Run on Banks in Spain and Italy Within Weeks

This past weekend Jim Cramer predicted that within weeks there would be a run on banks in Spain and Itally. Spain and Italy aren't even the worse nations. Greece is, but Spain and Italy aren't little economies like Greece. Italy is the 8th largest economy in the world. Jim Cramer also predicted a world wide economic slow down because of Euro woes.

So if the Euro goes what does that mean for us? Well, most certainly the Euro/Dollar exchange would suffer. The Euro currency would experience pretty strong inflation that would in turn cause some deflation of the US dollar, but mostly only in the EU/US trade. This would cause US products in Europe to become more expensive. Europe is the largest purchaser of US exports. If US exports become more expensive, along with economic troubles in Europe being exasperated, there will be a large slow down in the United States.

On top of this financial institutions are severely connected and likewise susceptible to the world economy. Many of the large US banks hold significant amounts of EU debt. Though the actual amount of expose is fiercely debated, it is likely that financial institutions in the United States would suffer significant losses. It would be like 2008-2009 all over again.

One of the largest US holders of EU debt is the cartel known as the Federal Reserve. Due to extreme secrecy of the cartel's financial statements, no one really knows what the affect of a default would be on the Federal Reserve. I would suspect that it would put additional strain on our monetary system. Thankfully our monetary system is not based on any reality, and so any strain can be similarly imagined away within the constrains of human acceptance of a fictional currency. That is, until we the people reject the imagined reality of the federal reserve.

All this would also cause the dollar price of gold to fall as well. Some people think that the EU crashing will cause gold to skyrocket. It may cause the real price of gold to rise, but it is not likely to rise in the dollar price. The EU crashing will cause slight deflation (increase of purchasing power) of the US dollar. That means that $1 can buy more gold. Thus the dollar price of gold will not likely rise much even though the real price may.

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