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Almost everyone I talk to thinks the European sovereign-debt crisis has passed. They say Greece’s bailout fixed the problem. Europe is on the mend, they say.
But as far as I’m concerned, nothing could be further from the truth.
First, severe austerity measures continue to this day and they are causing debt-to-GDP ratios to worsen.
The proof is in the numbers. Before the Greek crisis flared up, debt-to-GDP in Greece stood at 113%. Today, Greece’s debt-to-GDP stands at a tad north of a whopping 177%.
In Spain, pre-crisis debt stood at 40% of GDP. Today it’s more than 97%.
In Italy, it was 106%. Now it stands at 132%.
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| Think the European sovereign-debt crisis is over? Think again. |
In France, it was 68%. Now it’s 95%.
Even Germany’s debt-to-GDP is worsening, leaping from almost 67% in 2008 to almost 75% today.
In each and every case, debt-to-GDP is worse than it was at the beginning of the crisis — and the austerity measures are literally causing the entire European continent to implode.
Second, austerity and climbing debt levels are hollowing out Europe’s economic growth.
According to Eurostat, Europe’s GDP in the second quarter of 2015 slowed to 0.3%, leaving output 1.2% higher than a year ago. The figure disappointed all 19 economists polled who were expecting 0.4% growth.
France’s economy is slumping. GDP growth of 0.2% was expected, but growth came in at 0.0%.
Italy’s GDP came in at 0.2% compared with 0.3% in the first quarter, leaving output only 0.5% higher than a year ago.
And Germany’s economy, the only engine left holding the feeble union together, expanded by 0.4%, lower than the consensus forecast of 0.5%.
All of this continues to create …
Third, some of the worst unemployment we’ve seen in modern times.
Each and every one of these countries is in hock way over its head. And each and every one of them is in the depths of a nightmare caused by austerity measures.
Unemployment in Greece is at 25.6%. Spain: 22.5%. Portugal: 12.4%. Belgium: 8.6%. Italy: 12.7%.
Unemployment among youth (under 25) is still off the charts. In June 2015, 3.181 million young persons were unemployed in the euro area, an unemployment rate of 22.5%.
The lowest rates were observed in Germany (7.1%), Malta (10%), Estonia (10.1% in May 2015), Denmark and Austria (both 10.3%).
And the highest rates were seen in Greece (53.2%), Spain (49.2%), Italy (44.2%) and Croatia (43.1% in the second quarter 2015).
Corporate and personal bankruptcies are surging. Social discontent is on the rise again. And tensions between countries within Europe are higher than ever.
Pretty picture? Hardly. It’s the ugliest economic picture for Europe since the 1930s, when 17 European countries went belly up, sending hundreds of billions of dollars’ worth of francs, marks, lira, and more flooding into the U.S.
That, in turn, sent the U.S. stock markets exploding higher. It sent the dollar and gold simultaneously into a moon shot as well. And it’s all about to happen again.
Fourth, deflation is picking up momentum.
With austerity measures squashing growth all over Europe, deflation is starting to run rampant.
According to the latest data, prices eurozone producers charged for their goods fell a whopping 2.2% at the August data release.
In short, nothing, and I mean nothing, has been solved in Europe. The crisis will soon escalate with a vengeance.
When (not if) Europe’s economy roils again:
First, you’re going to see trillions more euros stampede for the exits. That’s going to send several large European financial institutions down the tubes.
Second, that flood of capital is going to send the U.S. dollar again into rally mode. Just like it did in the early 1930s when Europe last went bankrupt.
Third, after a correction, it’s also going to send our stock markets roaring higher. Just like it did between 1932 and 1937 when the Dow Jones Industrials soared 387% as Europe went under.
Fourth, it’s going to give you multiple profit opportunities to potentially make more money than you ever dreamed of. In stocks. In commodities. In the dollar. And in gold and silver.
My suggestions right now are …
A. Keep your eyes on Europe. And keep most of your liquid funds in cash, ready to be deployed on a moment’s notice, but as safe as can be right now.
The best way, in my opinion: A short-term Treasury-only fund in the U.S., or the equivalent.
B. Earmark a portion of your cash for speculation. Not too much, and not too little. I recommend 25% of your total investable funds. Funds that you do not need for anything else.
Finally, don’t let anyone kid you. Europe’s problems are simply the beginning of a great sovereign-debt crisis that will soon spread around the globe, creating some of the worst times we have ever seen …
And some of the biggest threats to your wealth, ever. But along with this crisis will also come some of the greatest speculative profit opportunities, ever …
And you should do everything in your power to take advantage of them. I know I will.
Best wishes,
Larry
Dominique Finnemore September 2, 2015
And so they have to have a means of transforming money from one nation to another. Despite grumblings from some modern observers, Europe is actually more and more uniting because of the economic crisis.
Puunjabi Kahkmeede August 25, 2015
Greetings from the great and terrifying Alabama!
