Greece, Germany, Gold, Oil and the Dollar


"What's happening in Greece is a dress rehearsal for the tragic drama that'll play out in the U.S."

Greece is broke. Aided by the wizards of Goldman Sachs, the monetary magicians managed to mask the Greek problem for 10 years or so. Now the solvency problem in Greece is too big to sweep under the rug. Unlike in the past, the debt markets won't just roll all that Greek debt over to some future time.

What's happening in Greece is a dress rehearsal for the tragic drama that'll play out in the U.S. over the next generation or so. Too much government, too many obligations and not enough money to pay for it. Something has to give, and my bet is that sooner or later, the U.S. dollar will go Greek on us.

Greece's problems have created a floor under gold and silver prices, and by extension beneath the precious metal miners. That floor is spreading outward, and supporting energy prices as well.

After Hubris Comes Nemesis

Where do things go from here? We're in the opening scenes of this Greek drama. There’s much more excitement ahead.

The European Union is 10 years into its common currency, the euro. And the bad habits of decades past are starting to show up and spoil the party.

British commentator Ambrose Evans-Pritchard unloads with both barrels. "The last two weeks have cruelly exposed the Original Sin of monetary union," he states, "that EMU was launched without an EU treasury or debt union. This will be tested again and again by bond vigilantes."

The German Bundestag has drafted an opinion that granting aid to Greece is illegal. Thus, per German diktat, state bodies are forbidden to purchase the debt of another state in any manner whatsoever.

The Germans are not at all out of line to balk at bailing out Greece. But what does all this mean to the euro's future? If the euro fails, what does it mean for the dollar—and by extension for precious metals, energy resources and the firms that extract these substances? It's something to think about.

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