Friday, July 22, 2011

Greece Gives Birth

So the Greecian Empire survives another day.

After hearing the news of the latest massive bailout of Greece's economy, my wife suggested it all sounded like giving birth. One minute you are having severe pain followed by a few moments of tranquility. But the end is still the same. Real bad pain.

But in Greece's case, what exactly are they going to give birth too? Will this International Monetary Fund bailout worth €109 billion ($US155 billion), and contributions from Banks and other private investors of €37 billion ($53 billion), be enough to assuage the huge systemic debt problems Greece faces? Will swaps, smaller interest rates and longer maturities be enough smoke and mirrors to fend off the fear.

Because fear has been more than evident lately. Dan Norcini recently commented that the recent action in gold has the smell of fear about it. Small dips in price are being quickly met by buyers eager to jump on board. This is a sign of a real bailout. The bailout from trust in governments, and their shoddy currencies, to safety in gold.

But the game has been stretched for another wee while to buy time for the European Union and the global financial system. And you cannot blame traders for being irrational about the market by selling gold and increasing risk or buying stocks. They are merely doing what is mandated for them; to make money. They will take the bliss between contractions and use the sentiment to their advantage. But as we have seen often, look out if confidence drops again. And it will.

Now is not the time to be selling your precious metals.

Do not be deceived, the eurozone has not fixed this problem. This new plan merely creates more debt to fix the debt. The balloon keeps inflating.

The golden summer (winter here in New Zealand), and many other forseeable seasons, will continue as long as the fog of confidence masks the common man from seeing the truth. Something will be born, but it may be highly deformed and grow into an unstable, and even violent monster.

Then again, there may be something more beautiful arising. Sensible government and a stable monetary system.

That's the kind of new beginning worth some pain.

Gold in New Zealand dollars: $1842.43 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $45.56 per oz
Previous all time high: $59.19
per oz

Articles of interest:

Another leaked news story suggesting a deal on the debt ceiling

See article here

David Morgan on Silver Price Manipulation, Delivery Default & Supply Shortage Risks

See article here

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001

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