Russell Napier: the end of the euro is nigh

The current global monetary system is coming to an end – and the euro could be the main casualty, warns analyst and financial historian Russell Napier.


Russell Napier, author, market strategist, founder of research platform ERIC

The current global monetary system is coming to an end and the euro could be the main casualty, warns analyst and financial historian Russell Napier in the Financial Times. Napier notes since the Asian economic crisis in the late 1990s, central banks in emerging economies have been intervening in the foreign exchange markets to keep their currencies weak against the US dollar.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

As a result, their reserves of dollars have ballooned (as they sell their own currencies to buy dollars), resulting "in the forced purchasing of US Treasuries" (as they invest the accumulated dollars in a "safe" asset). This has repressed US Treasury yields, fuelling an investment and consumer boom.

But now foreign exchange reserves are no longer growing, which means new US government debt (and there's a lot of it) needs to be bought by savers, rather than foreign central banks. In turn, demand for assets such as equities will fall, and consumer spending and economic growth will slow.

Advertisement - Article continues below

The big risk is that a heavily indebted China will respond to slowing growth by moving to a flexible exchange rate for the yuan, "thus creating the freedom to grow and inflate away these debts". The key risk for the euro is that this will cause global economic chaos, just as elections in May are likely to see many far-right and far-left politicians elected to the European Parliament.

Faced with economic havoc and angry voters, we could see the "imposition of capital controls by key eurozone countries".




The currencies to bet on this year

The US dollar could be set to weaken this year, while the euro, Canadian dollar and the Swiss franc could be good bets for optimistic traders.
17 Jan 2020

Welcome to Currency Corner – your weekly guide to the world’s biggest market

Forex is by far and away the biggest market in the world, with an average daily trading volume of over $5trn per day. Here, Dominic Frisby looks at th…
3 May 2019
Investment gurus

Seth Klarman: focusing on value stocks will pay off

Value stocks are very much out of favour , says Seth Klarman, chief executive of hedge fund Baupost. But that won't always be the case.
13 Feb 2020
Investment gurus

Cheah Cheng Hye: life is both "attractive and terrifying" for investors right now

Capitalism is in a systemic crisis, says Cheah Cheng Hye, co-chairman and co-CIO of Value Partners, but investors should continue to hold equities.
4 Feb 2020

Most Popular


Will coronavirus kill off the bull market?

It seems clear now the coronavirus will at some point go global. And when it does, will it bring down the stockmarket’s bull market? John Stepek looks…
27 Feb 2020

Gold, coronavirus, and the high cost of face masks in northern Italy

The price of gold is spiking – as it always does in a global panic. But this bull market predates the coronavirus epidemic, says Dominic Frisby, and w…
26 Feb 2020

What to look out for as panic over coronavirus spreads

Markets have started to get properly worried about the coronavirus outbreak. And it’s not just stocks, says John Stepek. Here’s what you should be kee…
28 Feb 2020

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019