The European Union (EU) was created by the Maastricht Treaty on November 1st 1993. It is a political and economic union between European countries which makes its own policies concerning the members’ economies, societies, laws and to some extent security. To some, the EU is an overblown bureaucracy which drains money…and compromises the power of sovereign states. For others, the EU is the best way to meet challenges smaller nations might struggle with – such as economic growth or negotiations with larger nations – and worth surrendering some sovereignty to achieve. Despite many years of integration, opposition remains strong.
ACCORDINGLY, there are signs the EU is teetering on implosion.
Indeed the Euro zone break up is inevitable for numerous reasons.
Unpayable government debts and the massive bailouts in Greece, Portugal, Spain and Ireland logically pave the road to an eventual EU break up.
While it's convenient to have the one currency for 17 different nations, the nature of those national economies and their strength is quite different and problematic. Indeed and fact it favors wealthy countries like Germany and France at the expense of the PIIGS (i.e. Portugal, Italy, Ireland, Greece and Spain).
Another issue is that while the 17 nations share the same Central Bank, they do not have a central control on government budgets, nor central political control.
Paul Griffiths, Colonial First State chief investment officer does not want to put a time frame on the euro zone being shrunk, but says it will eventually be very different from what it is today.
Unacceptable inequities of the EU are reflected in the Stock Market action of Germany vis-à-vis economically inferior members of the EU, commonly referred to as the PIIGS (i.e. Portugal, Italy, Ireland, Greece and Spain). Unabashedly Germany is living high on the hog (so to speak)…which translates to Germany living high on backs the PIIGS. To appreciate the gross disparity, compare the relative stock performances of their national Stock Indices.
PIIGS Stock Performance vs German DAX Index Since 1999
Literally, the PIIGS have been led to financial slaughter…while Germany lives high on the hog (pardon the pun).
Cracks in the Banking Wall of the Euro Union
In recent years the financial backbone of Europe has been its banking sector. To be sure, a few old name (once) prestigious banks have suffered irresistible dumping of their stock by shareholders. Most devastated are Portuguese Banco Espirito Santo, German Commerzbank, Deutsche Bank and the National Bank of Greece.
Portuguese Banco Espirito Santo stock has plummeted -98 % from its 2007 high of $6.18…and sells today for a mere 12 cents a share. However, several other EU banks have suffered the same fate of relentlessly tumbling stock prices. The chart below shows the heart wrenching losses of share value since mid-2007, which include Commerzbank (Germany), Deutsche Bank (Germany), Barclays Bank UK), ING (Netherlands) and Lloyds (UK).
Negative stock performance for leading European Banks since mid-2007:
And then there is the National Bank of Greece, whose stock has plummeted -99.4% during the past seven years (See chart):
The only salvation for investors in the EU is GOLD
When the ultimate and inevitable demise of the EU begins to materialize, many wealthy Europeans from all member countries will flee to the traditional safe haven of gold. And although the UK is not a member of the EU, its FTSE Stock Index will understandably feel the adverse effects of pervasive stock dumping …ergo the FTSE will also suffer a sharp correction. Moreover, even the affluent Germans will stampede to buy gold…as they realize that gold has soared in value by +345% vs only +89% for the German DAX Stock Index during the past 15 years.
Germans Must Remember the Currency Tragedy of the Weimar Republic from 1918-1924
Students of German history will certainly remember what happened during the Hyper-Inflation of the Weimar Republic from 1918-1924, when German paper Marks became virtually worthLESS (See above chart):
Moreover, the following will give the reader an idea of the viral currency inflation (monetary debasement) that plagued Germany from 1918-1924). Here is a photo of a German bank note for 100 Million Mark.
This near worthLESS bill represents 100 million. In fact in November 1923 One Billion would only buy 3 pounds of meat, or; 2 glasses of beer, or; one loaf of bread.
Although no one expects a repeat of the nightmarish 1918-1924 Hyper-Inflation, indubitably, the impending bust-up of the Euro Union will surely trash the paper Euro currency…as the heretofore members of the EU rush to re-establish their respective currencies. And as America’s greatest author Mark Twain once observed: “History doesn't repeatitself, but it does rhyme.”
And history is testament that the most devastating result of the Nightmarish Weimar Hyper-Inflation was an open door for Adolph Hitler to publish his infamous book in 1925: Mein Kampf…which ultimately led him to dictatorial power in Germany. And the rest is the nightmarishly dark history leading to World War II, which was the deadliest military conflict in history…when over 60 million people were killed.
It is painfully obvious the EU is a political concoction designed to further a covert political agenda. Indeed and fact there is no legitimate or logical basis for its existence. Consequently, it will not…and cannot last.
Based upon the above analysis, the Ultimate Demise Of The Euro Union is inevitable. The only unknown is WHEN AND HOW. Will it be Germany throwing in the towel after years of supporting the PIIGS…or will it be the PIIGS desperately wising to be masters of their own economic fate and sovereignty by abandoning the Euro currency in order to re-establish their old currencies (albeit at substantially lower valuations with a view to stimulate and revitalize their export markets)?
By I. M. Vronsky
Editor & Partner - Gold-Eagle
Editor & Partner - Gold-Eagle
Founder of GOLD-EAGLE in January 1997. Vronsky has over 40 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a Financial Analyst with White Weld. He believes gold and silver will soon be recognized as legal tender in all 50 US states (Utah and Arizona having already passed laws to that effect). Vronsky speaks three languages with indifference: English, Spanish and Brazilian Portuguese. His education includes university degrees in Engineering, Liberal Arts and an MBA in International Business Administration – qualifying as Phi Beta Kappa for high scholastic achievement in all three.