WikiLeaks Exposes Germany’s Euro Exit, Gold, Diamonds, Oil to Soar

It’s the German way or the highway in the eurozone, according to the latest hot cable released by WikiLeaks.  Sign-up for my 100% FREE Alerts!

U.S. ambassador to Germany, Philip Murphy (Goldman Sachs alumnus), issued cable 10BERLIN181 to Washington on Feb. 12, 2010, which essentially states that Germany leadership’s reluctance to backstop the PIIGS’s profligate spending of the past centers upon its sense that, in the end, Germany’s political and economic survival would be placed in jeopardy.

It appears Germany has no intentions of running a U.S.-style print-and-spend economy, nor does it want to hand over decades of productively earned savings to a bunch of layabouts from Club Med, either, especially those in Greece, where a Greek civil servant is able to retire at age 50, and, while employed, can take 14 months pay for 12 months work, for, presumably, spending-money during vacations.

Approximately 40% of the population of Greece works for the public sector. In comparison, nearly 20% of U.S. jobs come from U.S. tax dollars—a bloated number even by U.S. standards.

Gross inequity.  That’s the predominate mood in Germany, according to German news organization Die Welt (translated to English), which published a poll revealing that 71% of Germans insist upon a referendum on further steps taken regarding German’s obligations under the euro currency block.  Sixty-three percent of Germans want Greece to leave the euro.

One can only wonder about the rational of the other 29% and 37%, respectively, who agree to pay for early retirements and lucrative government jobs for so many Greeks.

Moreover, it’s no secret that Greeks don’t even want to pay for their own government’s spending habits.

CNN reported, “Greece is renowned for its history of tax evasion, estimated last year as worth 4% of GDP—$11 billion.”  That amount equals to approximately $560 billion to the U.S. Treasury derived from a $14 trillion economy—per year.  But the UK Telegraph suggests the amount of tax payments evaded is much higher. Greece loses €15bn ($20.5bn) a year to tax evasion, is the headline by the Telegraph.  Now, we’re talking nearly 7% of Greece’s $304 billion GDP (World Bank statistic).

And the New Yorker Magazine writes, “Greeks . . . see fraud and corruption as ubiquitous in business, in the tax system, and even in sports.”

So Germans, who’ve prided themselves as the most productive workers of the most extraordinary products for centuries, are now asked to pay into a broken system that the Greek people, themselves, don’t have confidence in?

In all, the WikiLeak’ed cable doesn’t add much new to what is already known, but it’s an interesting note that Washington has been bantering around the German question for some time, and has probably added fuel to the fire in Europe, too, in the hopes Treasury can skate a little while longer with its dollar debasement program of scare tactics, herding fund managers into the ‘safety trade’ of the U.S. dollar—another grotesque excuse for a currency.

Little attention by the U.S. media has been paid to the U.S. dollar’s noticeably weak response to the circus-like atmosphere in Europe—with no qualms, either, from the rumor mill of the Financial Times of London, as the Anglo-American tag team place center stage each and every sideshow act, as well, though Berlusconi’s narcissistic behavior can be quite amusing and compelling to report.

If the outrageous situation between the Germans and Greeks isn’t enough to crash the euro experiment in a heap with the Ford Edsel, the best tidbit within the Murphy cable briefly outlines the most difficult bolder to roll in the effort to force Germany to bailout Europe (which it mathematically cannot anyway): the legal one.

“In 1990, Germany’s Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an ‘inflationary zone,’ or 2) the German taxpayer became the Eurozone’s ‘de facto bailout provider,’” Murphy stated in the cable to Washington.  “Mayer [Thomas Mayer is Chief Economist of Deutsche Bank Group] proposes a ‘Chapter 11 for Eurozone countries,’ which would place troubled members under economic supervision until they put their house in order.”

Under these bizarre circumstances, a blog entry by Pippa Malmgren, former economic adviser to President George Bush (George II), has been given some traction since her post about her thoughts on the euro, in September.

She believes that the Greeks will default, the euro will fall, the Germans will walk, and gold, oil as well as other commodities will soar.

She writes, “Greece defaults. . . The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.”

As a result, she add, “Gold, diamonds, agricultural assets, energy prices and mined asset prices will rise. Default reduces the debt burden and allows growth and inflation to return.  If central banks (other than the ECB) throw huge liquidity out into the market because of this event then the liquidity is going to lean away from paper financial assets other than the most trusted and liquid (U.S. Treasuries), and lean toward hard assets.”

Anyone wondering how the U.S. Treasury intends to come up with $628 billion by Mar. 31, 2012, to keep the illusion of the U.S. dollar alive without herculean efforts by the Fed’s balance sheet may see the crisis in Europe as possible or partial answer.  As German protects itself from another Weimar, the U.S. needs a solution to its own reichsmark.  So far, the dying PIIGS have provided Treasury a temporary one.

Jim Rogers says Oil Price to Rise “beyond anyone’s expectations”

Speaking with the BBC, Tuesday, Jim Rogers said he believes oil prices will rise “beyond anyone’s expectations” in coming years.

The billionaire investor, author and co-founder of the legendary Quantum Fund also said the U.S. economy will “slow down” as a result of headwinds brought on from higher oil prices.

In firm responses to the host of BBC Hardtalk Stephen Sackur’s contentious questions, the 68-year-old Rogers reminded viewers of last year’s published IEA data, which strongly suggest that world oil production appears to have peaked in 2006—though the agency’s 2010 annual report didn’t make a definitive statement along the lines of the ‘peak oil’ theses.

Instead, the report, entitled, 2010 IEA World Energy Outlook, offered an assumption for plateauing conventional oil production through the year 2035 as a basis for withholding a ‘peak oil’ conclusion that many oil analysts now believe is reality.

“The IEA, the International Energy Agency, says the world’s known reserves of oil are declining at a rate of 6% per year.  There is no oil,” Rogers asserted.

When asked how high oil can go from today’s plus-$100 price tag, Rogers wouldn’t provide his best guess, knowing that bull markets can take prices to levels few people can imagine at the start of a multi-year rise in prices.  Instead, in typical Rogers’ style, he offered a couple of numbers he presumably knows will be easily achieved.

“Well, during the course of the bull market, during the next 10 years, 150, 200 [dollars].  You pick the number,” he said.  “I don’t know, but it’s going to go beyond anyone’s expectations, including mine. And I’m the bull.  But there will be corrections along the way.”

Rogers concurred with the BBC’s Sackur’s assessment that $200 oil will hurt many people within the U.S. and, indeed, other nations throughout the world, but also said many will benefit from high oil prices as well.

Just last month, the United Nations released an intergovernmental study on Climate Change which stated that as much as 77% of global consumption of energy will be met with solar power, wind and other forms of alternative energy sources by the year 2050.

That 190-nation UN study suggests that though some jobs will be eliminated from high oil prices, millions of new jobs in many new industries will be created worldwide as the result of soaring oil prices.

Moreover, the UN report stated that $12.3 trillion of investment into alternative energy sources to crude oil would be needed throughout the next two decades, or half way to the report’s 2050 year endpoint, to achieve 77% consumption of alternative energy sources by 2050.

“Some people will benefit,” Rogers said.  “Remember, there are lots of people in the world.  Somebody’s always benefiting and somebody’s always suffering.”

When asked to comment on the public’s perception that high oil prices are a result of speculators in the oil patch, Rogers said, “I know that’s great on TV and politicians like to say.  If you don’t have investment in the oil industry, where are we going to get the oil?”