As I’m writing you this email, the Euro is sinking to an 11-year low, as the EU struggles to avoid a full-fledged economic melt down. And while those of us who earn dollars “feel” richer, I wouldn’t go counting our chickens before they hatch…
The real reason the dollar looks so “strong” is that the Euro, and other currencies are just weakening.
Here are 5 Signs The Euro is Going Down:
1) The Swiss Are “Out.” The Swiss, who once vowed to defend the Swiss Franc - Euro peg with nearly unlimited amounts of money, have changed their tune. It seems, they have reached that threshold, and now The Swiss franc is floating freely against the euro after the Swiss National Bank last week abandoned the 1.20 francs-a-euro cap it had maintained since September 2011. The franc remains roughly 16% higher against the euro since the SNB’s policy change. Causing major losses for banks. Citigroup and Deutsche Bank both say that their losses were somewhere in the neighborhood of 150 million dollars, a major hedge fund that had 830 million dollars in assets at the end of December has been forced to shut down, and several major global currency trading firms have announced that they are now insolvent.
2) The Greeks Are Done With Austerity (Again). The far-left Syriza party wants to scrap austerity measures demanded by international lenders, and renegotiate debt payments.
3) The Germans Are Sick Of Supporting The Mess. The Germans are sick of being one of the only fiscally-sound countries supporting and paying for the falling euro because of the bad spending decisions of Greece, Spain, and Italy. Jeroen Dijsselbloem of Germany warned on Monday that, "The major problems in the Greek economy have not disappeared.”
4) Bail-Ins Are Real. And they could be coming to another bank near you. As we learned in 2013, when the Cypriots were relieved of a portion of their life’s savings by virtue of an across the board “bail in” to pay for banks’ bad decisions… let me assure you, bail-ins are real. And in 2014, the IMF said that what happened in Cyprus was a “good model” to follow, as long as they could pull it off without the masses (that’s you and me) finding out and getting their money OUT of the system.
5) Economy in Trouble? Quantitatively ease it! The European Central Bank plans on buying government bonds to put more money into the Eurozone. Is this a good idea? *Read With Sarcasm* “Oh, why, yes… let's buy more bad debt from broke governments to artificially inflate the perceived spending power of the people to keep the game going for just a bit longer…”
If I were holding euros, I’d keep a close eye on securing your chair, because the music is about to stop.
Just be ready for the dollar to continue to appear strong, as the euro sinks…
Until Next Time,
Max
P.S. I told my wife, when the euro gets below the dollar, it could be time for that Italian vacation. I just hope we get there before all of the countries de-couple from the euro.
Poster Comment:
Anything can happen. Besides, the U.K. never adopted the Euro. Maybe they knew something the others did not.