George Soros says euro bonds are the only solution, buy gold and silver
Posted on 16 August 2011 with 3 comments from readers
In an insightful interview with the German magazine Der Spiegel this week legendary hedge fund manager and multi-billionaire George Soros explained how he saw euro bonds and an effective German bailout of the entire euro zone as the only solution to the financial crisis.
He warned that the longer the Germans take to realize this is their only option, the more expensive it would become.
‘There is simply no alternative. If the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities. So it would push not only Germany, not only Europe, but also the whole world into conditions very reminiscent of the Great Depression in the 1930s, which was also caused by a banking crisis that was out of control.’
Euro failure unacceptable
He continued: ‘The euro exists, and if it were to break apart, all hell would break loose. Germany has to make it work. To make it work, you have got to allow the members of the euro zone to be able to refinance the bulk of their debt on reasonable terms. So you need this dirty word: “euro bonds”.’
Can this be achieved? Will the German authorities wake up in time? It is by no means certain. Indeed, there are some very powerful voices in Germany who are stalwartly opposed and in a position to block it.
So we are down to crisis management and brinkmanship to push these opponents into accepting euro bonds. Chancellor Merkel is a realist and will reluctantly embrace the inevitable to save the euro zone from a massive banking crisis.
For investors this bailout means inflation. Printing euro bonds to replace up to 60 per cent of the debt of bankrupt nations is highly inflationary. That is going to be good for gold and silver prices, and for that matter the US dollar which is supposed to be done with its currency debasement after QE2 finished.
Precious metals
On the other hand, if the Germans screw this up then gold and silver will surge even higher in the mother of all banking crises. ArabianMoney does not see this as a repeat of the 2008 crisis with a parallel meltdown for precious metals as the security of the bond market is a key issue and so diversification into multiple safe havens makes sense.
Now again, when will the Germans come to their senses? How bad does the crisis have to get? We just don’t seem to be close to it yet, and that portends a lively autumn with extensive volatility to come in financial markets.
3 Comments posted by readers:
I saw the title of your article as meaning that Soros is advising people to buy gold and silver but, reading your article, it is ArabianMoney’s advice, which I fully agree with.
However, perhaps Soros actually is advising the purchase of bullion unlike other hedge and investment fund managers at this time. At least, his hedge fund clients can now make up their own minds about buying gold and silver without having to purchase it through him.
I still think that closing his hedge fund at this moment in human financial history was an honest and honourable thing to do, although there may have been other factors as well in the timing of the closure.
How about other investment fund managers closing down their funds and, like Soros, returning the money to their clients with a letter saying “Invest in gold and silver. If you do it yourself, we won’t be taking any money off you for doing it for you”?
Even investment fund managers can invest their gotten gains in gold and silver themselves. They’d do a jolly sight better than shares or bonds. And if Bloomberg interviewers say, “But what can you do with gold and silver”, the knowledgeable investment fund managers can reply, “SELL some of it and enjoy the proceeds!”
yes, the title is misleading. soros didn’t ask people to buy gold and silver.
if soros is indeed asking people to buy gold and silver, then it is time to sell.
Don’t forget that a strong dollar will be bad news for the US stock market. In the absence of some daily crisis, nearly every time the euro goes up against the US dollar, the Dow goes up because the products of the large US multi-nationals get cheaper, versus products made in Europe.
The Brits in London are probably doing cartwheels on hearing the news on the proposed financial transaction tax. I can see them running around their offices like the zombies in London in the excellent British science fiction film ‘Lifeforce’ screaming ‘YES, YES, YES! Thank you Jesus!’
If banks in the US get into trouble and need another bail out as a result of what seems about to happen in Europe, we could be looking at a worldwide depression because the Republicans will try to block any bailout in order to get rid of Obama. Just today, we heard the new Republican front runner, Rick Perry, describe any further attempt by Bernanke to do any additional QE before the election as ‘treason’. These guys could end up getting rid of the entire government if they aren’t careful. A banking collapse can cause a revolution. Too few people realize how bad things will get within days of a worldwide banking crisis. It almost happened after Lehman. The entire economy shuts down within days without functioning banks. TRILLIONS of dollars vanish, never to be seen again. It is like shutting off the electricity. Upon hearing that Lehman would declare bankruptcy, Mohamed El-Erian of PIMCO didn’t call his wife and tell her to get as much CASH out of the ATM as she could for nothing. He knew what could happen in a banking collapse. Too many of these politicians don’t realize what they are messing around with. If you live in the USA, NEVER keep more than the FDIC insured $250,000 in one bank. If the banks get shut down after failing, when they reopen after nationalization, anything over that will be gone for good.
I’m just happy that if finally stopped raining long enough for me to ride the tractor and get the grass cut. It is amazing how tall grass and weeds can grow in the Southern Louisiana summer heat and humidity in only 2 weeks. I need to cut it every 7 days to keep it looking neat. And so far, no hurricanes. Only 6 weeks to go in the season for the BIG ones to hit around here. How about all that snow in New Zealand. Some of those videos on the New Zealand Herald web site looked like Siberia. Global warming must be causing that.