“We believe this crisis is very real [and] won’t be over tomorrow, next month or next year,” he says. “There is no silver bullet.”
Still, Merk takes solace in the efforts being undertaken in Europe both at the sovereign and individual bank levels. While “ugly, chaotic” and painful in the short-term, he believes this process will put the eurozone on steadier footing and bolster the euro.
The euro looks particularly good to Merk relative to the dollar as he sees few signs the U.S. is seriously tackling its long-term deficit issues. Thanks to the Fed’s efforts, Treasury rates are artificially low which is giving U.S. policymakers a reprieve from making tough choices.
While the Fed continues its policy of money-printing and quantitative easing, “the eurozone is on the other side of the trade,” he says. “Printing and spending less money will cause a lot of pain but it will give you a stronger euro. ”