Taking Out the Euro Trash

The Tragedy of the Euro is playing out in real-time. The Almighty Dollar is trashing the Euro, along with most major currencies. Were you forwarded this email? [Sign-up to Rude Awakening here.]( [Unsubscribe]( [The Rude Awakening] Taking Out the Euro Trash - The Almighty Dollar is trashing the Euro, along with most major currencies. - The Euro is a political project, so no amount of market rejection will sway Europe’s empire builders. - Say hello to “fragmentation risk.” Recommended Link [Fed Exposed! Former government insider tells ALL]( [Click here for more...]( Secret plan to destroy the markets? This [former government insider]( just went on LIVE camera and exposed the Federal Reserve for what it REALLY is… An institution created in secret designed to rob you of your savings, and destroy your wealth. And even though we all know these central bankers have blood on their hands (inflation, the Greenspan bubble, Ben Bernanke)… No one, and I mean NO ONE expected [this.]( If what this insider says is correct, you may only have days to prepare. See his shocking exposé. [Click Here Now]( Sean Ring Editor, Rude Awakening Good morning from a balmy Asti. When I moved to Europe three months ago, I loved how chilly it was. But I woke up to Southeast Asian weather in Northern Italy. I can’t wait until Autumn! Every once in a while, I’ll wake up to a WhatsApp from good friend and Rude reader, Nancy. She wrote, “I love your July 4 article. BTW, what do you think of the euro?” To which I replied: Then I showed her a chart of the EURUSD exchange rate, which I’ll reveal below. Nancy and I had a good emoji laugh. In this edition of the Rude, I’ll look at the weak euro and what that means going forward. How the Euro Came to Be Rome 1997 My first time on an airplane was in the autumn of 1997. My college sweetheart was studying in Florence for a semester. As she already spoke fluent Italian, it was more of a holiday for her than work. We did Florence, Pisa, Venice, and Rome. My life would never be the same. Hilariously, one of my fondest memories was of the Italian Lira. It was a perfectly ridiculous currency. So much so that turning my American Express Traveler’s Cheques (remember those?) into the lira prohibited my bifold wallet from closing. I gave cheques, and I got a brick of currency in return. But at least the Bank of Italy had control over its monetary policy. Now, that’s the job of the European Central Bank and its misguided head, Christine Lagarde. Frankenstein’s Monster If you’ve never read The Tragedy of the Euro, then put it on your list. After reading this newsletter, you can download it at zero cost on [mises.org](. Professor Philipp Bagus maps out the history of the currency and what’s ultimately wrong with it. I won’t give you a synopsis of the entire book, but the beginnings of the euro are interesting. Bagus outlines the competing visions of Europe: Classical Europe versus Socialist Europe. Bagus writes: The classical liberal model is defended traditionally by Christian democrats and states such as the Netherlands, Germany, and also Great Britain. But social democrats and socialists, usually led by the French government, defend the Empire version of Europe. In fact, in light of its rapid fall in 1940, the years of Nazi occupation, its failures in Indochina, and the loss of its African colonies, the French ruling class used the European Community to regain its influence and pride, and to compensate for the loss of its empire. Yes, it’s always the damn French. But you knew that already! Bagus goes further: The real reason the German government, traditionally opposed to the socialist vision, finally accepted the Euro, had to do with German reunification. The deal was as follows: France builds its European empire and Germany gets its reunification. It was maintained that Germany would otherwise become too powerful and its sharpest weapon, the Deutschmark, had to be taken away—in other words, disarmament. So the French handcuffed the Germans to maintain control of the European Union’s power levers. How’s that working for them? But really, this “political” project gives its politicians 100% discretion. That means there’s no economic occurrence that will shut down the project. And that’s a complete disaster for Europeans. Why the Euro Doesn’t Work As Intended Let’s start with the “original euro.” And that’s the US Dollar. What do I mean by that? Abraham Lincoln and his Treasury Secretary, Salmon Chase, instituted the [Office of the Comptroller of the Currency]( To promote opportunity, a dynamic economy, and a stronger Union, Lincoln and Chase conceived the national banking system and the Office of the Comptroller of the Currency to regulate and supervise it. Lincoln took pride in signing the National Currency Act, which he believed would provide "great benefit" to the people and the government. "The national system," he declared in this State of the Union message of 1864, "will create a reliable and permanent influence in support of the national credit and protect the people against losses in the use of paper money." Old Abe essentially created the present US dollar by fiat (government decree). In fact, you can argue Lincoln’s actions were far more dictatorial than Europe’s. At least the Europeans put it to a vote (however many times you need to vote to choose “correctly”). And while the ECB and the Federal Reserve work similarly, there’s one huge difference. The Fed only has to deal with one Treasury. That means they can coordinate monetary and fiscal policies. Obviously, that can go wrong, like right now. Joke Biden is running an enormous fiscal deficit, while the Fed has kept printing money willy-nilly for over a decade. This is one of the reasons your July Fourth BBQ cost $10 more this year than last. But the ECB has to deal with 19 different treasuries, all of whom are answerable only to their national governments. It’s a complete mess of a system that fosters zero coordination. In my mind, what Europe has lost in monetary freedom is far greater than the supposed benefits of lower transaction costs between member states. Of course, it’s going wrong right now. Just like it did in 2011 with the European sovereign debt crisis. Only this time, it’s Italy that’s causing palpitations. Recommended Link [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [Click here for more...]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click Here To See Why]( Fragmentation or Redenomination? First, let’s see how it’s going: Yes, that’s the euro falling out of bed against the USD. One of my LinkedIn connections wrote, “I thought that was a crypto chart!” Once we hit parity (1 USD for 1 EUR), look at the 0.85 level. As I’ve written before, the exchange rate is the one number that summarizes what the world thinks about your country (in this case, region) and currency. The Euro is clearly out of favor. Not only is Europe impaling itself thanks to its idiotic Russia policy, but now fragmentation is rearing its ugly head. This chart is the spread between Italian and German 10-year bond yields: Theoretically, there shouldn’t be much of a spread. But Italy has too much debt (134.8% debt-to-GDP ratio), and Italian banks hold much of that debt. So the worry is that Italy might force a break from the euro to return to the lira. From a European Parliament report titled, “[10 years after ‘whatever it takes’: fragmentation risk in the current context]( An extreme consequence of the fragmentation in credit and money markets is the possibility that the euro area could break, with the adoption of national currencies and the restoration of national monetary policies. This risk, known as the redenomination risk, can be measured by the risk that an asset denominated in euro can be converted (1 to 1) into a new national currency with a high probability of depreciation. A high probability of depreciation? If this scenario came to pass, the lira would trade 50 to 1 against the USD if it’s lucky! And Madame Lagarde can’t print her way out of this. Her printing is a big reason we’re in this mess, to begin with. Thank heavens for my offshore bank accounts… Wrap Up This may be one of those times when the dire claims of Austrian economists come true. Read The Tragedy of the Euro. It’s fantastic and free of charge. The euro is a straitjacket masquerading as pajamas. The pain of a euro fragmentation is almost too much to think about. Any euro savings would be wiped out overnight. The wealth destruction would be unimaginable. But there’s a non-zero chance of it happening. And it may happen sooner than anyone thinks. Until tomorrow. All the best, Sean Ring Editor, Rude Awakening [Whitelist Us]( | [Archive]( | [Privacy Policy]( | [Unsubscribe]( Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [unsubscribe](. Please read our [Privacy Statement.]( If you are you having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting us.]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470SJNED01[.](