Crisis Far From Over : Loss of Currencies’ Buying Power Continues

Market Report, March 30 2012

Listening to the politicians these last few weeks, one would think that the crisis is practically over.Christine Lagarde is even foreseeing the “end of the crisis in Europe and the United States".

Aren’t we living on different planets!

Politicians are only pretending that the situation has gotten better due, among other things, to the
last 1 trillion euro re-financing plan made possible by the BCE’s LTRO.

Said plan which is being followed by an announcement today, Friday March 30, 2012, 2012, by the eurozone finance ministers, of an additional 200 billion euros being allocated to the ESF (European Stability Fund).

But the reality is quite different, especially in Spain, where manifestations are now taking a violent turn.

Spain has now 700 billion euros of debt, a third of which has been contracted these last three months, to the tune of 100 billion a month. Spain will become the next Greece, but in a much more pronounced fashion.

The Spanish banks have never capitalized enough to muster through the crash of the Spanish real estate market.

And this real estate crash is happening at a pace never seen in Spain before: 11,2 % for the last four months of 2011. We are actually witnessing in Spain the very same kind of crash as the one that happened in 2008 in the USA.

The Spanish banks are stuck with more than 390 billion euros worth of bad real estate debt. They are all facing bankruptcy.

The dominant discourse is actually a form of propaganda.

Those analyzing the situation know that the central banks will have no choice other than printing money to infinity, thereby destructing that money’s purchasing power.

We have to keep in mind that only the printing of unlimited quantities of money can save the financial system, whatever the politicians and the central banks would have us believe.

Europe will crumble if some new re-financing plans are not voted in. In a context of coming elections in many European countries, the politicians make it clear that they will use the printing press.

The financial system has been imploding since 2008. Countries are having record deficits (many of them are facing default), but everything will be done to save the financial system for as long as possible by printing more and more money.

In reality, the financing needs of those countries are much higher than the trillion euros they got these last months.

The quantity of money needed to save the actual system is colossal. Potentially, tens of trillions of euros would be needed these coming years, just to keep the system afloat.

Investors cannot trust the dominant discourse to protect themselves from the crash of the currencies.

Holding physical gold constitutes protection from money devaluation; for this reason, investors must hold some. 

The progression in the price of gold is revealing of the loss of purchasing power of the currencies. This is one of the reasons why its price is being “managed” by “financial interests” favorable to a paper-money based monetary system.

Investing in precious metals without being aware of the manipulation going on makes it hard to support the market’s volatility, which can be quite discouraging at times. Hence, one must understand the role of gold as a base for a stable monetary system, and invest solely in physical gold or silver (not in paper certificates). Understanding these two elements helps investing serenely in physical gold and silver.

With gold rebounding from its $1,650 support, correction is over. April should see gold and silver prices go up sensibly, again showing a faster and faster destruction of the euro’s purchasing power.