Is there a Global financial crisis coming down the road?

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steviel

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Was just listening to some extracts from a debate on CNBC. Well, wasnt much of a debate, rather a pretty much unanimous view of what was going to happen in the next 2-3 years. The gist of the views of the panel including people like Martin Wolf (Chief economist for the FT), and various former Government / central bank chiefs from across the world was this:

The crisis to date has been a private sector liquidity and credit crunch. Concerted global government intervention and liquidity measures have avoided a 1930's style depression, but the debt burdens of the world's governments are now well beyond anything seen before. This is especially the case in the US, and a dollar crisis is inevitable in the next 2-3 years, as the US debt burden becomes too big, and i guess other Governments stop buying, or sell, US Treasuries.

What has happened to date feels pretty bad to all us 'little people', but what is the risk of a global government, rather than private, financial crisis? This would presumably be 10 times worse, with governments unable to pay welfare, and support services to the extent that they do currently! I am no economist so am interested in what the repercussions might be of the dollar collapsing under the weight of US government debt?

Is it time to buy a gun, Mad Max style?!?
 
That's what I'm asking in the bonds thread. I'd liksomeone to lay it out in detail if they could.
 
well china have publicly stated that they are growing tired of buying US dollar. this basically will drive money into commodities and stock markets as companies are seen as hard assets. we are already in the middle of a stock market bull run that is purely liquidity driven by central banks. the dollar collapsing will lead to rampant inflation. look for oil to hit 200 dollars a barrell and gold 2000 an ounce.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100000821/china-bernanke-and-the-price-of-gold/
 
Watch Peter Schiff on youtube.

In particular watch his Nov 2006 Mortgage Broker's Speech.

Also watch his 2009 Google Speech.

An excellent 2 hrs explaining why the USA may go down the pan.

Every investor should have 10-15% of their worth in gold. I do not believe we have seen the end of the crunch.

The next cruch will be government related.
 
I second that with regard to marc faber, he has been almost spot on throughout, he does tend to talk the same thing over that the dollar is doomed and of the return of gold,
 
joe sod said:
I second that with regard to marc faber, he has been almost spot on throughout, he does tend to talk the same thing over that the dollar is doomed and of the return of gold,
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I strongly recommend his book titled 'Tomorrow's Gold: Asia's age of discovery'.

http://www.amazon.co.uk/Tomorrows-G...=sr_1_1?ie=UTF8&s=books&qid=1253133662&sr=8-1

This is the best investment book ever written IMHO.

The topics on investing in emerging markets, inflationary markets, investment manias, Asia and why America is doomed are truely fantastic.

The guy has one of the best grasps of economic history going.

Legend.
 
america being doomed is a bit much. they are still decades ahead of asia. i dont listen to any of these cnbc commentators but faber is good and so is jimmy rogers. i think you just have to sit up and listen to a billionaire when they are talking about the markets and he says the exact same thing. buy commodities, asian stocks, dont have any shorts and the dollar is toast. the dollar dying will drive the stock markets skyward so there is big money to be made people
 
Purple said:
Why will it do that?
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Because all the excess liquidity being pumped in has to find a home.

The Fed kept rates too low leading into the mess and are now making the same mistakes post the crisis.

Anyhow what good is a stockmarket that doubles when the currency halves or inflation means the purchasing power of your investment has halved?!

Its about real purchasing power of your investments and not nominal values. Granted the euro, pound, etc are all being devalued along with the dollar so against each other investing in the US stockmarket may seem to make sense but if inflation rages itself then the return in 5-10 years will low.

You need to price all assets against gold or oil in order to see the true purchasing power of an investment over time.

Hence currency gains should be as important as dividend yield and potential capital appreciation when looking which stockmarket to invest in over the long term.

Over the long term a currency is merely a reflection of the strength of an economy and on this basis the US just doesn't do it for me. Who knows what the greenback will be worth in 20 years. The Fed have managed to devalue 95% of its worth over the last decade.

