The Euro this morning traded at $1.3486 versus the U.S. Dollar.
As we can see from the chart, the Euro started dropping around the beginning of December. Foreign currency traders were aware of Greece’s financial problems for the last year, but the negative pressure on the Euro was counter-acted by the negative pressure on the U.S. Dollar.
Both currencies are weak, but, since Greece is defying the EU authorities, the Euro is the weakestÃ¢â‚¬”for the moment.
Since the end of the Second World War, in 1945, the major industrial powers of Europe, and the financial powers of the West, have sought to form a Common Market in Europe.
These powers were not interested in anything so emotional as The Nationalism of Europe or the concept of competing with the U.SÃ¢â‚¬”No, they were simply interested in making greater profits.
What these large corporations wanted was standardization of Europe as a market. They wanted the tariff frontiers eradicated so that they could undersell all local small companies. They also wanted freedom for their large trucks to pass through the many border crossings without stopping. And, last of all, they wanted a common currency.
The big international corporations got everything they wished for. Nothing is free. The people of Europe paid the price for this gift to the major industrial corporations of Europe and the financial giants of the U.S and the U.K.
WHY DID THE EUROPEANS CHANGE?
Humans are essentially lazy. If you convince a group that they can do something with less work, they will eagerly accept the change. The Money Managers of Europe told the Europeans that they would have new passports which would allow them to drive through the border crossings.
This was all that was necessary to form the E.U. The Europeans ignored the fact that they would now have a large new government, new taxes and an enormous, complex costly bureaucracy. If the Europeans could drive through the borders without stopping they would pay any price.
Once the EU was established, the European countries continued their economic activities with their own currencies. This was unsatisfactory to the major corporations. They knew they could increase sales and lower costs if they had only one currency. The European population was told they would not have to exchange their currencies at the frontiersÃ¢â‚¬” less work.
The Europeans jumped for it, and the Euro was born. The Money Managers and the European governments ignored the fact that the Euro was a piece of paper that rested on fourteen nations with independent governments and markedly different cultures and societies.
Today, Greece is demonstrating this fact to the foreign currency traders of the world.
THE GREEKS ARE NOT INTERESTED
The Greek people are realists. They know all politicians are essentially corrupt. As a consequence, the Greeks try not to pay their taxes. They also try to get the most from their government in terms of retirement, vacations and social benefits.
The result of this realistic effort by a population governed by a corrupt government is enormous national debt. (We are seeing the same thing in the U.S. today.) The national debt of Greece cannot be repaid within the next decade. The other countries of Europe are suddenly faced with a devaluation of their currency in the midst of an enormous economic down turn.
MORE TO COME
Greece, of course, is not alone. The PIIGS includes, Portugal, Italy, Ireland and Spain. All of these countries have debts that cannot be repaid in a short period of time. With the current world economic crisis, these debts will not be repaid for several decades.
In the interim, interest rates on all the bonds of these countries will rise as default looms in the future.
MILLIONS OF MIGRANTS
Europe is packed with migrants from all over the Third World. These people came looking for unskilled work. They formed the background work force for construction, farming and the hospitality industry. Now, they are unemployed.
And, they will not go back to their home countries, because life in Europe is infinitely better than the Third World. The migrants pay no taxes and demand government assistance, which they get. This is a further drain on the countries of Europe.
Europe is faced with a decreasing world demand for the few products that it still exports. Europe has established the world’s largest welfare state on the planet. Europe is crowded with its own citizens and tens of millions of migrants.
Greece is the first in a long list of European countries that will be unable to pay its debts.
If you are a foreign exchange trader, now is the time to short the Euro