Greg T August 24, 2015
Things are not that much different than they were in the 1930’s. While they share a common currency, they do not share a common debt structure. Each country is subject to its own issues with debt to GDP ratios, deficit spending, and borrowing/rates. This is why Greece is being treated the way it is… can’t let them off the hook or everyone will come looking for a bailout.
Greg T August 24, 2015
Things are not that much different than they were in the 1930’s. While they share a common currency, they do not share a common debt structure. Each country is subject to its own issues with debt to GDP ratios, deficit spending, and borrowing/rates. This is why Greece is being treated the way it is… can’t let them off the hook or everyone will come looking for a bailout.
Mike M August 24, 2015
Larry,
It seams that Europe is different today with Euro monetary system than in the 1930`s where each country had its own monetary system. In the history books, Germany was hit badly since their debt was very high due to WW1 and the German marks became worthless. That’s how Hitler rose to power taking advantage of the situation when German people were very dissatisfied with their government and wanted change. How could Europe be much worst today compared to the 1930’s? Isn’t Europe better prepared to deal with the similarities of the same problem? The old saying goes ‘history repeats itself in a different way’.
Mike M
James C August 23, 2015
How come theirs no money and markets edition on Sunday, I was looking forward to my morning edition. This is an excellent daily report of the worldwide global economic crisis.
Christian Kircher August 23, 2015
Larry forgets with the financial analysis of europe to include the political and society changements resulting. With the example greece we have seen that it does not matter how much pressure is put on the greek governement, in any case they will not pay back any money they borrowed. no matter which governement will be formed there. This pressure only destabilizes the greek governement and will lead to big politic instability in this region. AND THIS MEANS NOTHING GOOD.
as Larry says Europe gets more and more in financial trouble. This means also more and more political instability. Which could be the death of democracy in europe .
Living in france i know 2017 will be a new chapter in this country. And the presidential elections will have an impact for all europe. Till then the status quo seems to hold on.
Robert P August 22, 2015
Thanks Heidi. Yes I think I DID get my answer today. Gold’s holding up well for now (for a change) but the markets aren’t finished yet…still some weaving and bobbing left to do…
BUT, when they REALLY start throwing out the bath water, baby gold will go with it, just like it did in times past.
May be wrong, but I still think NUGT is good for a date now, but wouldn’t get married to it.
jon August 21, 2015
larry ur august newsletter makes it sound like ur in a cave w a bazooka and 2k lbs of canned foods and 20lbs of gold waiting to come out in 2020. haha you must not sleep to well at night
Heidi August 21, 2015
uno – yes – and it’s about time too , right ? And so was were – just a reader here or more ?
uno August 25, 2015
we won’t know if were is right until the end of the year. i think this is just a correction and we’ll see new all-time highs by year’s end. were says the highs are in for the year. we’ll see who’s right in december – me or were. larry, on the other hand, get’s an atta-boy for best call of the year.
uno August 21, 2015
least we not forget these prediction by our fellow commentators:
john: time to buy gold stocks
were: top is in for the year in july
edelson: time now for a correction
looks like mr edelson was spot on!!!
John T August 20, 2015
As they say, Buy when everyone else is selling, sell when everyone is buying. Need I say more?
Rob,. August 21, 2015
yes, are you buying or selling?
John T August 21, 2015
buying of course
Robert P August 20, 2015
Heidi, I hear you. The move you speak of has come only recently (…I believe there is more “correction” left in this current movement)…however, I believe Larry has been telegraphing correction talk for quite a while, but the markets continued to move higher & gold lower.
Mephisto, yes, “suckers’ rally.” I don’t think this is a buy and hold kind of time.
What do you think, Heidi? …any of you readers? DJIA, gold…higher or lower from here?
Headed where, to what level? I respect your thoughts.
Heidi August 21, 2015
Robert P I think you got your answer about the markets today Aug. 21 . Gold the ” safehaven ” as some like to call it ( and I have no idea why ) was able to hold for today but do you remember 2008 ? How long did gold fool everybody before it gave up as well ? Have fun watching it or is anybody buying here already ?
Heidi August 21, 2015
Robert P I think you got your answer about the markets today Aug. 21 . Gold the ” safehaven ” as some like to call it ( and I have no idea why ) was able to hold for today but do you remember 2008 ? How long did gold fool everybody before it gave up as well ? Have fun watching it or is anybody buying here already ?
Georgie August 20, 2015
WERE was wrong……………..Not to boast about it, but didn’t she or he say AUGUST 17 was the high in GOLD
Look at it now………………..
I would like an explanation please
My retirement account needs a boost, and this could be a good vehicle to increase my not so good net worth
If you are so good, and better than Larry, give me some other ideas to grow my small account
Georgie
were August 21, 2015
you should reread exactly what I said. I didn’t say what you think I said.
