Put a fork in Ireland, and the Gold rally

Looks like bankruptcy might be an inevitable conclusion for Ireland. Professor Morgan Kelly, their top economist said as much too today. (http://bit.ly/9svpX7) Is the government really going to step in and do something about the new spate of residential mortgage foreclosures, after frittering away so much money on banks with commercial mortgages losses? There is no money left, and access to the EU coffers is going to carry very burdensome terms. So burdensome that I think Ireland will choose default instead of conforming to the EU’s lending conditions.

Remember two years ago, when our beloved government saved Bear Stearns (explosion #1) but let Lehman (explosion #2) serve as a warning for other banks. The Don’t come running to Uncle Sam model worked our rather well eh? AIG (explosion #3) and Merril Lynch (explosion #4) fell within hours, a mess we are still cleaning up.

I think a PIIGS default is imminent, and IMHO, Ireland will be the domino that triggers contagion. Greece was brought back from the brink (explosion #1) and so that makes Ireland another Lehman. Will the EU make Ireland an example? Or will it learn from the US that a creating a martyr can take down a whole system? With Gold topping 1400 usd today, it does make me think a bounce back in the US dollar is due. (Remember when oil was 147 in July of 2008, and people kept talking about a 200 usd target? ‘Nuff said.) So maybe an Ireland default sets off a panic in other PIIGS credit derivatives, and leads to a run on the Euro.  If that happens, the dollar screams higher and Gold kinda crashes. So you heard it here first – a Eurozone collapse leads to a gold crash, and other commodities should feel the hurt too.

Euro vs Gold: http://www.hiddenlevers.com/hl/u?bAr2NQ

If you want to dig deeper, and find out what effect a European debt default could have on your stocks, try HiddenLevers: http://www.hiddenlevers.com/hl/u?9ICERE

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