Kiss the Euro Goodbye …

Posted by Larry Edelson - Commodities, Stocks, Technical Analysis

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Screen Shot 2016-03-02 at 7.27.36 AM

Screen Shot 2016-03-02 at 7.27.36 AMWay back in 1998, before the euro even got off the ground, I told everyone I could that the currency wouldn’t last. At best, I said, it would last until the year 2020.

Few believed me. Many said I was nuts. After all, how could I make such a definite longer-term forecast, especially involving a region of the world that then, and now, still represents the second-largest economic region in the world?

Well, forecasting that the euro would fail was simple: It wasn’t put together properly in the first place. It didn’t stand a chance to survive long-term and still doesn’t.

The architects of the euro — if you can call them that — didn’t have a clue as to what it takes to have a single currency. They just believed one size fits all. But oh, how very foolish, yet typical of leaders anywhere. 

Fact: Although the European Central Bank (ECB) was created, each individual country’s former national or central bank was kept in place, with virtually all the powers it had previously.

In other words, the Bank of Italy, for instance, could create its own interest rate policy, set rates, itself, and yes, even print euros if desired.

Imagine that. It would be as if each of the 50 states in the U.S. had their own central bank that could decide its own interest rate policy and print dollars whenever it wanted.

Fact: Euro-planners also never set up a federal debt market. Instead, they figured the existing debts of the individual countries would suffice. No need to convert them to a national or federal debt. No need to unify anything. Just let those debts be.

Insane. What that did was create a potpourri of debts. Worse, underperforming countries could see their debts swing wildly in value as the new currency started to trade. No stability whatsoever. 

And, it allowed other countries, such as Greece, to borrow oodles of euros at the low rates of another country when, in reality, its credit rating didn’t deserve such low rates.

To make another analogy, that would be as if the U.S. had no Treasury market whatsoever, and instead, relied on the debts of states as diverse as Mississippi and California as a kind of national debt market. 

Fact: As a Continent, Europe is composed of almost 50 countries, each with its own language, own culture and own history. And some countries in Europe have even more than one national language.

So is there a common language in Europe so all Europeans can talk to each other? No, there isn’t. 

Is there a common background of some sort that would unite them? No, there isn’t and never has been.

Is there a common future goal that would unite them? You might say an economic union would, which is what the designers of the euro had in mind. A United States of Europe so to speak. A peaceful, united Continent that could avoid the untold scores of wars that have plagued Europe throughout the millennia.

And that is certainly a nice goal or dream to have. But unless you put the infrastructure in place to make a real economic union, with sensitivity and empathy to all the different players and cultures involved …

Such an economic union doesn’t have a snowball’s chance in hell of a surviving.

And indeed, that brings us to today, where now, the euro is finally cracking the last vestiges of important, long-term support.

The currency has already plunged from a monthly high of 1.6028 in July 2008 to 1.08826 as I pen this issue. That’s a humongous plunge of 32.08% in the past eight years, a record decline for a supposed major currency.


And now, as you can see from my latest cyclic forecast chart, the euro’s plunge is about to get a whole lot worse. 

The currency has just cracked important support at the 1.0900 level. 

It should now fall to the 1.0500 level, then 1.0300 then to 1.000 …

And ultimately, far lower, ceasing to exist at all by the year 2020.

What’s worse are the geopolitical ramifications. What was meant to unite Europe will end up causing the opposite: More and more civil protests … more and more discontent … more revolutionary actions … secessions … anti-Semitism and more, including bloodshed. 

For you see, it’s the grand experiments of harebrained politicians that are always the root cause of discontent. They endlessly tinker with the likes of you and me, with the economy, with things they don’t have a clue about …

Until the whole house of cards comes crashing down.

My view: Kiss the euro goodbye. Avoid doing business in the euro at all costs. Stay in U.S. dollars. Invest in U.S. dollars, trade in U.S. dollars. 

Best wishes,