• 4 hours Trump Tweet Sends Oil Soaring 25%
  • 21 hours Why The Coronavirus Economic Crash Is Worse Than You Think
  • 1 day Is A Global Currency Necessary?
  • 2 days America Has Shed 500,000 Millionaires Since The Coronavirus Lockdown Began
  • 2 days Trump Wants Another $2 Trillion Economic Intervention
  • 3 days The Surprising Businesses Deemed “Essential” During The Coronavirus Lockdown
  • 3 days Priceless Van Gogh "Spring Garden" Painting Stolen
  • 3 days Oil Falls To $20 For First Time In Nearly Two Decades
  • 3 days COVID-19 Could Be The End Of U.S. Coal
  • 4 days How Much Does Your Social Security Number Cost? $4 On The Dark Web
  • 5 days Silver Stocks Have Been Decimated In The Coronavirus Sell-Off
  • 6 days How Blockchain Tech Could Make Mergers And Acquisitions More Efficient
  • 6 days America’s Shortage Of This Metal Keeps Trump Up At Night
  • 7 days Bidet Bonanza: Defying The Toilet Paper Shortage
  • 7 days U.S. Auto Sales Fall By 75%
  • 8 days Violating Quarantine? Big Brother Is Watching
  • 8 days Does Gold Still Have Some Room To Run?
  • 8 days Major Acquisition Gives The World’s First Green Ride-Share Another Edge
  • 9 days U.S. Pushes For Digital Currency For Immediate Stimulus
  • 9 days The Impossible Challenges Created By Growing Population
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

John Rubino

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners…

Contact Author

  1. Home
  2. Markets
  3. Other

Euro Devaluation Accelerates - Millions Of Europeans Wishing They'd Bought Gold

ECB Chairman Mario Draghi's announcement of bigger and better QE this morning should have surprised no one. The fact is that the eurozone is coming apart at the seams and the only tool left to delay the inevitable is easier money. As the following chart illustrates, the euro has been declining since 2008, with the descent accelerating lately.

CurrencyShares Euro Trust ETF

And more is coming. The only way for Italy, Greece and possibly France to keep it together is for their currency to plunge relative to those of their trading partners, thus making it easier to sell domestically-produced stuff abroad. So euro parity with the dollar will generate headlines when it happens but will just be a way-point on a journey to much lower numbers. That is, if the whole global financial system doesn't blow up first.

What's a European saver to do? Sitting on a euro-denominated bank account generated a 30% loss of real purchasing power during this "recovery," which for the average European more than offset the trade benefits of a cheaper currency (hence the recent political turmoil). So going forward, cash is clearly not an attractive way to preserve capital.

Gold, on the other hand, is made for this kind of situation. In the past decade it has more-or-less doubled in euro terms. The difference between a 30% loss and a 100% gain is not lost on the people living through it, so expect European gold demand to rise going forward.

Gold Price per Ounce in Euros

Meanwhile, the same thing is happening in China, where the yuan has been falling steadily and is now at a multi-year low to the USD.

CNY to USD Chart

The difference is that many Chinese seemed to have understood what was coming and have for the past decade been loading up on gold. The result: currency devaluation actually improves the finances of large numbers of gold-owning citizens.

1-Year Gold Prtice in CNY

For Americans there are two lessons here:

1) Because we're making the same mistakes as Europe and China - borrowing more than we can ever hope to pay off and papering the growing mess over with artificially-low interest rates and aggressive currency creation - the dollar won't last long as the only major currency that's appreciating. We'll eventually be forced to devalue, which will take the currency war to a new and vastly more dangerous stage.

2) When the above happens gold will soar in dollar terms just as it is now rising in euro and yuan terms. So today's US savers have a choice of role models: Will we be impoverished Europeans with shrinking bank accounts or enriched Chinese with ever-more-valuable stacks of gold?

 

Back to homepage

Leave a comment

Leave a comment