Dear Reader

A few weeks ago, we produced a piece on The Italian Job – light-hearted and easy-to-read. But this week, Italy hits the headlines with an entirely different feel. 

Today, once again, the Italian financial crisis is yet another alarm trying to wake us up. It’s always been strongly considered that the eurozone has been disordered financially from its inception, and whereas I cannot fault the desire to not repeat World War II or the hope that wars within countries as such close neighbours never repeats, this doesn’t have to mean fiscal cart-horsing – just a deeper respect for one other.

I thought it wise not to look at the eurozone news this week from within Europe, and for much of the British mainstream press. This is a little like asking the false self what it thinks of itself. It thinks itself fine (publicly at least). 

 

Meeting with President of Italy Sergio

 

So, let’s look at India and the US perspective on the news. Because if we can see what’s really happening we can prepare. If we are awake, it truly makes sense to protect ourselves financially from the absolute inevitable. Two years, ten years, twenty years, nobody knows. But the collapse of the eurozone is inevitable.

Business Television India writes that “rising political uncertainty in Italy and growing U.S. – China trade tensions should see Gold holding a bid [an APAC trading head at OANDA]. But he states “with the yellow metal’s sensitivity to the U.S. dollar on full display, it is unlikely Gold will move significantly higher until we reach the EU ‘Crisis Zone’ which we are nowhere near at this stage.” Did you hear that? The absolute assumption that the Eurozone has a crisis zone ahead of itself – not if we reach the crisis zone, but when. 

Now, let’s spin the globe and let our fingers wander over the Middle East, the European continent, arch over the Atlantic, to land in the good ole (really quite mad) U.S of A. The land of tension, injustice, inequality, and more than a fair amount of social insanity *cough, Starbucks, cough*.

 

USA on a globe

 

“Italy’s government plunged into crisis on Sunday, sending shockwaves from Brussels and Wall Street.” – New York Magazine

 

First of all, why? Why shock waves? Why was this result a shock? Because people still expect a different result from the same action. Honestly, I’m shocked that they were shocked. The New York Magazine continues “the problem took root in March, when Italy became the latest European country to hold an election with surprisingly disastrous results for the political establishment.”

Secondly, many have argued that actually the problem took hold in 1992 in the Maastricht treaty and then compounded in the 2012 revolts within the Arab crescent nations. Let’s continue… 

“The [Italian] March 4th vote saw mainstream parties on both the right and the left knocked down by a new generation of populist politicians fueled by euro-skepticism and popular frustration over the Mediterranean migrant crisis. The idiosyncratic, anti-establishment Five Star Movement finished first with about one-third of the vote, while the League, a ring-wing populist & nationalist party running on an explicitly xenophobic anti-immigrant platform, came in third with nearly 18 percent. Although the two parties do not see eye-to-eye on all issues they went into coalition together.”

 

Outside building of Italian Houses of Parliment

 

Why is the Italian coalition important for Physical Gold?

It’s been predicted many times that an economic collapse within the eurozone would catapult the value of physical Gold through the roof:

“The debt Italy owes to the rest of the Europe – 25% of its GDP – is so bad that a default would ‘shatter’ the country, cripple Europe with unpaid debts and wipe 0.4% off global GDP, according to Oxford Economics analyst Taha Saei. “If the eurozone’s fourth largest economy were forced to leave the euro, it would likely default given the increased debt obligations from settling this bill would cripple its economy,” Saei says. “Recovery would take decades,” he wrote in a note to clients in 2017.

And Italy’s debt as a percentage of its GDP has been over 130% since 2013, (Focus Economics).

 

Graph showing National debt in the member states of the European Union in the 3rd quarter 2017 (in billion euros)

 

National debt in the member states of the European Union in the 3rd quarter 2017 (in billion euros)

(Source: statista.com)
 

So, those pesky nationalists didn’t cause the problem and concerns about the migrant crisis arguably arose from the war in Syria and Libya’s open territory, yet the migrant crisis is now being blamed for the turmoil within Southern Europe, not the longstanding inherent economic weakness of the euro project.

So, we can expect much of the same over the coming few years. Which sadly just increases disrespect between people, who could be working together rather than living in greater and greater cognitive dissonance. And because we can expect more of the same, it is extremely wise to prepare for the result.

Firstly, a collapse in the eurozone through Italy would slow the UK’s economic growth even further. Speculation about the impacts of the possible break up of the eurozone is rife. It is, of course, only speculation and the only thing economists really agree on is that a double-dip recession in the UK is becoming increasingly certain as the eurozone crisis intensifies, particularly given the current weak growth figures. The collapse of the euro would guarantee another recession.

 

In summary, it is estimated that: 

  1. The UK wouldn’t recover for at least three years
  2. The euro collapse would knock 4% off of UK GDP
  3. There would be a period of catastrophic intense austerity and economic pain for the UK

 
This summary is taken from an excellent article about the coming eurozone crash from The Guardian… in 2011. Wait, we were told that staying in the eurozone was the best economic option. Cognitive Dissonance maybe?
 
Meanwhile, stay awake. Stay open-minded. Regardless of your political persuasion. And perhaps buy some Physical Gold. 
 
Call Bleyer on 01769 618618 to talk through your Gold and Silver purchases now. We encourage our readers not to be caught out by rising prices. Personal and thorough Gold Education is key. Call a member of the Bleyer team now to chat through your current investment choices. Or simply order online at bleyerbullion.co.uk at a time of your convenience, day or night.

 

Two 1oz Gold Rooster Coins