Once a Government runs out of borrowing options, money printing due to high inflation and the currency's credibility. there is only one class of people left, to fund any bailouts and money to keep the country going. That is you.
In the Eurozone it is even worse as their central banks are banned from printing money only the ECB can do that, but the ECB is banned from being the lender of last resort.
This is exactly the right way to construct an unstable currency area.
When the UK runs out of money in 2016-17, they will go after any assets of yours they can to keep the country going. They don't care if you are left totally destitute as long as they are not left hanging from lampposts. This has happened in the past when countries have got into this situation and even if you put your assets into UK branches of foreign banks that will not save you.
US President FDR nationalized all private gold in the 1930's.
When private asset theft happens they will disguise it, by giving you something in return, that in reality is worthless. In the UK and US during WWII you had to buy war bonds, by the time thses were paid out in the UK, inflation had made them pretty much worthless. In Cyprus you get worthless shares in a bankrupt bank, but maybe they will use this to tap the shareholders for more money.
You need sound safe haven countries that are politically stable have a sound economy with low GDP to debt ratios but these are as common as an honest politician.
Spread your savings into a number of different types of asset in different countries, seems to me the only way to minimize losses and steer clear of European countries as much as possible. Good luck everybody as the next few years ain't going to be financially pretty.
Where US have largely restructured their banks and have had their property crash, prices and new builds are now going up and have put the worst of the recession behind them. They still have a large deficit and sovereign debt issues but they will use cheap shale gas and oil to pull and save themselves from economic collapse.
I can't say the same about any Western European countries where none of the countries have solved their current liabilities or successfully restructure their banks. Germany has $1.35tn of Eurozone liabilities, Switzerland have printed unlimited amounts of Swiss Francs to keep the Euro exchange rate pegged at above 1.2. Probably the safest are Norway, who are actively dissuading foreign investments or Finland as at least they make the Eurozone countries receiving bailout money from them pledge assets as security (but will they get them)?
When the Euro breaks up, which it must with the current structure and non-German bank liabilities, especially for Spain, Italy and France, we now know from what has happened with Cyprus, Germany / EU / ECB will under no circumstances underwrite any of these liabilities, like they have for Greece, Ireland and Portugal who got in early with their bailouts. Once the majority of the countries have reverted back to their own currencies, which will happen at some point through referendum or revolution and applies Lex Monetae to how they intend to repay their ECB and Target2 debts, where the contracts have been written that they must be paid in Euro, then the fun will begin. Will Germany respond with international court action or Panzer action, or both, with trillions of Euros at stake?
Get a comfortable chair, plenty of buckets of pop corn and sit this one out until you get your call up papers.
Author
Topic: Cyprus bailout takes a new and potentially dramatic turn. (Read 8017 times)