Tags: victor | riesco

Europe to Spark the Next Global Financial Inferno

Tuesday, 04 May 2010 11:30 AM

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
We are beginning to see the crisis shift to the government sector as we observe what happens in Europe.

They are trying to fight fire with fire in Greece, giving a debt-burdened country more debt to roll over previous obligations and finance out-of-control government spending.

What's ridiculous is the countries that are going to make the loans to Greece also have ample deficits and will need to borrow to lend the money, worsening their own financial condition.

I think politicians have misinterpreted Keynes and pursue policies that lead to huge imbalances.

Western governments borrow and spend in boom times and then double their efforts of borrowing and spending during recessions.

This leads to huge structural deficits like in Greece, the United Kingdom and even the United States. They can continue until the market realizes the risk in this lending and then interest rates spiral out control, worsening the fiscal situation to the point of default.

Central banks keep interest rates below the rate of inflation for extended periods of time, favoring overconsumption, creating asset bubbles, bad investments and speculation.

This also leads to a gradual debasement of paper money. The recent dollar strength is mainly because of the euro. Currencies like the Canadian dollar or Singapore dollar are strong. Hard assets like gold or oil are near their highs.

The gasoline tank that will cause the next worldwide financial fire is being filled. Europe may be the spark that starts the inferno.

Place your bets accordingly.

About the Author: Victor Riesco
Victor Riesco, a financial analyst and trader in Santiago, Chile, works as an independent adviser and educator and operates a brokerage and trading business for local investors.
Click Here to read more of his articles.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Alibaba Set to Price IPO Shares Amid Investor Frenzy

Thursday, 18 Sep 2014 08:42 AM

Chinese e-commerce giant Alibaba Group Holding Ltd is set to sell some $22 billion of shares on Thursday, capping a two- . . .

Top Cardinals Criticize One of Pope's Favorite Thinkers on Marriage

Thursday, 18 Sep 2014 08:23 AM

Five high-ranking cardinals have taken one of Pope Francis' favorite theologians to task over an issue dear to the pope' . . .

No Magic Bullet Seen for Pensions as Calpers Exits Hedge Funds

Thursday, 18 Sep 2014 07:16 AM

A record-setting run for U.S. stocks and an expanding economy aren't solving one of the biggest challenges facing cities . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved