It could then be that this is the top of the stock market, which is fundamentally very overpriced. The latest rallies are the result of statements by French President Sarkozy and German chancellor Mrs. Merkel that a financial solution is at hand for Europe. This announcement named the end of the month as the date for release of this information.
Thus far there has been no further comment. This was the justification for a very strong rally. In the wings there are large short and put positions, which tell us that there is a body of speculators that believe the fundaments are not in place, nor was the recent rally justified. In relation to Europe we see two possibilities; countries bailing out their own financial sectors and the use of leverage to extend bailout funds into trillions of dollars to assist the six insolvent nations. Some nations currently prohibit the use of leverage. Needless to say, rules do not impede adventurous politicians in the control of elitist interests such as the banking community. We will have to wait for this new formula, but in the meantime its results have already been discounted, or military action increases in the Middle East, perhaps in connection with Iran?
Debt problems are endemic worldwide. We all know of the problems in the US, UK and Europe, but they extend all over the world. We are in a major financial crisis, which is as bad and will be as damaging as the credit crisis of three years ago. In fact we never exited that crisis. Debt is the problem and creating more debt does not solve the problem. We have written often about debt and currency problems and as yet nothing is being done to solve these problems. It is as if these powers wanted a collapse. How long can the US dollar continue to take this thrashing? Unfortunately it is not only the dollar. Over the past 1-1/2 years nine major currencies have fallen on average more than 20% vs. gold and silver.