Since last summer the euro has been on the rise. Is that a trend you see continuing going forward?
JT: It’s hard to predict the euro’s moves against other fiat currencies. All are being debased at a rapid rate by central banks. This means that the euro doesn’t really stand out as a poor performer in this context. In fact over the last decade, it’s held its value slightly better than the US dollar, Chinese yuan, Indian rupee, Japanese yen and the British pound – as can be seen from the following chart I produced as part of a recent article for the GoldMoney website.
What I can say with confidence is that over the medium to long term the euro will continue to lose value relative to sound money: gold, silver and other precious metals – though this doesn’t preclude short-term rallies in the euro/gold exchange rate (as we’ve seen since last Autumn).
With bank assets of €47 trillion, the EU has officially the largest banking system in the world. It almost crashed in 2008, but since then the banks have been kept afloat by a string of interventions. Have the authorities averted a banking crisis, or have they just postponed it?
JT: They’ve postponed it, but the day of reckoning will come eventually – given the banks’ huge exposure to sovereign debt. Governments all over the world continue to spend way beyond their means, which means that the bonds they issue to pay for this spending will be made steadily worthless in the years ahead – either by outright default (as in Iceland), restructuring of the debt (the case with Greece), or by inflation (the Anglo-Saxon preference). It’s a case of picking your poison as far as bondholders are concerned. Add to this the systemic risk inherent to the tens-of-trillions worth of derivative products in the banking system, and it should be clear that another 2008-style crisis – or worse – is a very real risk.
The Basel III regulations were meant to insure that banks have…
Read the complete article at GoldMoney – Gold Research Analysis.
Author: The GoldMoney News Desk