A Recipe for Economic Disaster - Part V?

The past two weeks have been a disaster for the EU because of its handling of Cyprus. Not only did it put a chill on ordinary bank depositors by the mere suggestion of taking money deposited at the banks, but it laid the groundwork moving forward by indicating that this would serve as a model for future banking crisis. Yes, the EU did back off its initial position by agreeing to preserve small deposits – those under 100,000 euro – but deposits in excess of that amount will get a “haircut” of 40% or more. A haircut? No, it’s more like a guillotine to the Cyprus economy.

The Cyprus economy will suffer the same fate as Spain and Greece – years of high unemployment and economic repression. The worst outcome though is likely the euro zone’s loss of confidence in banks. If the Euro doesn’t go away, which is questionable at this point, it will likely depreciate significantly as people throughout Europe seek a safer haven for their wealth – Dollar, Swiss Franc or Gold to name a few.

What follows is a flow chart we created 18 months ago to visually show the possible outcomes of the Euro Zone crisis. Our thesis has proven accurate given what has transpired over the past 18 months. We have always believed that the final curtain call for the EU would come as a result of social unrest. Comparison of Merkel to Hitler is not a great sign for “Euro” cohesion. We believe social unrest along with crisis fatigue is setting the stage for dramatic changes in Europe. The grand experiment of the Euro may be rapidly coming to an end.

Sincerely,

Your THOR Team