Each Successive European Bailout Has Been Producing Smaller And Smaller Effects, Systemic Risk Will Hit All At Once, Analyst Says

Graham Summers of  Phoenix Capital Research relates in his daily newsletter: The Euro As a Concept Is Finished

1)   Each successive bailout will produce smaller and smaller effects until systemic risk hits all at once

2)   The world’s central banks are in fact powerless to stop systemic risk once contagion hits

3)   The powers that be will do everything they can to maintain the illusion of control despite the clear fact contagion is spreading

4)   To the unthinking masses, things will appear to be alright right until we’re literally in the eye of the storm

We now see the same drama unfolding in Europe. It is clear to anyone with a thinking brain that Greece, Ireland and the like will never pay their debts off. Moreover, the European Central Bank (ECB) will not be able to do anything to stop the now accelerating collapse.

Indeed, consider that while Greece and the ECB proclaimed “all is well” for five months, the Euro nose-dived from December (when Greece first caught headlines) until June when the ECB announced a $1 trillion bailout.

This $1 trillion bailout kicked off a relief rally from June to early November. However, at that point it was clear that:

1)   The European situation was much, much bigger than just one country

2)   $1 trillion would not be adequate to solve the problem

Since then, the Euro has begun to breakdown in a major way. Timing this breakdown will not be easy. The powers that be will do all they can to intervene and attempt to stop this from happening.  However, these interventions ultimately do nothing to change the big picture.

The big picture is that the Euro is on the verge of entering a “systemic risk” period similar to what happened in the US in Autumn 2008. This period will feature accelerating contagion combined with panic selling that will push the Euro down to test its June 2010 low and potentially break it. (His monthly chart of the Euro, $XEU, shows that it entered an Elliott Wave 3 of 3 down at 141.50 on November 4, 2010; and the daily chart of the Euro, FXE, show that it entered an Elliott Wave 3 of 3 of 3 down at 133.30 on December 13, 2010.)  

This break-down in the Euro will coincide with a rally in the US Dollar and a drop in stocks and commodities across the board. It this sounds like 2008 all over again, you’re right, we’ve essentially re-entered that exact environment.

The only difference is that after the collapse is finished, investors will then set their sites on the US Dollar as the next currency to fall. That’s when inflation will accelerate as the US Dollar collapses, destroying purchasing power while inflation hedges EXPLODE higher. (This is called hyper inflation or a crack up boom).

 I recently detailed three such investments in a Special Report titled, The Inflationary Storm.

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