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Heads up!
And the timing couldn’t be more appropriate: Just this past week, the New York Times … Moody’s and S&P … and now, even top European leaders finally recognized what we’ve been warning you about for so long.
They’re issuing their OWN dire warnings that the Greek bailout may fail … that the debt contagion is spreading like wildfire across Europe … and that the European Union may not survive.
Indeed, if the chaotic events of this past week prove anything, it’s that this great sovereign debt crisis is both a huge DANGER and a major OPPORTUNITY for you right now.
An Impossible “Mission Impossible”
The terms of the latest bailout require that Greece slash its annual deficits to just 3% of its GDP by 2014. That’s like demanding that Washington slash spending by $1.2 TRILLION in just 24 months!
Think about it. Those kinds of cuts here in the U.S. would mean excruciating reductions in Social Security, Medicare and other entitlement programs — cuts that would prove to be political death sentences for any politician who voted for them.
What are the chances these massive cuts will actually be made in Greece? With each passing day, more investors worldwide are answering: “Slim to none!”
And some people in high places seem to agree:
- Yesterday, German Chancellor Angela Merkel warned that Europe’s fate is at stake and that the euro is now in the most serious crisis of its 11-year life! And …
- In Helsinki this week, Finnish Prime Minister Matti Vanhanen acknowledged that even if Greece IS rescued, this great crisis could continue to sweep across Europe.
But fact is, this great debt catastrophe has already spread well past Greece:
Ireland’s credit rating was slashed months ago.
Last month, S&P cut Italy’s credit rating by one full notch.
Then Spain, which has the euro-zone’s third-largest deficit after Ireland and Greece, had its credit rating slashed.
And this past week, Moody’s Investors Service announced that it will likely downgrade Portugal’s credit rating as well.
Plus, on Thursday, Moody’s warned that Europe’s fiscal crisis could soon threaten banks in Portugal, Spain, Italy, Ireland and the UK!
Why I Think the Euro Is DOOMED
Unsurprisingly, the growing realization that this great sovereign debt crisis is beyond anybody’s control is crushing the value of the euro.
Not only has the euro currency suffered an almost non-stop plunge this week — falling to a new 14-month low of $1.26 against the U.S. dollar — even European leaders are warning that the euro’s days may be numbered.
So at this point, I can foresee only two scenarios:
Scenario #1: The Greek bailout fails. The nation defaults on its debts and bond investors get their heads handed to them.
Fallout: Worried that a similar fate awaits other European investments, investors dump the euro like there’s no tomorrow, crushing the currency’s value.
Scenario #2: The Greek bailout succeeds. Portugal, Spain, Italy and other highly indebted nations demand their own bailouts — but the European Union and IMF don’t have anywhere near enough money to come to their rescue.
Fallout: Investors dump the euro like there’s no tomorrow, crushing the currency’s value.
Bottom line: Either way, the euro — and the European Union itself — are likely doomed.
The U.S. Dollar Is Next
Right now, global investors are stampeding for the EU exits; selling euros and buying U.S. dollars and gold. So for the moment, the greenback is showing some strength.
But in the weeks ahead, that crisis will inevitably subside and our own debt crisis will explode into the headlines. My forecast:
Once global investors realize that Washington’s debts are even worse than those of Portugal, Ireland, Spain and the U.K., it will be too late to protect yourself. The U.S. dollar will collapse like a cheap suit.
THE MORAL OF THE STORY: It is too late for governments to avoid or prevent this crisis. Sooner than later, the value and buying power of your money will be in the gutter.
Now, more than ever before, the decisions you make and actions you take will determine how well — or even IF — your family weathers this horrific economic hurricane.
As always, we are absolutely committed to giving you the intelligence, strategies and recommendations you need to insulate your wealth and even grow richer as this crisis unfolds.
And to do that, we’re hosting what may well prove to be the single most crucial online briefing in our company’s history …
Best wishes,
Larry
About Money and Markets
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