We live in an unreal world with unreal prices based on unreal (fake) money and this is why it will all come to a very abrupt end. That time could start now at any time. Fundamentally it must happen. Here’s why.
Larger Debts Are Coming
Every single major government is running deficits and increasing debts exponentially.
- The U.S. hasn’t had a budget surplus for over 50 years and has no intention of repaying the debt. Similar with many nations.
- I cannot for the life of me understand how any investor can buy government bonds at zero percent yield that will not and cannot ever be repaid with real money. The only way to repay the debt is to print more money but that will make the debt larger and not smaller and also make the money worthless.
The Coming “Great Financial Disaster”
The world has never before in history been in a position when all economies are bankrupt simultaneously. The debt and deficit trap exists in every major nation, Japan, Europe, USA, China and all emerging markets and that is why the coming collapse will be “The Great Financial Disaster”. There will be no government and no power that can save the world. Thus, fundamentally, the collapse must happen. It is only a question of when.
The World’s Stock Markets Will Crash
Fundamentals don’t help us with timing but technicals and cycles can do. There is now a confluence of these indicators that point to:
- an imminent fall of stock markets of probably 20-25% worldwide – and that is just the beginning and
- a drop in stocks by 75-95% and many bonds becoming worthless before the biggest debt and asset bubble in history has imploded totally which will take a few years, maybe 5-6 and maybe longer.
What the trigger will be is of course impossible to say. With a fragile system in disequilibrium, very little is needed. It is that last snowflake that creates the avalanche. Will it be a bank going under, bad economic news or a catastrophic geopolitical event? All are possible.
Precious Metals – The Ultimate Wealth Preservation
With unprecedented risk in the world, wealth preservation will be critical to avoid a total destruction of assets. The likely scenario in the next few years is initially massive money printing worldwide in a futile attempt by governments to save the world but that will fail this time.
We have reached a point when it is not possible to push on the string any further. The coming colossal money printing will:
- lead to hyperinflation first but as soon as the world discovers that what caused the problem cannot also be applied as the remedy,
- there will be a deflationary implosion of assets and debts.
Physical gold and some silver stored outside the banking system will be one of the few ways to preserve wealth.
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Since the peak of silver in April 2011, we have seen a 72% decline. Gold has “only” declined by 44% since the peak in September 2011. In the precious metals mining stocks, there has been a real massacre. The HUI or Gold Bugs’ Index declined a massive 84% from the 2011 high to the recent low.
Buying precious metals will not just preserve wealth in the next few years but is likely to yield a very high real return. My target for gold, when we invested in 2002, was already then $ 10,000 in today’s money but, since I believe we will have hyperinflation, the actual price could be considerably higher. That would give silver a potential target in today’s money of $ 500. Silver is of course much more volatile therefore caution is required. Many gold and silver miners could go up by much more than ten times but remember that stocks are not wealth preservation like physical gold or silver and therefore much more risky in the ensuing economic environment.
The coming years will not be easy. I wrote an article a few years ago called “The Dark Years Are Here” and I now really think they are imminent. These will be difficult times for most of us. At least the privileged few who have some savings have a chance to preserve these by owning physical gold and silver.