Right now the focus is on Europe. What we must remember about the euro crisis is that it isn’t really a crisis about the sovereign countries themselves. Sovereign defaults really are no big deal. They have been going on for thousands of years and they will continue to go on for thousands of more years.

Greece, for example, has gone belly up on numerous occasions in the past 150 years, as has Argentina.

The big problem is more of the leverage in the European banking system. Most banks in Europe are leveraged 20 or 30 to 1. This means that for every $1 in deposits or assets, they have about $30 in loans. So if Greece defaults on $1 billion to a specific institution, that institution may feel that in up to $30 billion in losses.

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So what people really are worried about aren’t so much the PIIGS nations (Portugal, Ireland, Italy, Greece, and Spain) themselves but rather the effect on the European banks if they see some sort of default.

The U.S. has a lot of problems, but the TARP program did allow the banks to recapitalize and bought them time to rebuild balance sheets. The Europeans are talking about a similar program.

However, on the other hand, Europe is way ahead of the United States in terms of actually tackling deficits. Italy, Germany, Spain, Portugal and the United Kingdom have all started some form of austerity programs to cut deficits. And other than the U.K., none of them have a deficit as large as the United States (near 9 percent of GDP for fiscal 2011).

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Therefore, once Europe figures out its banking program and backs up its banks with some sort of TARP style fund, we could see the euro soar.

Virtually no one is bullish on the euro at the moment because of the recent debt problems. But as a contrarian, I can tell you that is when rallies often begin. These problems in Europe have lead to a bounce in the U.S. dollar and declines in the prices of many commodities as people fear about global growth.

Watch the European banking crisis. Once there is a solution and despite the slow-movement political structure in Europe, the United States will take a major hit once again as investors begin to focus on the U.S. deficit and the lack of an effort to do anything about it.

This will begin the next move higher in gold, precious metals and commodities as a whole.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.