The financial market is unstable, and currencies collapse around the world. European Central Bank (ECB) run out of ways to keep the market up, and now Euro might be in trouble.

Why is Euro in trouble?

The market strategies Russell Napier said that Euro is in trouble. He told the Financial Times that our financial system shows serious vulnerabilities and the demise of Euro may trigger the collapse of the financial system.

Major regions within the eurozone including Germany, France, and Italy struggles to deal with a declining rate of overall growth. Another issue is the weakened performance of large financial institutions. Napier says:

“The key consequence of this collapse will be the destruction of the euro. The expected success of the far-right and far-left in the European parliamentary election in May this year augurs the beginning of the end for the currency union. Both extremes share a commitment to the return of sovereignty to their parliaments that is incompatible with a single currency.”

The analyst is not the only one who sees a weakened financial situation. A British politician stated a while back that banks are broke. Godfrey William Bloom explained that The system in itself is not healthy. It also leads to a moral, political hazard. If any regular man or woman printed money like the banks are doing, they would go to prison. Central banks do it all the time.

However, Napier argues that ECB and the EU authorities might impose strict capital controls in the short-term. It may be good for the short-term but affect the long-term performance of the Euro.

While strict capital controls and restriction, on both individuals and businesses, to send the euro outside of the eurozone may prevent the devaluation of the euro, it could also cause domestic companies to suffer. Local companies with diversified portfolios or plans to expand outside of the eurozone are likely to run into difficulties. The inflow of capital from the U.S. and Asia into the European market could also decrease.

What will happen to Euro and Fiat currencies?

Some analysts believe that the eurozone will not face a devasting recession this year. They believe that the eurozone economy is expected to grow by 1.5 per cent by the four quarter of 2019. However, with the ECB struggling to find tools to stimulate the eurozone economy and domestic firms seeing weakness in many areas, the European economy could experience a gradual decline over the long run. Napier adds:

“Throughout the past few weeks, the euro has demonstrated losses against both the Canadian dollar and the U.S. dollar, leading traders to fear for the short-term trend of the currency.”

What will happen to Fiat-currencies is impossible to say. However, there are signs that the financial situation in many countries is not ideal. There are riots in France where the yellow vests try to collapse the banks through bank runs. China tries to counter their declining economy by injecting $82 billion.

“The news is clear – the economy needs help,” said Trinh Nguyen, senior economist for emerging Asia at Natixis in Hong Kong.

Then we have other analysts, like the Billionaire Tim Draper, who argues that crypto will surpass Fiat in the years to come. He explained that bitcoin could reach $250,000 by 2022 if we think globally. He bases this prediction not only on strict economics but in the paradigm shift that Bitcoin and cryptocurrencies represent. For Draper, this paradigm shift means thinking globally.While thinking globally, maybe the financial markets are not our biggest issue. If you ask the legendary investor Jeremy Grantham, he states that humanity is the biggest bubble of all. Jeremy is famous for predicting the dot-com bubble as well as the global financial crises of 2008. His latest prediction is that civilisation will become the next big crises which are a lot bigger than just economics.

Image Source: “Pexels”