“People around the world concerned about events in Europe are turning to physical Gold and Silver.” (Money Metals Exchange)
It is hard to believe it has only been a week since our last blog on: “The Greek Default and Stocking up on Gold.” The situation is so full of twists and turns, that it is a challenge to ensure we give you the very latest financial developments. Last week, we watched as the first developed country defaulted on the IMF. Greece now joins a sobering list of default countries, such as Somalia and Zimbabwe. Then, we watched the socialist Greek government call a referendum on a deal of austerity measures, that had technically already expired with the IMF and ECB. We then saw the Greek people vote “No” to that deal of austerity measures. It was a strange feeling, watching people celebrate this outcome in the streets, knowing that the path ahead of them will be extremely painful. Now, we are seeing the Greek government trying to use the “No” vote against austerity to today negotiate a “new better” deal with the ECB. At this very moment, there is a special European Parliament session on Greece in Strasburg, so I will do my very best to keep this article as up to date as possible, as the situation is ongoing.
“The Euro zone has given Greece until Thursday to present new proposals to secure a deal with creditors, and has called a full EU summit for Sunday. The Euro zone had expected Greece to submit fresh plans on Tuesday after its voters rejected a deal in a referendum, but no new proposals were tabled. The European Parliament in Strasbourg is now debating Greece (Wednesday am) European Council President Donald Tusk told MEPs there were only “four days left” to reach agreement.” (BBC)
But needless to say, no country has ever left the Euro before – we are in uncharted territory – and that is what will happen, if Greece, the IMF and the ECB cannot come up with a new agreed deal by Sunday. Being in uncharted territory can make people panic financially, and that is what concerns me today, as I write this article for you. It is this panic and contagion that must now motivate us to protect our wealth.
We could debate the reasons, and the most beneficial financial way forward for Greece, for hours. There are, after all, two other developed countries that faced similar national debt but each came through it, through implementing strict measures. Both the economies of these countries are now doing very well, in terms of employment and growth of GDP. These two countries are Iceland (2008 debt crisis) and Israel (1985 debt crisis). But the glaring difference between these countries and Greece is not primarily the difference of a Greek socialist fiscal approach vs. a capitalist approach, although that is striking to our British ears in its narrative. But, the difference, which surely must concern us, is the fact that both these countries were not in the Euro zone.
According to the Prime Minister of Iceland, “Being out of the European Union was instrumental in getting us out of the economic crisis, which began in 2008… in part because we were in a position to make decisions for ourselves; we had control over our own currency.” Greece does not have this flexibility and it is precisely because the Greek debt is so intertwined with other European nations that this makes the Greek crisis a very real and serious concern regarding imminent financial debt contagion.
But overwhelming, this tragedy is about people; everyday people. I was moved last night, as I looked through this collection of photos entitled “The Starkest pictures that show the emotional effect of the Greece debt crisis
This is particularly hard to face, as these pensioners could be our elderly parents, they could be us. What would we do if ALL our wealth was tied up in the banking system? Have we given some time to think about this, as we watch the news on Greece? Please read on to learn of mitigating steps we can take now.
As mentioned, in last week’s blog, my brother works in Athens for the Foreign and Commonwealth Office and is not scheduled to return to the UK for some months. My sister in law emailed me this morning to say that they fully expect food shortages imminently but, in great British spirit, said that they “still have good coffee and friends.” But, they have children, my nephews, and soon the break down in operating society will become noticeable. In downtown Athens, there have been nightly riots. My family, being British nationals, now have access to a British bank account. But money cannot buy you food if there is no food. So, this situation is real for me, and for any of you, our readers, who also have family and loved ones based in Greece, our thoughts are with you.
However, in many ways, this personal dimension to this historic crisis is an early wake-up call. Do we have our wealth protected from bank closures and capital controls? Is there anything we can do now, as a nation and as individuals, to protect ourselves from this economic contagion from the Euro zone?
As I sat down to write this morning, I realised that this Euro crisis is like watching someone skim a smooth pebble over the sea. The pebble, we all know, will eventually sink. The length of its skimming “illusion” is in part dependent on the smoothness of the water, and so when the surface gets choppy its chances of descent are sudden. The surface of the Euro zone is now extremely choppy. In the financial scheme of currencies, I believe it really doesn’t matter if a new deal between Greece, the ECB and IMF is agreed by this Sunday or not. Either way Greece is bankrupt. Any new deal will only slightly delay the sinking of the stone. But the stone will sink. The question is can that process be slowed down enough to give Britain, and the British people, time to act? Or is this our last wake-up call? As I listen to the special session on Greece in the European Parliament, I can hear the spreading fear of contagion as the delegates from the Euro zone stand up to speak. Each country is now scrambling to take care of its own financial well-being, with relations between Germany and Greece at an all time low.
