‘Perfect Storm’ Of Global Banking and Sovereign Debt Crisis To Lead to Global Currency Crisis
Volatility and wild gyrations in all financial markets continues due to a confluence of negative data, news and fundamentals.
French banks have been downgraded and Chinese Premier Wen’s call that Europe get its own house in order quashed the unsubstantiated and unsourced rumors regarding massive Chinese intervention to solve the Eurozone debt crisis.
European banks are hemorrhaging deposits as savers and money funds pile into other perceived havens such sterling, dollar and Swiss franc deposit accounts. Retail and institutional deposits at Greek banks fell 19 percent in the past year and almost 40 percent at Irish lenders in 18 months.
A tiny fraction of these European deposits has gone into gold with the majority going into other fiat currency deposits. It is not just the saver of periphery nations who are opening non euro deposit accounts – many German savers are opening up deposit accounts in Switzerland.
Greece’s inevitable default is being prepared for despite the usual denials. A conference call among Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel is set for 16:00 GMT.
More obfuscation and delusion is likely unfortunately but it may lead to another misguided bout of irrational exuberance and excessive risk appetite.
The reality is that a default by Greece is inevitable and indeed a breakup of the European monetary system and reversion by some countries to national currencies seems increasingly inevitable.