasing the shit out of their currency. Their voters won't have it. The most likely outcome is #2, or #3. All roads lead to monetization under the current regime where Bankers rule the day. Euro parity looks good. With FED talk of QE4, why not look for another trade? Say short euro/gld or euro/oil?
Yeah I agree, the euro and $ are friends, they're most likely going to meet half way like real friends do! It's just asset protection i'm thinking, not my active trading account. What you say makes sense. I'll probably diversify the shit out of it with a slight skew against inflation and just leave it. Some of my family keeps CHF as a safe haven, although I keep telling them not to. How low will the euro need to go before the crazy Swiss un-peg it? I haven't heard any speculation on that by anyone. I mean if we go down to 0.90 EUR.USD will the Swiss still be like "mkay we don't care" ? I'd expect at one point they can't afford to keep buying and it'll just explode, making CHF a good safe haven. Let's speculate. Also, are there any figures on how much buying (of currencies) the Swiss bank is doing to keep the CHF where it is?
If you want to short EUR (based on expected monetization), then you can also consider some slightly slower-moving trades, such as short EUR/GBP.
The silver price has fallen in my opinion due to the increase in dollar value against the Euro. I think it is an indicator that the relationship with currency and silver is mainly linked to the dollar.
It appears they are being a bit smarter than that - buying up long-term access to resources ex-USA instead. It's a tricky business - "nationalizing" is always a threat - but it's certainly better than blowing it all on hookers and blow in Vegas or buying the Rockefeller Center for a zillion dollars.