Global Financial Markets Could be at a Turning Point
Global stock markets were sharply lower on Monday as talks between Greece and the European Union broke down over the weekend with no deal deal being reached. According to multiple media outlets, Greek Prime Minister Alexis Tsipras, surprised creditors by announcing a referendum on the country’s bailout terms to take place July 5th. European Stock Markets collapsed by 3% on average today.
Banks closed and Capital Controls in Place
It has also been reported that the Greek stock market and banks will be closed this week. What is so interesting is how many so called experts have been wrong about Greece. 60 Euro cash withdrawal per day, no international transfers. FAZ a German news outlet reported that the Greek won't even have the 110 million the referendum will cost even if they default on Tuesday's IMF payback. While we do not believe that there will be a Grexit there is a possibility that the country could leave the Euro Currency Union.
While it is difficult to predict whether a Grexit will have any material effect on the Euro currency, one thing that may be concerning to Germany is that the Euro’s share of global currency reserves is 22%. This makes it the second most important currency in the world, behind the US Dollar.
For this reason the uncertainty around investor reaction to a possible Greek exit has to be unsettling to German leaders, European Regulators and the Central Bank.
The World is Defenseless Against the Next Financial Crisis
The above title was taken from an article in the Telegraph. The article highlights a warning that was issued by the Bank of International Settlements in its recent annual report. The underlying theme of the warning by the BIS centers around the fact that world will be unable to fight the next global crash as Central Banks have used their ammunition trying to resolve the last crisis. (Source: telegraph.co.uk 2015 June 28th)
The BIS went on to comment that rates have been so low for so long that Central Banks are not equipped to handle the next financial crisis. In many countries rates have never been so low for so long. The headlines signaling financial warnings are growing.
In an article on ZeroHedge, a fund manger for Fidelity, one of the largest mutual funds and investment groups in the world, has also warned investors to have an allocation to “physical cash” “including precious metals” to protect against “systemic risk”. (Source: ZeroHedge 2015 June 22nd)
Gold and Silver
We do not have any explanation why gold and silver did not rise today. It seems as though every passing week the global financial system is becoming more uncertain. It is difficult to say whether a small country like Greece could be the catalyst for the next crisis. For those who have not added safe haven investments now might be a good time to consider it.
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