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Real Wealth #217 02/13/2009
Toxic Debt Could Cause European Meltdown: $5,000 gold
Dear Gold & Energy Advisor Subscribers,
Virtually every U.S. investor, banker, politician and “man on the street” here in the United States is focuses on the U.S. economy and credit crises. There’s good reason to worry as unemployment continues to rise, the economy continues to slow, consumer confidence plummets. With in a few months we’ll start to see major defaults in the commercial real estate and corporate bond market which will only make things worse here in the United States. Yet there even a bigger threat on the horizon coming from Western and Eastern European toxic debt.
The recession threatening to become a depression is not only domestic its international and as such the European Union is not only faced with a credit and asset meltdown from its own mortgage and corporate finance sector it’s also facing the real possibility that debts owed by Eastern Europe banks, financial institutions private and corporate mortgage and bonds may be uncollectable. All told the estimate of the potential monies lost by European Banks range from $21 Trillion to $45 Trillion.
The choice is very clear for Europe’s politicians. You either cut interest rates, print money or you let the entire house of cards collapse and accept the reality that we’re looking at a financial devastation that will trigger the collapse of not only banks and financial institutions but also the collapse of European governments.
European banks' toxic debts risk overwhelming EU governments
The toxic debts of European banks risk overwhelming a number of EU governments and may pose a “systemic” danger to the broader EU banking system, according a confidential memo prepared by the European Commission.
The politicians won’t go down without a fight. In short they’ll see to it interest rates are cut to the bone, pursue a ZERO interest rate policy like we have here in the United States and as were also doing keep the printing presses running round the clock. In short, there’s going to be an explosion of newly printed money and bonds. This will delay a complete world economic meltdown. Instead of deflationary spiral we’ll see the collapse of the world economy come in the form of an inflationary spiral that will end in a complete monetary collapse: the death of the dollar, yen, euro, and ruble etc...
It occurred to me that the next big wave of economic collapses may not trigger a world wide bank run. After all, why stand in line to get your cash when most governments are guaranteeing bank deposits and it’s likely that the money will have virtually no spending power. What were more likely to see when all hell breaks loose are massive riots, military coups and countries adopt the Italian model of the ‘government of the week” as the norm.
It’s going to be brutal. The signs of the approaching danger are already appearing in the gold market. Gold is appreciating versus every major currency as smart investors around the world are buying gold so aggressively that there’s actually a gold coin shortage.
My rare coin and precious metals firm Finest Known, Inc. is now dealing with delivery delays from literally the biggest wholesale gold dealers and exchanges in the world.
Jay London, my chief precious metals trader pulled me aside yesterday and said...
“I haven’t seen anything like this in my life. The lack of gold coinage on the market is not only driving premiums up daily but when I manage to make a buy any gold coins I’m being told delivery could take two even three weeks!”
Yesterday, after speaking with Jay I made several calls to my oldest most reliable sources and was shocked to discover I was only able to buy 232 NGC Graded and Authenticated Gem Uncirculated (Flawless) MS70 1 ounce US Gold Eagles. After about 5 minutes of apologies from the trader selling the coin (an old friend of more than 30 years) , I had to agree to delivery in 10 business days. He also warned me that it may actually come to the point where he’ll be out of inventory for weeks at a time.
“James, I’m really worried. My business is built on having enough gold to meet orders. If I can’t get my hands on inventory I may actually have to lay off employees for the first time in 34 years.
“It’s not even a buying frenzy yet. Buying has been steady and consistent and coming from a larger and larger pool of gold buyers. I’m getting calls from Asia, Eastern Europe and the Middle East. These were almost always buyers that bought from Swiss Banks. We’re hearing that the gold shortage is so acute that there is no gold to be found in Switzerland so these buyers are now showing up from every corner of the planet.“
I can only imagine what a full fledge gold buying frenzy will look like. Earlier this week I pointed out the danger that exists in the Comex “paper” gold market. There’s not enough physical gold to meet the number of Comex contracts. In an environment where gold inventories are so tight, the reality of a genuine gold buying frenzy sets up the possibility of not only a frenzy but panic. $5,000 gold may be the end result, the collapse of the Comex Exchange may go hand in hand with the death of the dollar and fiat paper money.
My staff has just informed me were now down to a 183 NGC Graded and Authenticated Gem Uncirculated (Flawless) MS70 1 ounce US Gold Eagles. These remaining gold coins are a being specially priced.
Call 1-866-697-4653 to lock up your share of this small group of gold coins. Remember you can also put physical gold in to your IRA.
James Di Georgia
Please see risk disclosure link below.