It’s Friday 13th, so here’s how things are going to pan out over the next 13 years:

Greece is a tragedy. On May 7th they were already priced for a 30% haircut, and the banks prohibited it. So instead of dealing with EUR 210bn in debt (300bn *.7) they will be looking at 450bn in 2 years time. Good advice, Mr. Stiglitz. Once the current government is being overthrown by a (possibly communist-leaning) movement I doubt the new powers in place will recognize current debt obligations.

Europe will delay any useful policy responses due to fighting between the austerity and Keynesian camps, hence nothing will get done. Week countries will finally leave the Euro, which means default (if you default anyway, you might as well leave the Euro, since the punishment will be same, hence Euro-exit a freebie). Then, ironically, the remaining Euro members (Germany, Netherlands, may be France) will make the Euro a very strong currency (which in turn will hit those countries’ export businesses).

The US, uninhibited from infighting of the Europeans, will happily print money and debase the currency. But as long as you own the reserve currency you make others share the burden. Then the IMF comes in with it’s idea of abolishing all 3 major currencies in favor of their SDRs, and the printing will start in earnest (since Switzerland will have established FX controls there will be no decent currency left to switch into).

Finally the public loses trust in fiat currencies and a mad gold rush follows, hyperinflation, war. The only way the public will accept a new currency is by backing it by minuscule amounts of gold. Many people believe there was not enough gold to do that – at $100,000/oz, there is.

Crazy, right?

I like push back on my ideas – feel free to use comments.