Lately, you’ve heard of PIIGS?  I’d imagine your next thought is what are these people referring to?  No, it’s not that farm animal in your head.  I typically write about personal finance topics.  You know things like getting out of debt, how to plan for retirement, etc.  However, in order to act prudently it helps to understand the world around us.  So, what are these PIIGS anyway?

One of the things that happens after a boom is that you have to deal with the debt and easy credit that was created.  Countries that borrowed too much during the boom times are struggling to pay their debt back to their competitors.  Eventually, some of them default as a result of weakening demand.   As the world’s reserve currency, the Federal Reserve has the ability to print money and essentially buy the bad loans off the balance sheets of banks and even other countries, in order to protect the financial system.  People get really riled up about this…but guess what?  That is actually their job, like it or not.  I don’t necessarily agree with how they are doing things but that is their job (protect their charter banks) It’s not a conspiracy.  Onto how this started…

In 2007 it was the sub prime lenders.  In 2008 it was the investment bankers.  In 2009, I would guess your bank changed names?  Guess what is next?  Countries. Yes, countries.

The countries most likely to blow up this time around are the “PIIGS”: Portugal, Ireland, Italy, Greece, and Spain. One ore more of them will likely default in the next couple of years. And, that could result in the death of the Euro currency.   Now a lot of people are calling for the death of the dollar.  What they fail to realize is the entire global banking system uses USD as their reserve currency.  By default, the dollar will be the last to go…My guess (And I am not a gambler) is that the dollar will be on par with the Euro in a couple years.

It’s like watching history in the making.  Kind of exciting if you ask me.  Eventually we’ll (most likely have to go to a resource backed currency) in years, not months.  And this is how you bring value back into a financial system that is falling apart; you back it with SOMETHING!  Time will tell…it’s only time.

Things change.  Everyone is guessing right now.   Asset protection is your #1 priority, IMHO!

Related posts:

1. So You Thought The Debt Crisis Was Over?
2. Understanding How Debt and Leverage Work Inside The Financial Crisis