European governments will Default

The big question on every investors mind is will the western governments print their way out of their debt crisis or will they default. If they can inflate their way out, the politicians and bankers who got us into this mess stay in power and can pretend nothing is their fault. If they default, the politicians and bankers lose their job and many will go to jail, and most importantly responsible profitable efficient organizations, individuals, and banks that remain solvent will rise in power.

Regarding investments, knowing this outcome is extremely important, because if we have inflation, you want to own commodities, stocks, and homes as they will hold value against a declining currency and there is no reason to pay off debts because they will get inflated away. On the other hand if we have default, then you only want to own what you need, invest in solid investments, and limit your debt.

Here is my prediction on what will happen:
Europe will default. The main reason is that the German’s understand too much about the evils of printing money from their nazi days. And they stand to benefit as the last country standing. Also, where as the US government in 2008 constantly over funded any threat, the European response has been to do as little as possible as late as possible. The markets smell blood and there just doesn’t seem to be a enough money or will for the Europeans to bailout all the governments suffering in this debt crisis.
Once this default occurs, BUY Europe and own the euro.

The idea that bailouts save a currency is absurd and counterintuitive. A currency’s value is nothing more than the amount of currency outstanding vs the amount of economic value it covers. Thus if an economy declines and they print money, the currency declines in relative value. If they don’t print and the economy declines, the currency could still decline as the economy declines, but by less than if they printed. But by not printing the currency should hold its value against gold. Then, holding value against gold will gain trust and that trust will further increase its value.