HardAssetsInvestor

Mike Norman, Hard Assets Investor (Norman): Everybody, welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. Today my guest is Kevin Kerr, coming back to the program, who is a senior analyst with MoneyandMarkets.com. Kevin, thanks very much for coming back.

Kevin Kerr, senior analyst, MoneyandMarkets.com (Kerr): Good to be here.

Norman: And I should mention to everyone that you, not too long ago — an American citizen — left the United States. You now reside in Estonia, of all places.

Kerr: And that’s not in Queens.

Norman: Not in Queens, not that Estonia. But tell us how the world looks from where you sit now.

Kerr: Well, Estonia is located right on the border of Russia. It’s kind of on the fringe, I like to say, of the EU, and just recently took on the euro. They’ve been trying to get EU membership for a long time. They got that, and then they took the big step of taking on the euro.

Norman: Why in the world, with all the problems we see in the eurozone, would any country want to become a part of that?

Kerr: Seems crazy, right?

Norman: It does.

Kerr: They worked for so many years, Mike, to try to get this currency and be part of Europe, to be more part of western Europe and assimilate. And they really created their own austerity for a very long time. The people there have suffered high unemployment, high taxes, all to get their finances in line to become a member of the EU.

Why they want it, I think is just that belief that once they’re part of Europe, supposedly, that there’s going to be a lot of benefit. I’ve written about this. It’s more like being invited to a wedding and it turns out to be a funeral. It’s that bad.

Norman: Absolutely; it is bad. Now you’re a big currency and commodity guy. And with Estonia’s entrance into the EU, and with all the problems they’re having, are you surprised at how resiliently the euro has held up?

Kerr: Well absolutely. If you look at the systemic risk from Italy, Spain, Portugal, Ireland, the list goes on and on, of course, and the Baltics, there’s concerns everywhere. How is this currency managing to stay at the levels it's at? And I think there’s a real warning here of what’s to come.

Spain and Italy are not Greece. If Italy’s going, I think the euro goes. I think what we’re going to see though, ultimately, is maybe not the end of the euro but a fracturing between the countries that have and the countries that don’t have. It would be similar to if America and Mexico and Canada merged. When they split up, you’re going to just have to split up the weakest country — Mexico — between the states here that are poor and rich. That’s what’s going to happen.

You’re going to have a two-class euro is basically what’s going to happen. Or it’s not going to survive at all. It’s really a mess.