Dollar Will Rise As Euro Collapses

The Horrible Truth Starts To Dawn On Europe's Leaders

Excerpts from a well written article by Ambrose Evans Pritchard follow:

The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.

In a speech this morning, EU President Herman Van Rompuy (poet, and writer of Japanese and Latin verse) warned that if Europe’s leaders mishandle the current crisis and allow the eurozone to break up, they will destroy the European Union itself.

“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union,” he said.

Well, well. This theme is all too familiar to readers of The Daily Telegraph, but it comes as something of a shock to hear such a confession after all these years from Europe’s president.

He is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.

My own view is that the EU became illegitimate when it refused to accept the rejection of the European Constitution by French and Dutch voters in 2005. There can be no justification for reviving the text as the Lisbon Treaty and ramming it through by parliamentary procedure without referenda, in what amounted to an authoritarian Putsch. (Yes, the national parliaments were themselves elected – so don’t write indignant comments pointing this out – but what was their motive for denying their own peoples a vote in this specific instance? Elected leaders can violate democracy as well. There was a corporal from Austria … but let’s not get into that).

Ireland was the one country forced to hold a vote by its constitutional court. When this lonely electorate also voted no, the EU again disregarded the result and intimidated Ireland into voting a second time to get it “right”.

This is the behaviour of a proto-Fascist organization, so if Ireland now – by historic irony, and in condign retribution – sets off the chain-reaction that destroys the eurozone and the European Union, it will be hard to resist the temptation of opening a bottle of Connemara whisky and enjoying the moment. But resist one must. The cataclysm will not be pretty.


The ill-conceived socialist currency experiment the Euro, is close to collapse.

As this fiat currency ugly contest unfolds, it will soon become apparent, that the unloved US dollar, with all its warts, crooked nose and bushy eyebrows will start to look pretty good in comparison.

As the Euro unravels, I expect the US dollar index to spike.

Note that the Euro makes up over 60% of the weighting of the dollar index.
Increasing instability in Europe with the threat of currency collapse is likely to drive investors in two directions:

1) US Treasuries
2) Gold bullion

The run to treasuries will help the dollar climb.

Dollar to Rise

My target for the dollar is the 90 to 92 mark on the US dollar index.

Dollar Target


  1. PW, do you see a demise in the dollar as well, in the next five years? After all, I assume that currency vigilantes will eventually realize that the U.S. goverment is broke as well.

  2. Yes, I believe the dollar is ultimately doomed based on the present policies of both the Central Bank and Treasury. In my view, the Euro is due to collapse before the dollar and is beyond the reach of monetary salvation.

    If a moment of sanity returned to the decision makers at the Fed and Treasury, it may still be possible to save the dollar, but the costs of austerity would be very high.
    It seems more likely we will look for a US default in the next 1 to 5 years.

  3. Mr. Bailey would you assume or predict a return to the Gold standard or would the SDR take president, or quite possible the renminbi steps forward, your thoughts are appreciated.

    Interesting times we live in, and about to get even more interesting, its not everyday we get to witness the collapse of a reserve currency, the quest here is too survive it.

    Your Blog is a daily stop,and very much appreciated.


  4. Thank you for your comments Bill.
    I will deal with this topic in a blog post within the next few days.


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