[This interview previously appeared on IndexUniverse.com, and is published here with permission.]

Dennis Gartman is the mind behind The Gartman Letter, a daily newsletter discussing global capital markets. For over 20 years, The Gartman Letter has tackled the political, economic and social trends shaping the world's markets, and Gartman himself is a frequent guest on CNBC, Bloomberg and other financial media outlets.

Recently, we sat down with Gartman to discuss his thoughts on the fate of the euro, including how Greece could doom the dollar, why you should dump dollar-denominated gold and whether inflation or deflation is yet in store.

Crigger: Recently we've been seeing the dollar trade higher relative to the euro. Is this due to strength in the dollar, or is it weakness in the euro?

Gartman: The latter. Actually, the euro isn't just weakening relative to the U.S. dollar. The euro is weakening relative to the Australian dollar, the New Zealand dollar, the Canadian dollar. While it's holding its own relative to the other European currencies that are not members of the European Monetary Union—the pound sterling and the Swiss franc—the euro is very weak relative to dollars overall. So I think that argues that the euro that is weak, not the [U.S.] dollar being demonstrably strong.

Why is that so? It's because of the problems that are extant right now with Greece. We know the problems that Greece has fiscally, and if Europe—or really, Germany and France, because for all intents and purposes, that's who the European Monetary Union really is—if Germany and France come to Greece's aid, then who's next? Maybe then Portugal. And if they bail out Portugal, then Spain's next. Where does it stop? It doesn't.

Crigger: So which is worse for the euro: a Greek default or a Greek bailout?

Gartman: I think a Greek bailout would be worse. Again, if they bail out Greece, then it's only a matter of time before the next group asks to be bailed out. If they were to throw Greece out of the European Union and out of the political union, and say, "You know what guys? You never had the stream of income that you said you had; you have a horrifyingly tax-averse public, who is at the same time even more horrifyingly willing to drink at the trough of federal payments ... you lied to us. You're out." If they did that, then maybe that would be beneficial. But are they really going to do that?

Crigger: With this bleak situation facing the European Union, is the euro doomed?

Gartman: Yes. For all intents, I think the euro is doomed. There were many who said they didn't think the euro would make it past the first important recession. Well, this is really the first important recession since the creation of the euro. And I've been surprised it has lasted as long as it has. Honestly, I think the euro is a doomed currency.

But these things take time to play out. The euro will still be extant by Feb. 28. It will still be around by March 30. It'll probably still be around by the end of April, and the end of this year, and it will probably still be here a year and a half, two years from now. But I think these are terminal problems that the monetary union and the political union are facing, and it's only a matter of time before it ceases to exist. Will it happen overnight? No. It will happen in a slow, very painful, long-standing, horribly drawn-out, ugly affair.

Crigger: A few years from now, when we look back at this time, are we going to say the Greece crisis was the turning point?

Gartman: I think the turning point was in late November of last year. That's when I think the market began to understand that there were problems coming. What was important was that the technicians saw it first. The euro broke its uptrend that had extended back for 18 or 20 months. Now we understand why it broke.

Crigger: The European Monetary Union expended so much time and effort in creating the euro. Won't that help propel the euro forward?

Gartman: That has propelled the euro forward. That's why the euro made it to fruition in the first place, in that so much mental capital and political capital had been expended in the 20 years to get it up and running. So much so, that even though Germany was not enamored with the notion of a unified currency, everyone else had spent so much time and there was so much invested in it, that they had to go with it. They had to bring it to the market.

 Prev12Next