Over the last few years we have seen some amazing developments occur in the global financial sector; none of which are good or encouraging. An example of this is the sovereign debt debacle in the Eurozone that threatens the very existence of the euro as well as many banks. And, it is no news that the US is technically bankrupt.
Anyone with some basic common sense can see that Greece will not be able to repay its debts and it seems as if the market has long concluded that Greece will default. However, concerns about larger nations such as Italy and Spain are increasing as the real facts are slowly revealed. While policy makers of the G20, G8, G7, ECB, EU, IMF etc., as well as those of large banks and financial institutions try find ways to avert a total global monetary meltdown, the fact remains that the current problems are far from being resolved.
A solvency crisis for large nations in the Eurozone would have significant negative implications for the global economy; first for the banking sector, then spreading to other sectors of the economy as global liquidity tightens. The impacts would be felt world-wide, and the difficulty in seeing past the crisis is reflected by current global stock valuations. No wonder investment sentiment is extremely low at the moment.
Even though this current debacle was caused by the banking system and the policies of the central banks, now that greed has resulted in financial loss, the very same people behind this disaster do not want to accept their losses. A little more than a year ago, European banks that had acquired Greek government bonds were touting them as an incredible investment opportunity due to their high yields. Of course, all they were looking at was the high yield as this was the main criteria under consideration in their typical investment paradigm. The risk involved which was clearly obvious at the time was completely overlooked. And, now as the bonds become worthless, those banks that purchased high yielding government debt are squealing that they don’t want to take their losses. They are only prepared to suffer a slight loss citing any losses calculated on current market valuations may cause banking failures. Can you imagine if you told you stock broker that you were not prepared to take the loss on the shares you bought a year ago?
What is even more unbelievable is in order to protect these banks from their disingenuous practices, financial leaders and leading political figures are trying to resolve this issue by offering financial assistance. But, this is obviously not easy because the underlying problem is really political. Europe’s political elites know that for the euro to survive in its present form, it must move towards full fiscal and political integration. Yet national leaders, and the voters they answer to, are as yet unwilling to accept the loss of sovereignty, and indeed the shared liabilities, that such a revolution demands.
It is difficult to predict the outcome of all these current meetings, but it seems that currently, European officials are discussing ways to save their union. The talks focus on three aspects: restructuring Greece's debt, bolstering European banks, and increasing the scope and power of Europe's rescue fund – the 440 billion euro European financial stability facility (EFSF).
In the meantime, while all the focus has been on the Eurozone debt crisis the spotlight has been taken off the US. But, things there are not much better and are for the moment being ignored. The US fiscal position simply worsens by the month with a $1.6 trillion deficit projected for the fiscal year 2012. And, while global attention has turned to the Eurozone, the latest updated projections reveal that the US will reach a 100% debt to GDP ratio before the end of this month.
Regardless of all the new acronyms that will no doubt appear in the coming months, in simple English all these efforts from these financial wizards will result in further monetary expansion, in other words the printing of more money. The effect of this will be further currency debasement which will translate into a loss of purchasing power. The final outcome of excessive money printing is a total collapse of currencies and any savings held in banks will become totally worthless. Whether or not this will happen, no one really knows, but one thing for sure, it is time to take some steps to protect your wealth and this does not include having blind faith in your banks or the current banking system.
The first step is to accumulate a core holding of precious metals, in particular gold and silver bullion. This can be done by acquiring gold and silver bullion bars and bullion coins. (Do not be beguiled into believing that limited edition medallions, or any commemorative or inaugural medallions offer a better alternative to bullion). Also, do not confuse mining shares with the physical metal.
The next step is to keep a portion of your funds in an offshore account, and ignore the total misinformation propagated by financial regulators that these types of accounts are only used by individuals involved in money-laundering, organised crime and tax evasion. They simply don’t want to lose out on grabbing your money themselves.