The Asian markets are generally well capitalised, low in debt and therefore these markets will see their currencies appreciation against us indebted westerners for the forseeable future.
 
the stock markets will rise when the dollar dies because as ringledman says the excess liquidity will have to find a home. commodities and companies are seen as hard assets and save havens in times of currency crisis.

for an extreme example look at zimbabwe. their inflation was off the charts in 2007 and their stock market rose 12000% over 12 months.
 
Every investor should have 10-15% of their worth in gold
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why is gold a store fo wealth? its just metal. I'm not trying to be being smart, I just don't get it. it doesn't really have a value to me so why should it have a value to anyone else.

I have been promising myself to start reading up on economics, infaltion, gold etc but just never got round to it.
 
Gold and silver have always been treated as a store of wealth for centuries. Put it this way, does a fancy piece of paper in the form of fiat currencies have any real value.
 
Gold supply is increasing at 2% per annum.

fiat currencies are increasing at 15-20% per annum.

How can gold not go up against such currency debasement???

Owning gold does not really increase your wealth it merely preserves it. When times are tough gold is seen as a safe haven investment that cannot be destroyed, manipulated, supply increased, etc by poor governments.

Gold represents all the blood, sweat and toil that has gone into extracting it from the ground.

Priniting IOU paper fiat currencies (confetti) is as simple as turning on the printing press.

No productive effort has gone into producing the paper currencies, it is a fake economy to think printing money will solve the Western world's economic woes. Without extra productive capital investment in order to create real money and wealth through exporting new products a country cannot create new wealth by merely creating more of their currency. It is a crazy concept to believe.

There is a saying buy gold and hope it falls in value. I.e. gold is generally low correlated to other assets. so when everything else you own is tanking in value in real terms (cash, stocks, property) gold should hopefully do the opposite and go up in value. An inverse or uncorrelated relationship exists most of the time.

As a simple example - if 90% of your assets are down by 10% you would hope that the 10% you own in gold doubles in value thus preserving your overall wealth. Gold maintains its real purchasing power in deflationary or inflationary environments.

As the previous poster said gold has been a store of wealth for centuries. Money used to be backed by gold and silver. Unfortunately no more.
 
UptheDeise said:
Put it this way, does a fancy piece of paper in the form of fiat currencies have any real value.
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If it is commonly accepted that a fiat currency can collapse, why is it not a possibilty that the concept of gold as something of value would not collapse also?

Genuinely curious.

edit: cross posted with ringledman, good post, thanks
 
manaboutdog said:
If it is commonly accepted that a fiat currency can collapse, why is it not a possibilty that the concept of gold as something of value would not collapse also?

Genuinely curious.

edit: cross posted with ringledman, good post, thanks
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Fiat currencies are not backed up by anything. Gold and silver are rare and therefore deemed to be precious metals. While the value of gold and silver can collapse, it's highly unlikely they will go to zero. Also bare in mind, that gold and silver have industrial value, your computer wouldn't work without gold. History has shown time and time again that all fiat currencies devauled to zero.

Thanks for complimenting my post.
 
"History has shown time and time again that all fiat currencies devauled to zero."

could you anyone explain this statement? thanks.
 
UptheDeise said:
Fiat currencies are not backed up by anything. Gold and silver are rare and therefore deemed to be precious metals. While the value of gold and silver can collapse, it's highly unlikely they will go to zero. Also bare in mind, that gold and silver have industrial value, your computer wouldn't work without gold. History has shown time and time again that all fiat currencies devauled to zero.

Thanks for complimenting my post.
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But if you are scared of armageddon, it is only worth buying gold if you are actually taking delivery of the bullion and hiding it away in your house, surely. The exchange traded funds method of taking exposure to gold, or buying gold that is spread around the world (and all you have is a bit of paper proving ownership) is useless if the **** hits the fan. The counterparty risk is too big, and you will likely end up with nothing.
 
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