Turmoil in Eastern Europe Encourages You to Hold Gold

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Last Updated on: 22nd January 2018, 01:47 pm

This past week saw a significant amount of turmoil reverberating across Eastern Europe in some of the newer democratic European Union countries. The new government in the Czech Republic failed to successfully form by the end of the allotted time. The Romanian government is welcoming its third different prime minister in only a year.

The Bulgarian prime minister's government will undergo another corruption debate and hearing in parliament.  Elsewhere in Hungary and Poland, increasingly strongmen styled leaders are standing up to the policies of the European Union. This geopolitical chaos sweeping across Eastern Europe reminds you why you need to hedge your investment and retirement portfolios with gold and precious metals.

Gold makes sense in an IRA because it has thousands of years' worth of history at protecting wealth in chaotic geopolitical environments and financial turmoil. In fact gold outperforms in times of market chaos. Now is a good time to consider IRA-approved gold as well as the top five gold coins for investors.

Czech Republic Prime Minister Can't Form a Government

The irony of the chaos spreading throughout Eastern Europe is it belies the popularity of the populist leaders ruling with an increasingly authoritarian manner in these nations. Consider the Czech Republic as a first case.

The billionaire winner Andrej Babis of the Czech elections in the fall has been unable to establish a cabinet. He rode a populist wave into power on promises to run the Czech nation like one of his successful businesses.

Babis has not been able to bring on board any of the country's mainstream parties so that he can create a governing coalition. All have staunchly refused to participate. This and new corruption allegations forced Babis to resign this past Wednesday.

Despite this fact, President Milos Zeman has pledged to give him another chance. Not only will Babis remain in power, he will again work to set up a government without the support of the other parties. His popularity in the Czech Republic continues to swell as well.

Third Prime Minister for Romania in a Year

Romania is a second Eastern European nation that suffered from a chaotic announcement this past week. The power behind the country's politics is the head of the governing Socialist Democratic Party, Liviu Dragnea. He is not prime minister thanks to a personal criminal conviction.

Yet despite this he very much runs the country as he demonstrated this last week. After feuding with his Prime Minister Mihai Tudose, the six months in office prime minister resigned. Dragnea now gets to replace the head of government this week.

Since 2016, he has been running the country from behind the scenes. This is his third prime minister appointment in only a year. His party is now turning its attention to completely reforming the judiciary.

Despite the chaos of having appointed three separate governments, Dragnea and his party continue to retain and even increase their popularity. This chart below demonstrates the rising popularity of the leader not only in Romania, but across chaotic Eastern Europe:

Bulgarian Renewed Corruption Probe Hearing

In Bulgaria to the south of Romania, the ruling government led by Bulgarian Prime Minister Boyko Borissov has been in power several times since 2009. The news emerged this past week that the one-time bodyguard's government will endure a parliamentary hearing on new corruption charges.

He will also undergo a no-confidence vote. Yet with his party and its allies holding a majority in the Bulgarian parliament, this is only an embarrassing gesture. More humiliating for Europe is the fact that Bulgaria just assumed the six month rotating presidency of the European Union.

The only saving grace is that less attention will be called to the matter as it dies quickly. Borissov has been successful most of the last decade on promises to boost infrastructure and increase the minimum wages in this poorest country of the EU.

The opposition managed to get a no-confidence motion in his administration arranged for this week. Yet this procedure has frequently been initiated over the past 27 years of post-communist democracy. It has always failed to unseat a prime minister in Bulgaria.

Financial Markets Rewarding Strongmen

It has been the financial markets that have enabled these kinds of strongmen to continue their chaotic rules in Eastern Europe. There has yet to be any financial turmoil in these economies. Hungary, the Czech Republic, and Poland have the three currencies which are are the best performers among the emerging markets since 2017 began.

Over the past 12 months, each of their stock markets reached multiple year level highs. Their Eastern European economies have likely grown by at least 3.7 percent for 2017 according to a Bloomberg survey of country forecasts. This represents the most rapid level of growth dating back to 2011. These nations also benefit from EU subsidies that amount to billions in euros.

This has enabled leaders like Hungary's Viktor Orban to remain popular. He boasts of his named “illiberal democracy” and pursues anti-EU policies such as building fences to close the country to refugees. The next election on April 8th is anticipated to deliver him a third term. His attacks on Hungarian George Soros have reminded the billionaire of propaganda from the Nazi era.

Naturally the EU is vehemently opposed to Orban and the political direction that the Eastern European area has gone in that he represents. Carnegie Europe Fellow Judy Dempsey explained their success with:

“These strongmen managed to tap into the general dissatisfaction of the people in these post-communist countries. They are doing quite well economically. But there's a general disgust with how politics have been conducted in the past three decades.”

Another example of where good economies have empowered hardliners is in Poland. Jaroslaw Kaczynski's Law and Justice Party gained a previously unknown majority in parliament back in 2015. He has increased this level of popularity with offering additional payments to families.

Kaczynski has further cemented his position through his attacks on both the European Union and his opponents. In 2017 he removed his earlier prime minister in favor of a more loyal member of the party.

Personality-Driven Politics Threaten the EU

The ultra nationalist forces that have taken Europe by storm have found a willing audience in the Eastern part of the continent. Their ideas have not only gained prominence here, but they are gaining strength with time. Especially in Hungary and Poland, the leaders are boosting their support through battles with the centrist European Union and pledges to restore their nations' greatness.

Eurasia Group political risk analyst James Sawyer warned about their assault on EU ideas with:

“Eastern European leaders are telling voters ‘don't trust institutions, trust me.' And voters are increasingly rewarding personality-driven politics. Some of the political upheaval we're seeing now is the clash of personalities and institutions.”

These attacks on the European Union increasingly threaten its cohesion and integrity.  Political chaos in the world is enough of a threat to your retirement portfolio. When it threatens the future of the world's largest trading block, this is a greater danger still.

This is why IRA-approved metals are so important to hedge your retirement accounts. It is even easier to secure precious metals now. You can now buy gold in monthly installments and gradually build up your portfolio insurance policy. Consider some gold IRA allocation strategies today.

David Crowder
David Crowder

W.D. Crowder is an American published author. His background and areas of expertise include history, economics, expatriate living, international relations, investments and personal finance. A widely read and top of his class graduate of Stetson University, he obtained his bachelor of arts degree in History with minors in Latin American Studies and International Relations and a special emphasis in Economics. He was President of his Phi Alpha Theta (National History Honors Fraternity) Stetson University chapter and a Phi Beta Kappa (National Honors Fraternity) member.

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