When the next financial crisis hits, don’t be surprised if investors choose the euro over the U.S. dollar as the safe haven of choice.

“When the Syrian crisis flared up [this week] the money went to the euro, not to the dollar,” says Axel Merk, president and chief investment officer of Merk Investments. “That doesn’t mean the dollar is not a safe haven anymore but they are competitors,” says Merk, referring to the euro and the dollar.

“The euro is cursed to go higher,” says Merk. “There’s value to be had where there was money in the streets.”

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One reason for that value, says Merk, is the balance sheet of the European Central Bank which is shrinking as the ECB “mops up” liquidity. In contrast, the Fed hasn’t even begun to reduce its balance sheet which tops $3.6 trillion, though there is talk of “tapering” asset purchases to begin that process.

The euro has been gaining not only against the dollar but also against emerging market currencies. Investors who had been pouring money into emerging market stocks and bonds in search of bigger capital gains and higher yields are now pulling out of some of those markets because of rising risks and poor performance.

Related: America Leads the Way as Emerging Nations Like China Fade

“The problem with emerging markets is they are very thinly traded markets,” says Merk. “It was a free ride, you bought bonds, caught the yield, maybe some currency appreciation...” But now, says Merk, volatility in those markets is rising while liquidity is falling, and investors, as a result, are repricing risk.

He’s especially critical of markets like Brazil, Indonesia, India and South Africa with large current account deficits. In a recent note he advises emerging markets to “stop crying [and] grow up.” As you'll see in the video above, Merk says those countries have been blaming the Fed for signaling its retreat from massive asset purchases, but they shouldn't.

U.S. interest rates have been rising as a result of the taper talk, attracting money out of emerging markets and into the U.S. but those emerging markets, not the U.S., are at fault, says Merk.

Related: Fed Tapering Will Cause Markets to Freak Out: Heidi Moore

"You have to embrace reform, open your markets, develop an investment culture, be open to capital," says Merk. "Otherwise it will be a boom/bust scenario and the coming months and years will be more on the bust side for them.”

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