Tags: Roche | Europe | Bailout

Roche: There's No Logic to Europe's $1 Trillion Bailout

Tuesday, 11 May 2010 02:40 PM

The nearly $1 trillion European bailout merely postpones an inevitable collapse, says David Roche, global investment strategist for Independent Strategy.

"There is not one word in what was decided ... as to how the austerity measures which will enable these countries to become solvent again are going to be enacted by them, democratically, in the face of resistant politicians," Roche says.

"All I see is a huge amount of leverage being taken on by countries which are supposedly strong, like Germany which has 80 percent of GDP in government debt, to bail out countries which have 135 percent of GDP in government debt," Roche told CNBC.

"I can really not see how adding to already excessive sovereign debt is going to cure the impossible sovereign debt of countries which are patently insolvent."

Roche points out that there are only two alternatives here.

“Either so much money is printed or created and thrown at people to actually cover their insolvency with waves of free money and waves of liquidity that we end up with fiat currencies being completely devalued in the eyes of people and gold at something like $7,000 an ounce,” he says.

“Or alternatively ... eventually the governments will default on their debts.”

Interest rates surged in the bond market after European leaders and central banks around the world agreed to a nearly $1 trillion aid package to help stem growing debt problems in Europe, The Washington Post reports.

With the rescue package in place, investors are diving back into riskier assets like stocks at the expense of safe investments like U.S. Treasury bonds.

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The nearly $1 trillion European bailout merely postpones an inevitable collapse, says David Roche, global investment strategist for Independent Strategy. There is not one word in what was decided ... as to how the austerity measures which will enable these countries to...
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