The biggest news in the markets overnight was this:
“The world’s largest foreign exchange platform has prepared for the return of every original Eurozone currency in a worst-case scenario should the single currency union break up.”
The chief executive of institutional broking firm, Icap, David Rutter told the Financial Times, “We dusted everything off. This is a precautionary step to make sure we’re ready for any eventuality.”
Is the euro on the verge of breaking up?
One day it will. Whether it happens this year, next year or in 20 years, the euro can’t and won’t last… because the European Union can’t last either. Failed empires litter history.
Eventually, power becomes so centralised and individuals feel so excluded the empire collapses. Add to that the fact that a productive part of the empire (e.g. Germany) has to support an unproductive part of the empire (e.g. Greece) and it becomes a case of “when” not “if”.
We won’t go out on a limb and say the euro will collapse this year (although, like Icap, you should prepare for it), because our bet is the Europeans still have a few more tricks up their sleeve.
After all, they’ve done well to drag things out this far.
Take this from a Bloomberg News story in May 2005… almost seven years ago:
“Before Italy joined the single currency, companies could rely on governments to devalue the lira to boost their exports. Stripped of that tool, Italy’s economy has become the least competitive in the euro region…
“…Italy and Greece debt-insurance costs [are] near a two-year high. Greece and Italy have the lowest debt-ratings of the 12 countries using the euro. Greece’s credit-default swaps have doubled since April, while Italy’s have risen 50 percent.”
As we say, it’s when it will collapse, not if.
Cheers.
Kris
From the Archives…
A Story of Sell-Offs & Super Spikes by a Stock Market Trader
2012-01-07 – Murray Dawes
Why BHP Will Be the First Victim of China’s Economic Collapse
2012-01-06 – Kris Sayce
The Sun Starts to Set on China’s Economy
2012-01-05 – Kris Sayce
New Year’s Eve 2029: Will the Australian Stock Market Lose a Decade of Growth?
2012-01-03 – Kris Sayce
How to Buy Gold and Silver
2011-12-11 – Dr Alex Cowie
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