Europe has no choice but to pursue QE and print money to recapitalize European banks; Expected Result: Same as US QE

Jim Sinclair's Mineset

Europe has no choice but to pursue QE and print money to recapitalize European banks. In the final analysis, we do not see any other alternative to solve Europe’s problems than for Europe to engage in a lot of QE, and that is exactly what has been happening; from the UK, from Switzerland, and now from European Central Bank itself. Whether it comes from the various European central banks, some institution/fund backed by European taxpayers, or if it comes from individual countries who have to nationalize their banking systems, it will be QE. Others may quibble about the individual events on a day to day basis; we liken this to focusing on the trees in the forest. We are focused on the forest itself and we are confident that in the name of self interest, Europe will act as we suggest. In our view, there is no other alternative that any politician would find even remotely palatable.  Letting the banks fail is not an option.  Doing so would be the end of a prime minister’s political career, the end of their party’s influence, and possibly the end of their party’s role in government for years to come. Since it will be QE, we believe that the reaction of world markets will be much like the last time QE was introduced on a grand scale (by the U.S. in early 2009). At that time the U.S. did the QE; this time it will be Europe and European nations. After the U.S. QE in 2009, developed market stocks, emerging market stocks, commodities, commodity (Canadian, Australian, and Brazilian) currencies, and especially gold went up and stayed up for over a year. We expect a similar outcome this time.

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