Euro Exit to Cost Over $1 Trillion

Townhall.com ^ | May 26, 2012 | Mike Shedlock

[Attention Surplus Disorder]

Re: “It could take $200-$400 out of gold.”

But only because the USD is the “least poisonous” currency still standing.

The least toxic major one. The Cana dollar is in pretty good shape. Still. Numbers is numbers, dollar gets strong, gold gets weak, to us. I’ll acknowledge my theory is just that; theory; but it’s inarguable that a strong dollar, especially propelled by rocket fuel, will make gold look like it’s taking a serious poop relative to the USD. Now, one might say, “well, all those Euro folks should buy gold, or certainly some will, and that will provide a floor to the POG”. Yeah, could. I’m building up cash to re-buy some gold that I sold at $1750, about 1/3rd of mine. I doubt I’ll ever be all the way out of it, but I think gold and silver rest here for the interim. Maybe get weaker.

How long can USA interest rates stay at zero with $50 trillion in unfunded liabilities coming due?

If there is no other game, there’s no other game. Lotta people have gone broke over the past few years betting that rates will rise and rise a lot. Those liabilites are a decade or more off in the future. If US rates go significantly higher, the US will *not* be able to pay the interest on its current debt, never mind future liabilities. That would be the functional equivalent a Greek default, right now (or whenever it happens) And...the bazillions in debt the Fed has bought will suffer massive losses as well. We would see Ben squirm like nothing we’ve imagined so far.

On the other hand, I am personally amazed at the performance of American business during the Great Recession.

I agree, the US economy is an incredibly adaptive beast, in so many ways. Truly, lots of business profits have come from layoffs, but there are lots of profits anyway. However, if the Eurozone collapses, those profits will be seen to suffer, and they will, both in perception and in reality.

Taken as a whole, I am not shy about claiming that America has the best managed global corporations and small companies in the history of the world.

No doubt.

Time and again, business has pulled America out of the fire.

Maybe they can answer the bell one more time?

Don’t forget the US consumer. The consumer, in my mind, should get all kinds of awards for spending his rear end off through all manner of recession and job loss. IMO the consumer was really the saving grace in the period 2000-2007.