Greece is in trouble. That statement is agreed on by almost everyone. What's more the trouble is not liquidity, but solvency. In other words, not only can Greece not borrow money in the normal markets, but the physical demand of the interest payments is greater than the national ability to pay the debts. The country is broke.
What are the possible solutions to the problem?
1) Give Greece a grant so they can pay the debts and start a normal life. While this solution would be best for the financial markets, Germany and France taxpayers will object. The idea that Europe can act decisively and quickly is most unlikely. Thus, this option, the best for financial markets, the Greek economy and Europe as a whole is off the table.
2) Let Greece default. Not a real option, because the banks of France and other European countries will go broke. Not to mention the ECB- the European Fed will also go broke. The taxpayers of France and Germany will pay more under this option than just bailing out Greece in option 1. The leaders will do all they can to prevent this from happening.
3) So what does Europe do without doing 1 or 2? Try to kick the can down the road. The leaders will try everything possible not to make a decision that really solves the Greek insolvency problem. They will meet; They will argue; They will make small as possible decisions. It is risky to take any decision and thus they will try as hard as they can to kick the can down the road.
What impact will this have on US investors?
1) Banks and the financial system will be frozen and not good investments. The US financial system will not be hot investments as long as Greece is insolvent, but still alive.
2) The dollar will be much stronger than the Euro. While the dollar has lot's of problems, the Euro has more. In the race to the bottom, the Euro will win.
3) Gold will continue to do well. Where does other countries (China, Japan, Middle East) put their money? Euro.... no
Dollar.... already too much... The simple fact is gold is one of few investments that makes any sense.
I wish I could find more investments, but at the present time, all the alternatives look weak.