$1,000 gold August 24, 2015
so far, were and edelson are right. both called this correction. credit where credit is due. plain as day, were said the high was in for the year in july. likewise, edelson said a correction was due. it’s crystal clear both these guys made the correct call at the right time. good job were. good job larry.
$1,000 gold August 24, 2015
gold is still toast. corrections like the one we’ve just entered last a few months. soon, gold should continue its downward journey. after this correction, one more up wave left in the markets that should last at least a couple more years before a recession, which will just be another buying op just like this correction is. i doubt we see gold bottom until a recession, which puts us on track for $1,000 gold or less before a rebound. i don’t expect gold to rebound higher than the 2011 high.
$1,000 gold August 24, 2015
i’ll be buying back into the s&p during this correction in september or october, if all goes well. thanks again to were and larry for the heads up on this correction.
Robert P August 20, 2015
Finally!!!
Kitco.com has a news headline today, Aug. 20, which reads: “Gold Extends Early Gains to Trade Solidly Up; Stock Mkt Sell-Off Sparks Safe-Haven Demand”
Looks like it’s finally happening! It’s about time!!!
So thankful!!
mephisto August 20, 2015
This is what is classically called a “sucker’s rally”. Last one out will be the biggest loser.
John T August 20, 2015
just bought $5000 of gold socks, lets see who the biggest loser really is. Certainly not goung to wait for Larry to call a bottom?
Heidi August 21, 2015
John T. – you picked a good day on Thursday Aug. 20th to buy gold stocks . Have fun picking some more soon ? Let’s see by Christmas how much you’re going to be up or down . Do you remember 2008 ?
John T August 22, 2015
Heidi – Yes I do, held on to long.
Manny August 20, 2015
Practically no commentary on the metals? This despite a $70 price point rally? At this point, whatever Larry says we should probably do the opposite.
Robert P August 19, 2015
Larry, I agree with you completely: “In short, nothing, and I mean nothing, has been solved in Europe. The crisis will soon escalate with a vengeance.”
You’ve been saying basically the same thing now for awhile…yet, meantime, the market has yawned, shrugged all this off, along with the Russia-Ukraine mess, and the ISIS/ISIL stuff, etc…and has continued higher…..and gold has continued lower!!
I’m still looking for your predicted “correction” in the markets, and I know it’ll come, sooner or later. BUT, very seldom does the market ever correct when “everybody’s” expecting it! And, it seems, everybody’s expecting it now. Do you think it’ll happen this time??
Heidi August 20, 2015
Robert P ” The market has yawned . Expecting a market correction – will it happen now ” ? Are you living on this planet ? The Dow was as high as 18,300 – now at 17,140 – down 1160 pts. or 6.5 % . HELLO ? Are you well ?
Rob,. August 21, 2015
erm correction,. 6.5 is no correction!,.
Heidi August 24, 2015
Robert P. picky , picky – 6.5 is no correction ? O.k., Monday , Aug. 24 the DOW will fall another 400 pts. ( for sure ) or will it be 8 % like China ? A 4 % drop brings it down to 16,050 – 12.25 % is that better ? By the way Armstrong just wrote : Oil to $ 15 by 2017
http://www.armstrongeconomics.com/archives/36373
James C August 19, 2015
I tried to purchase the financial times today, do they not print that paper anymore? Gold has got to be a better store of value than paper money.
Robert P August 19, 2015
I beg your pardon, John T…he DID mention gold…..haha
“Fourth, it’s going to give you multiple profit opportunities to potentially make more money than you ever dreamed of. In stocks. In commodities. In the dollar. And in gold and silver.”
Larry: Switching your post from Monday to Wednesday hasn’t seemed to really help much, has it, Bud??
John T August 20, 2015
Missed that one
John T August 19, 2015
another week and nothing about gold? Some gold Guru you are?
Heidi August 20, 2015
John T Maybe now you found out that he is no guru ? But he advised to be in CASH & maybe 25 % of one’s portfolio in short term treasury . If you read him before than you also must know that he is expecting gold to go under $ 1000 but it’s not there yet . So what is your beef ?
John T August 20, 2015
spot gold up 19.20 to 1153.66 as of 5:28pm thu 11/220/2015
Will August 19, 2015
Yes Larry,
Europe, Japan and China could all be looking for a “Safe Haven” to invest in; which could lead to a flood of money coming to the USA. Remember that the U.S. depends less than most countries on exporting commodities to China, Europe and Japan. Countries like Australia, New Zealand and Canada among others are far more export dependent than the U.S. With the rest of the world in recession or depression, could the U.S end up in STAGFLATION as a result of too much money with no place else for the money to go? Might the unaware in the U.S. be cought as the last man standing in a game of musical chairs?
Howard August 19, 2015
Hi Larry
You can’t help a man with a drinking problem by giving them another drink. You can’t help a state with a debt problem by lending them more money. Debt is out of control.