What Recent European Turmoil Means For Gold And Silver Prices

Some more signs of euro zone uncertainty are cropping up recently. The most important barometer of potential instability is the report released by the International Monetary Fund that prompts the debt crippled states of Ireland, Portugal, and Greece to take drastic measures to not have to default. This shows that, from the top, confidence in the ability of these countries to repay their debts is waning. It has already been months and years and the news does not look good.

Most worrying is the possibility of the debt crisis spreading to the euro and to other European countries . This just goes to show you that the 2008 global financial crisis is nowhere near over. The aftershocks are still felt and they still threaten the economies of entire nations. Greece specifically appears to be in troubled waters. While many market analysts had thought that a default or debt restructuring was not going to be necessary, because of the relatively slow European recovery, now people are beginning to rethink this. As each day goes by, it appears more likely that Greece will require some type of additional debt aid.

Nobody is talking about how Greece will get out of the debt. It appears to be a type of digging yourself out of debt with more debt, which is entirely unsustainable and is founded on the naïve hope that someday in the near future there’ll be a strong enough national economy to pay off that debt. However, there is certainly no guarantee that the economy will improve substantially in time for Greece to reap the benefits. Furthermore, the interest rates on the loans punish the Greek people in their attempts to improve their national economy. This makes it even harder for them to get out of debt the more debt that they have. All of this is like quicksand. The only way to really get out of it is to default on debts. When this happens, however, the aftershocks should send ripples through the euro and to the European and global stock markets. Much social instability and inflation will likely follow.

All of this is immensely important to the gold and silver price. This is because they are effective hedges against the euro being devalued by central bank printing presses. If you hold gold and silver, then when the euro gets hit, you will actually preserve your wealth and profit from instability.