Gold buyer: Don't worry, be happy
Gold prices rise and rise. Some buy gold to protect against inflation, but many fear that something will go wrong, in China or Greece or Ireland or the U.S. housing market, or...
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Spreads on Italian and Belgian bonds jumped to a post-EMU high as the sell-off moved beyond the battered trio of Ireland, Portugal, and Spain, raising concerns that the crisis could start to turn systemic. It was the worst single day in Mediterranean markets since the launch of monetary union.Skip to next paragraph
Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning (dailyreckoning.com).
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The euro fell sharply to a two-month low of €1.3064 against the dollar, while bourses slid across the world. The FTSE 100 fell almost 118 points to 5,550, while the Dow was off 120 points in early trading.
“The crisis is intensifying and worsening,” said Nick Matthews, a credit expert at RBS. “Bond purchases by the European Central Bank are the only anti-contagion weapon left. It needs to act much more aggressively.”
Meanwhile, in Ireland, the public mood is turning as dark as December.
Irish voters are threatening to turn away the rescue boats and instead throw the bankers overboard. The Telegraph report continues:
One poll suggested a majority of Irish voters favour default on Ireland’s bank debt. Popular fury raises the “political risk” that a new government elected next year will turn its back on the deal.
Premier Brian Cowen said there was no other option. “We are not an irresponsible country, “ he said, adding that Brussels had squashed any idea of haircuts on senior debt. Irish ministers say privately that Ireland is being forced to hold the line to prevent a pan-European bank run.
There is bitterness over the EU-IMF loan rate of 5.8pc, which may be too high to allow Ireland to claw its way out of a debt trap. Interest payments will reach a quarter of total revenues by 2014. Moody’s says the average trigger for default in recent history worldwide has been 22pc.
If Ireland shirks its debt load, others will too. And then, the euro will collapse. (It fell below $1.30 yesterday.) And if the euro goes…so does world trade. And if world trade collapses so do the US stock market and the US economy.
And remember, that’s just one of the risks. There are more.
So what should you do?
Easy. Buy gold on dips. Sell stocks on rallies. Don’t worry. Be happy.
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