As the Telegraph wrote on Monday, “The result is a tired, stumbling European Union that is dying on its feet before our very eyes. Credibility for the project is fading fast. We do not need a single currency or a political union to be friends, neighbours and trading partners. Far more important than this European Union is the concept of national democracy.”
As I write and listen, the UK representative has just spoken to the European Parliament, a calm and elegantly British voice in an otherwise extremely heated debate. His address was brief and concluded with the words: “I recommend you (Greece) negotiate an orderly exit from the Euro, which is the best chance Greece has of recovering.” A Greek exit from the Euro will mean that Greece will not pay back the money it owes. It currently can’t anyway. But a Grexit will make this fact now clear to the markets.
Germany, France, Italy, Spain, the ECB and the U.S. are all ahead of Britain in how much money they lose, if Greece cannot pay back its debt, and that fact is 99.9% inevitable. What concerns me greatly, is the presence of Italy, the U.S. and Spain in that list. Each of these countries have been in a deepening debt crisis of their own for several years. The debt to GDP ratio currently stands at 140.94% for Italy, 105.30% for the U.S. and 86.32% for Spain. Greece is the knock-on affect that could instigate their fall. All their economies are larger than the Greek economy. If they collapse the dominoes will fall hard and fast, internationally.
In this week’s blog, and last week’s, I have tried to stay away from the analysts and commentators, whose voices are extremely alarmist. When we are calm we think better. But the words “economic tsunami” and “terrifying” are out there.
So, what can we learn from watching the Greek people? How do everyday people react in a situation like this? “Greeks are switching cash for gold coins because of the growing certainty their government will confiscate a portion of what they have on deposit and then replace the remainder with newly re-issued drachmas worth far less. People around the world concerned about events in Europe are turning to physical gold and silver.” (Money Metals Exchange)
I mentioned last week to our readers that one of the best ways to see what is really going on in the Physical Gold and Silver markets is not to look at the daily price, but at the volume of Gold and Silver ounces being sold. This helps to see whether there is real demand going on behind the scenes. We at Bleyer have explored the concept of manipulated Gold and Silver prices. For more on this please explore our previous blogs. We may see the price of Gold and Silver rise. Many think so. “The real possibility of a Grexit is back on the cards. And with it a resurgent gold price.” (Mining.com)
But, at Bleyer, we are looking for signs ahead of the price rise, that show us the optimum time to enter the market, and to then pass on those clues to our readers, the British public. So, this morning I decided to look into the Gold Futures markets as well, to see what signs are hidden beyond the information in the press. A “Future” is a simple device in the trading world. “If you buy a futures contract, you are basically agreeing to buy something that a seller has not yet produced for a set price.” (The Fundamentals of Futures) It’s a bit like any reserving an item that you wish to buy in the future. Now, if you wished to reserve a new limited edition car, that hadn’t yet been built, but you wished to buy it in three months time, you would expect that if the car industry was doing really well, the price you would have to reserve it for now, would be higher than the price you would pay if you bought your car today. This is because the car industry knows that they could sell that car in three months time for the higher price, so will ask you to match that if you want to reserve it ahead of time. The same is true for Gold and Silver.
So, by looking at the Future’s market in Gold we can pick up signs of what the insiders believe will happen to the price of Gold and Silver. Here is what I found – Gold futures from August 2015 through to February 2016 are selling for a cumulative increase of 7.6% in price.
If I translate that projected increase in price onto a 250g bar of Physical Gold, one of our most popular products, then what would cost you £6,271 to buy today would cost you £476 more in February. The price would increase to £6748. To put into perspective, which bank account would offer you a 7.6% interest rate over the next seven months? Now, there is always a caveat; the futures market changes daily and it is a volatile game. But, the futures market has indicated price rises in Physical Gold and Silver before. It is a sign worth noting and researching further if you are interested.
We wouldn’t be doing our job thoroughly enough if we didn’t say that none of this is an exact science and that the price of Gold and Silver can go down as well as up. But when we take a step back and look at the price of these metals over the last 20 years or so, the general wealth cycle is easier to spot. Through out history, Gold and Silver have been seen as traditional stores of value during uncertain times. When the road gets bumpy, many put their money into Gold and Silver. We encourage our readers to look at these metals with a long range view, so that if the price dips before it rises you can peacefully go about your business, knowing you can afford to wait. We would like our readers to be aware of what to look for, how to read the news with fresh eyes, relating previously “disconnected” headlines owning your own Gold and Silver. We would also like all our readers to be those people that were in the market before the price rises.
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