Here’s a hypothetical sequence of events: (Warning, this post might ruin your day!!)
- Government dilutes austerity measures as they are socially unacceptable.
- Government spending continues to increase.
- Borrowing costs increase as markets lose faith in government’s commitment to tackle the deficit.
- Unemployment sky-rockets and tax revenues collapse.
- Government borrowing increases to cover additional debt burden & welfare payments.
- Bond markets lose faith in government, borrowing costs rise to crippling high levels.
- Government resorts to 100% direct bond purchase to bring interests rates down.
- Currency begins to depreciate due to government monetisation (money printing).
- Inflation is ignited as import costs soar.
- More money printing is required to prevent a depressionary collapse.
- Currency become worthless.
- Hyperinflation and societal collapse.
It doesn’t have to end this way but I ask the question, how likely is it and what are governments doing to avert this? To my mind absolutely nothing. In fact they are effectively creating these events by the very means the buffoons are using to prevent it.
I would suggest here in the UK we’re at #1 and just about to spill over into #2. The USA are at #7, Bernake is completely in denial suggesting recently another round of money printing (QE3) and so I’m 99.99% certain heading the whole way to #12. The US do have their secret ‘Nuclear’ weapon to potentially save them… which is gold!
Jim Rickards – ‘Rethinking the Future International Security Environment’
Market intelligence analyst James G. Rickards of research firm Omnis Inc. made a long presentation to the “Rethinking the Future International Security Environment” conference held 7th Dec 2010 in Washington by the Applied Physics Laboratory of Johns Hopkins University. The second half starting around 62mins into Rickards’ presentation elaborated on his recent incisive observations about gold, as expressed at King World News and elsewhere.
Rickards told the Johns Hopkins conference that he considers gold to be the secret economic weapon of the US government, and he noted that devaluing currencies against gold in times of economic distress has been done frequently throughout history.
He said he expects the United States to avert the dollar’s collapse by returning it to a gold standard or even to avert the collapse of currencies worldwide by sponsoring a new gold-backed international currency, with gold revalued to perhaps $4,000 per ounce under either scenario. Protect yourself, Buy Physcial Gold and Silver now!
