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Saturday, September 21, 2013

Doomster report: be prepared

Graph: Karl Denninger (2013)
Karl Denninger graphs the S&P share index against total public and private debt in the US and concludes that, volatility aside, they match.

If, for some reason, the ratio between debt and GDP reverted to that of 1980, the implication is that the S&P would approximately halve (which would be the third time since 2000, as I've said before). The consequences for pension funds etc would be dire, and this is the point at which, perhaps, the printing presses start to roll in earnest. Houses have inflated and popped, so have the banks, all that's left is the governments themselves - and the value of your savings.

As reported by Zero Hedge, Marc Faber predicts "a total collapse, but from a higher diving board", so he sees gold as an safeguard, not an investment in the usual profit-making sense: "I always buy gold and I own gold. I don't even value it. I regard it as an insurance policy. I think responsible citizens should own gold, period." Back in May, James Dines took much the same view: cash plus gold as a backstop.

But as I said last year, if "total collapse" means what it says, gold won't help either - otherwise we wouldn't have found the Lichfield Hoard buried in a Midlands field hundreds of years later. Which is why Investment Watch now reminds us of the need to prepare for truly serious emergencies.

I know some "preppers", but part of the preparation is not telling people who they are. It is going on.

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1 comment:

Paddington said...

The next bubbles are likely to be legal drugs and education.