ECB warns of political uncertainty risk to Eurozone

Video transcript:

Today is Monday 28th November 2016 and we are very briefly addressing an announcement made by the European Central Bank last Thursday declaring that Political uncertainty is putting the eurozone's financial stability at risk.

The European Central Bank (ECB) has an assessment metric called the "composite indicator of systemic stress" and it feels that this has been heightened, specifically as a result of both the Brexit referendum and the US elections. It fears that the 19 countries that use the euro could be hit by trade wars, higher inflation and rising US interest rates and quite possibly could reignite the 2009 eurozone debt crisis.

It further warned that some stock markets could be heading for sharp falls:

"Valuation measures... are in some regions hovering at levels which, in the past, have been harbingers of impending large corrections."

Added to what has already occurred, it also has to contend with the uncertainties surrounding the constitutional referendum in Italy on 4th December (especially if the Prime Minister ends up resigning) and elections in France and Germany next year, the outcomes of which are no way certain.

We all know that markets hate uncertainty. However they dislike even more, the prospect of ‘populist anti globalist Governments’ being elected which could very well change the current order of things. The European project is in defensive mode.

The financial crisis in Greece, BREXIT negotiations and other EU countries watching Britain’s exit, closely, threatens the very establishment which has had an ongoing Federal Agenda since the creation of the original EEC in 1958.

In essence what this all means is that although we felt that 2016 was going to be a tumultuous year, it will prove insignificant in comparison to 2017 should some of these elections be won by anti-establishment Parties. Donald Trump is still an unknown, but by the end of 2017 we will all have a reasonably clear picture of the direction the world will be heading.

The French Presidential election is in April, and the German Federal election must take place before 22nd October 2017; the earliest possible date is in late August. These two countries dominate the EC and should the regimes change, coupled with a new maverick US President, then absolutely anything is possible.

By the way, the ‘dead cat bounce’ in gold and silver we mentioned in Saturdays weekly update has occurred this morning albeit perhaps better described as a ‘dead cat hop’ with gold reaching $1197 and now standing at $1191 and silver stretching to $16.87 and now standing at $16.67. We did expect slightly higher levels being reached and of course it still has time, however, we are of the view that the trend is down for the moment. The dollar index has fallen this morning by 0.43 which accounts to some degree for the increasing precious metal strength.

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Disclaimer:

Illuminati Silver owners come from a background of Banking, International Wealth Management and Economics. Having now retired from these worlds we are not qualified to give investment advice. Therefore, this and other productions must not be deemed to be giving such advice and merely represent the personal views of its owners.