A monumental event is taking place in Europe, of a scope that makes the credit crisis in the US of the past almost three years, look small by comparison.

Those in the financial community do not understand the ongoing detrimental effect it will have on the entire world economy. It certainly will make European goods and services from the euro zone at least 12% cheaper for export than they have in the past. The flipside of that is imported goods, particularly energy, will be more expensive and that means higher European inflation. We see Iran and China making announcements that they will use dollars rather than euros in trade in the future. We guess they forgot the euro members may have lots of problems, but the euro still has about 7% gold backing, something the US dollar and all other currencies do not possess. This is not an excuse to own euros, but it has fallen from $1.50 to $1.19 and that is a sizeable correction. Those who are short the euro and have been since last October, and long the dollar, will want to take some profits. It is also in the best interest of all that the euro doesn’t fall any further at least at this time. The same holds true for Greek bonds, as well as those of Ireland, Spain, Portugal and Italy.

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