Taking a Optimistic Look at the Euro

In the past few days, I mused in this blog pessimistically about the future of the Euro, but there is a contrary view that should be aired. The European Union is the biggest economy in the world. Over a half billion people, and owning 10,000 tons of gold, substantially more than the USA.  The Euro is a popular currency within the EU. People recall the lack of government accountability with currencies such as the Greek drachma and are happy for the Euro.  Outsiders also. The Chinese are investing heavily in Europe and the Euro, buying the Euro as they dump USA treasuries.

And the charts show Euro strength too. In the past several years, the Euro has dropped off several times, but it can’t seem to break $1.03. It refuses parity with the dollar. 

Le Pen and Euro Both Surge

Two days ago at http://gordonfeil.blogspot.ca/2017/04/hello-le-pen-and-good-bye-eu.html and http://gordon-feil-economics.blogspot.ca/2017/04/will-eu-unravel.html I posted a prediction that if Le Pen did well in today’s election, the EU could be expected to start unravelling. She did well, but so did the Euro.  I guess not many agree with me. The Euro gapped up sharply. It will fall far enough to close the gap of course, but then it may rise again…or it may not. We’ll see.  Gold stood still on the news.  So yeah, I’m a prophet of doom I guess.

Will the EU Unravel?

The French election this Sunday could topple the European Union. I have been saying for years that the Euro is going to zero in the long run. If Marine Le Pen and her Front National Party win, and there seems a good chance that they could, the markets will likely flush the Euro down the drain on the expectation that the EU will unravel. French bond markets, and maybe Italian with them, might freeze up….no bids. 

Given that the model of the super-state ruled by the few has been superseded by decentralization and distribution of power (at least optically), this would be in keeping with the trend.  I said “optically” meaning that is how it looks.  In reality, real power has shifted from politicians to business leaders. International business organizations exercise a lot of clout.

When the world’s biggest economy disintegrates, others will not be immune. Europe’s trading partners will be affected. The summer of 2017 may be interesting.  Deutsche Bank and others that are in a similar condition, won’t be able to band-aid over their severed jugulars. If DB goes under, the jet wash will send a lot of others into the ground.