Deutsche Bank forecasts crash of the Euro for 2017
by Michael Smith (Veshengro)
According to predictions by the Deutsche Bank the Euro is headed for the abyss and it is headed for it at a rate of knots. They predict that the demise of the is about imminent and state that the Euro zone is headed for the largest capital flight in history and estimate that the value of the Euro until the year 2017 will fall to below that of one US Dollar.
After already Goldman Sachs, the leading American investment bank, declared the true and fair value of the Euro to be one Dollar or less the Deutsche Bank is following suit in that analysis. According to prognoses by Deutsche Bank the Euro will only be worth 95 US-Cents by 2017, which would mean a catastrophe for Europe and the Euro.
A fall to 95 US-Cent would mean a devaluing of the Euro by 25%. With this estimate the Deutsche Bank stands, however, almost alone as almost no other bank seems to see it in the same way. However, as the Deutsche Bank is the world's second largest dealer in foreign currencies this estimate should be taken seriously and into consideration.
Currency expert George Saravelos justifies this with the largest flight of capital the Europe will be facing in the near future. The continuing stagnation in Europe – even the possibility of another recession in the Euro zone – which is being likened to the lost decades of Japan, together with low rates of growth (as said, another recession may be in the offing even) and very low rates of interest will lead to investors no longer seeing any return for their investments in Europe and thus will move their money in droves to other places. This would seriously weaken the European common currency.
Saravelos said that the proof for his thesis of the Euro problems are in the economic data. The currency union produces record export surpluses while at the same time the unemployment rate remains at a record high.
This is referred to as an economic paradox. The export surpluses are estimated to be soon over 400 Billion Euro per annum and thus will be higher than those of China even. This surplus is, however, not, as it would be common, transferred into local currency in order to pay workers there. The European Central Bank (ECB) creates artificially low interest rates and negative deposit rates and levies penalty interest on the money that is “stored” in banks and shown on the balance sheets the investments of which are over 500 Billion Euro so that investors have no other option but to move their money abroad.
The British Barclays Banks sees the situation equally gloomy as does the Deutsche Bank and also the US bank Morgan Stanley.
Already in October 2014 the Euro crashed from its then value of $ 1.40 to the current level of $ 1.26.
A further devaluation of the Euro of the magnitude predicted and estimated by the Deutsche Bank and others will see the Euro zone hitting rock bottom and as no local, as in sovereign national currencies, exist anymore in the Euro zone countries those cannot even jump into the gap to bridge things.
This could lead to a new Great Depression rather than just a Great Recession in the Euro zone and to a collapse of the economy – at least of those parts of industry and commerce dependent on export – with serious consequences. The 1920s in Germany will look benign in comparison to what may be headed Europe's way should the predictions of Deutsche Bank be to some degree correct.