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Reasons why the Euro may be doomed!


Mercury

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Over the past few months, even before Brexit, and in recent EURUSD analysis and wider Stocks analysis I have suggested that the Euro will drop more than GBP in the final analysis (for the record I think GBP will get to parity with the USD but not much lower and the EUR will go much lower than parity).  I have even suggested the Euro will undergo an existential crisis that it may very well not come out of.

 

In addition to purely technical analysis supporting this position there are several fundamentals type factors behind my assessment as follows:

 

  1. The EU exports more to the UK than vice versa so a breakdown in trading relations hurts the EU more.
  2. The UK has strong ties with former colonial countries via the Commonwealth and also countries like Ireland and the US not in the Commonwealth (PS: if you think Ireland is going to stop trading with the UK at the behest of Brussels you don't know anything about Ireland or the Irish.)
  3. The May government is very correctly and cleverly taking it's time over Art 50 to get deals in place with the above mentioned countries.  in doing this she protects the UK against EU intransigence on trade talks with immediate access alternatives and strengthens the UK's bargaining position.  This is why people like that un-elected bureaucrat Juncker are trying to pressure the UK into executing Art 50 early, they know they are caught in a trap and it is one of their own making.
  4. The Eurocrats want to be tough on the UK to stop the rot but, as outlined above, they can't.  Others, like Greece, may follow the UKs lead.  The Eurocrats are terrified the gravy train is about to hit the buffers, hence the hard language and tough talk.
  5. Merkel has botched the immigration thing in German and will lose power in the elections next year; Holland is done as well; Spain doesn't have a government; Italy is on the verge of financial chaos and associated political upheaval and they don't like the immigration policy either; there are immigrant riots and no go areas in Sweden, Denmark, Holland and people simply do not like it.  Hungary has said "FU" to EU diktats over taking immigrants.  Apparently other former Soviet bloc countries feel similarly.  The worm has turned, the EU itself is facing an existential crisis never mind the Euro
  6. The surge in so-called refugees is not a normal humanitarian issue but an invasion.  This has happened before in history with catastrophic consequences for the indigenous population.  In Europe many times, in Briton (Saxon invasion), In the US, In Australia.  Instinctively the European peoples know this deep down and will fight it.  Brexit was the first shot.  It is not about racism it is about protecting the European, not to say Western, culture and way of life - Freedom, Democracy, Tolerance, Security - against those who would pull us into a new dark age.  The EU does not stand up for these values in deeds, only in words.  Their words are worthless.
  7. Recently Margaritis Schinas, chief spokesperson for the European Commission said that one of the principles underpinning "the system" [note the language!] is the primacy of EU law.  The EU is not a nation state!  The people of Europe, while identifying strongly with each other and being more than friends, are not ready for one European nation.  We value our independent cultures and the incredible diversity that brings.  We like France becaue it is French, German because it is German and Britain for its unique British-ness)  All of this is at the core of Brexit and is the reason the EU will fail, hopefully to be born again as an economic and cooperative community to preserve and protect European values and way of life
  8. The Euro is not a real currency but rather just a stronger version of the ERM.  There is not single nation behind it.  There is not signal economy, no real central bank and, despite what Schinas would have us believe, there is no EU law backing the Euro.  In a global economic and political crisis period what will be the go to currencies and safe asset states?  The US, the UK, Germany with a return to the DM.  Not the Euro, which contains fragile economies like Greece, Ireland, Portugal, Spain and Italy! 

What happens next will determine whether the EU fails catastrophically or in a well ordered and constructive way.  The rhetoric and posturing of people like Juncker, Holland and Co. is as divisive as that of people like Le Pen.  Even in the UK the Remainers fairly set their hair on fire when they lost the referendum and called for anti-democratic action to quash the result, and the UK is one of the most stable, if not THE most stable democracy in the world.  The UK will be fine in the end.  The EU will not be.  The UK was a first mover and thus the GBP has taken a hit, but it needed that anyway for purely economic reasons and that will end soon.  Therefore GBP will bottom earlier that others and stabilise and the EUR will fall a long, long way and will likely not survive.

 

 

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