The Next Stage of the Crisis - 7 September 2011

Prediction: Germany will leave the Euro before the year is out...

ONE BIG prediction that I've been making for over a year is unfortunately coming true, writes Porter Stansberry in the Daily Wealth.

The currency of the world's largest economic zone, the Euro, is toast as. A year ago, I wrote:

You should expect the Euro to continue to weaken, as the European Central Bank cannot allow Italy or any large commercial bank to fail. And that means more and bigger bailouts. As the size of these bailouts continues to escalate, investors around the world will turn to gold and silver as the only truly reliable currencies.

Since I wrote that, gold is up 55%. Silver is up 140%. And European stock markets have collapsed. The cost of insurance against European sovereign debt defaults has skyrocketed to all-time highs.

Shares of Italy's largest bank, UniCredit, have collapsed 50% in just three months. Share prices in European banks most Americans are familiar with, Germany's Deutsche Bank and England's Barclays, are collapsing. Even UBS and Credit Suisse – headquartered in Switzerland, considered a stable banking haven – are collapsing:

Germany, the economic engine of Europe, finds itself holding the bag for essentially all the credit problems of "problem children" like Greece and Italy. Its central bank is currently holding more than $300 billion in IOUs from peripheral European central banks – obligations that are probably worth less than $100 billion.

It's unclear whether Germany will continue to finance these bad debts. And because of Germany's history, Germany's leaders are loath to consider any substantial effort to monetize the debts through inflation.

I believe Germany will leave the Euro before the end of this year, triggering a massive devaluation in all the Euro's remaining members. I'll state again: The Euro is toast.

Over the past three years, people have asked me when I expect the crisis to begin. Over that time, we've seen the bankruptcy of General Motors, the complete destruction of America's investment banks, the receivership of the world's largest mortgage firms (Fannie and Freddie), and the collapse of the world's biggest insurance company (AIG). We've seen gold soar to all-time highs. We've watched agricultural prices soar. We've watched US federal debt explode to $14 trillion...and total US debt soar past $54 trillion.

And now, we're seeing the collapse of the European banking system. Keep in mind, this system underpins an economic zone that is larger than the entire United States. The crisis is already here.

I know many people still think I'm crazy for my prediction. But when I perform a simple accounting analysis of US and European sovereign balance sheets, and when I look at the European financial system in crisis, I have to think you're crazy NOT to come to the same conclusion. And – in my opinion – you're crazy not to try to protect yourself against this crisis by owning plenty of gold and Silver Bullion.

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