Montreal, Canada

The European Central Bank (ECB) is now part of the "quantitative easing" cycle joining other major central banks since late 2008. The ECB will start printing money en masse to essentially bail out eurozone banks saddled by the threat of default in Greece and elsewhere in Europe's monetary periphery. Indeed, the printing presses at the world's largest central banks are now working overtime as officials continue to battle the forces of credit deflation, weak housing markets and tepid employment growth in the advanced economies.

The ECB will now head into secondary market in the eurozone to purchase government bonds – an exercise the Fed, The Bank of England and the Swiss National Bank have conducted over the last 12-18 months. Markets, including Greece, posted huge rallies on Monday coupled with plunging bond yields in Athens (rising prices) as relief spread across European capital markets.

But the answer to fix Europe's structural deficits won't be cured by throwing another $1 trillion dollars at the problem; Greece and other profligate spenders will have to head down the path of austerity, which implies hard economic decisions, accelerated deflation across most regional economies and a long period of economic stagnation. That's not a bullish picture for the EUR, now officially in a bear market versus all things paper and tangible.

Basically, the EUR is heading down the same path as the U.S. dollar and the majority of fiat currencies as central banks increase the ante to bail out respective financial systems, domestic banks and flush out speculators.

The EUR, unfortunately, barely climbed to 1.30 versus the dollar on Monday's almost $1 trillion dollar European spending blitz to bail out troubled eurozone members and to create a slush fund to protect the EUR from massive shorts; open interest shows a continued acceleration of short-sellers or institutions betting against the EUR since March. The EUR opens this morning at 1.27 – a sad level after a barrage of financial support announced just 36 hours earlier.

For investors, two of the world's largest reserve currencies are now heading down Banana Row. The dollar and the EUR are debt-infested units that will continue to struggle over the next several years and beyond and eventually, will be replaced by some sort of global currency unit backed by the largest emerging market nations, the majors and some commodities, including gold and possibly, crude oil.

The EUR is now down more than 20% against gold this year and I suspect this trend will accelerate as more investors dump the single currency and run to the yellow metal to protect their purchasing power. The ECB has shamed the Bundesbank. It's a dark day for hard-money Austrian economists and a great time to be a gold-bug. Next stop: gold $1,300.