Citigroup Economists Predict Jan. 1 2013 Grexit
According to Citigroup last Wednesday, Greece will leave the euro zone on Jan. 1 2013 and its new currency will immediately decline by 60% against the euro, thus “unleashing a sizeable and unavoidable wave of contagion across Europe,” Citigroup said late Wednesday.
Such a timeline, in an election year in the United States, implies a medium-term bullish period for the US Dollar as concern over euro uncertainty colors the psychology of market participants, and therefore soft gold and silver prices in dollar-denominated terms until the Jan. 1 exit date. At that point, should the euro appear strengthened for a short period in the eyes of investors, then bearish sentiment will bring the dollar down and send gold and silver prices up only to segue quickly into chatter about who the next country to leave the euro zone will be. Thus, at the end of the day, putting increasing pressure on the euro and the European Central Bank to tighten its control over member countries turning the continent into a neo-Soviet Union. Forget the United States of Europe, this is set to turn the continent into the U.S.S.R.E: Union of Soviet Socialist Republics, Europe.
Citigroup made the statement in a note clients. The world’s second-largest currency trading bank said the consequences of a Greed exit would accelerate the collapse of the European banking system and force the European Central Bank to lower interest rates and embark on continent-wide quantitative easing.
“We expect that Grexit will be followed by a series of policy responses aiming to prevent a domino-style collapse of the banking system and escalating economic disruption,” Citigroup economists said in the note.
