This past week has seen the Turkish economy gyrate back and forth worse than any carnival ride ever could. What has been missed by a lot of the mainstream media news coverage is the real danger to the world economy and your portfolio from this growing crisis.
Sure it is not great for Turkey, its neighbors, or even the global economy if one of the key G20 nations like Turkey goes completely to pieces. That would not be good for anybody. But it is not the real threat.
The real threat is what has been happening to the European Union economy as a result of the fears of EU exposure to Turkey. More specifically, the problem centers on EU national country bank exposure to the seemingly collapsing Turkish economy.
You may ask yourself: how can an emerging market nation like Turkey be a threat to the world’s largest trading block and technically biggest economy in the world (by some measures)? The EU central banking system possesses the world’s largest gold reserves at over 10,000 metric tons!
The European Union economy is large and diversified across 28 (soon to be 27 countries with Brexit looming large in March) vastly different nations. Some of these constituents are the world’s largest exporting nation (Germany), and G7 nations Germany, France, Italy, and for another seven months the United Kingdom. Four of the G7 countries are a part of the EU (for now, it soon will be three).
This is all true, but the commercial banking system in any country is its weakest link in the proverbial chain. It is where Europe’s great Achilles’ heel lies too. The danger to the European Union banking system (and hence the whole world’s banking system by extension) comes from Italy.
We could go on and on about the mess the Italian banking system is in currently. The European Central Bank tries to sweep its serious problems under the carpet, but even they can not hide the truth. The Italian banking system is sitting on hundreds of billions of euros in loans that will never be repaid. This chart tells the sad tale:
Now add to this dangerous mix the Turkish crisis, and what you have is a toxic recipe for disaster in the Italian banking system. The biggest immediate threat comes not from their third largest (and basically hopelessly broke) bank, which also happens to be the oldest in the world— Monte dei Paschi di Sienna.
It comes from the largest Italian bank UniCredit SpA. Now this is serious folks. This is one of the world’s larger and leading banks. Imagine if Wells Fargo or Citigroup was in real trouble, and you get the picture here. UniCredit is a major, international, global European bank that happens to be dangerously exposed to Turkey.
In particular, the danger with the bank comes from its heavy exposure to its wholly owned local banking venture in Turkey. The crashing Turkish lira is badly impacting the value of this particular UniCredit unit. UniCredit SpA even admits there is cause for concern here, with their statement that they have been “paying particular attention” to geopolitical dangers in Turkey. You know the situation must be dire when the incredibly sophisticated and highly manipulative ECB warns that UniCredit SpA is “particularly vulnerable to Turkey’s troubled markets.”
And the scary part is this is only one troubled area of operations for the Italian mega financial institution. In their first half financial report from last Friday, the Italian banking giant admitted that it is expressly focused on the situation in Russia and Brexit, along with regulation challenges.
Is Your Retirement Portfolio Protected from A Massive European-Launched Global Banking Crisis?
The situation in Russia is unstable at best. Brexit has the very real potential of leading to a crashing out of the EU without a deal. It is time to face the facts. UniCredit SpA is doomed (along with maybe half the entire Italian banking system). Even the European Central Bank is not big enough to bail out one of the world’s largest and most important domestic and international banking systems. You are talking about over a trillion dollars plus in potential liabilities in Italian banking alone. Then there is contagion to worry about for the rest of European banks, Great British banks, and finally the U.S. banks. Unfortunately for everybody, they are all closely connected. You must take steps now to protect your retirement portfolio from the potentially impending banking crisis coming to the world and the U.S. from Europe.
The good news is that you do not need to stay up all night trying to decide how you will safeguard your retirement portfolio after the European banking system crashes and burns and takes the rest of the world’s financial system down with it. Your only hope is gold. The yellow metal has earned your attention with its time-tested role as the guardian of the world’s money for most of recorded human history. Gold will also protect your own retirement portfolio as it always has throughout the countless centuries.
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