In order to get rid of all of this simply astonishing debt levels in all parts of the financial system regardless of where you look e.g. bank debt, shadow bank debt, private debt, municipal debt, official country debt and off balance sheet country debt there are only two ways. Either hyper inflate and/or write the debt off.
This as nobody will be able to take on all of this debt there simply aren’t enough taxpayers in the world. Real-estate will deflate but everything else will go up in price like nothing you have ever seen before.In fact the US now desperately want to hyper inflate, print more paper money, as does all other countries deep in debt but the US at the same time need to maintain the petro dollar so that "satellite states" with recourses like oil will continue to accept the dollar as payments for commodities.
In order to maintain this system the US needs a huge military capacity and thus runs on a budget deficit as today some 40% of all military expenses today is taken of the debt.If and when they don’t that will cause massive inflation as US consumers have to begin to pay 5-6 times more for gas at the pump.
Then also in the cards is that the Chinese Renmimbi will appreciate vs. the dollar further down the line again causing prices in the US of from china primarily imported consumer technology and clothing to soar.
Basically everything you'll need to stay alive will cost more. As bonds clearly is the mother of all bubbles, as interest rates increase and worldwide bond markets become saturated with bond auctions, there will only be one safe haven for investors and that is commodities.If you want to protect your purchasing power you choose precious metals that can be used as payment.
Remember gold and silver really are very puny markets very easy to manipulate and as Gold in particular only have but quite limited use other than as payment is also the easy in insert new regulation if authorities want to get rid of the notion of gold/silver as an alternative to the status quo monetary system.
Most certainly and already they have tried already e.g. by implementing trade limits on a scale never seen before. Real serious however it will become whey /if they try to demonetize as has happened before in the US in regards of silver.
Also blatant confiscation has happened e.g. 1933 in the US but this time I do believe they will do all in their power to demonetize gold basically all over the world via trading and legal restriction. Making it virtually impossible to trade or to use these precious metals as payment in any way, shape or form.
So I believe you need to focus on real hard assets that are in fact needed in the real economy and in particular where there are coming and possible supply issues vs. demand. Regardless of what will happen in the financial system people still have to eat, travel, transport, build, construct and get warmth and heat and there will be industrial capacity requesting these as input.It’s going to get crowded as investors flee in to e.g. zinc producers to protect themselves for inflation as all currencies in most OECD countries depreciate in a very coordinated manner.
In regards of zinc some 25% of the real zinc supply is expected to evaporate coming years as old mines deplete and not enough new mines are in the pipe anywhere near to compensate for that fall off.As far as oil is concerned you can soon expect a real serious supply crunch as early as by 2013 when basically there will be almost no spare capacity left. Soon what will be the real issue for the markets certainly isn’t possible oil demand destruction but rather supply destruction. On an annual basis some 6% of all oil world production is depleted. Just keeping up with this fact and maintain current production capacity will require huge efforts as well as investments on a scale never seen before.
All economic activity, transportation, construction, manufacturing as well as food production and distribution depends on oil. As our current monetary system is based on creating money, via debt, and as it’s only possible to create debt in a growing economy. It’s thus clear to see the fact that oil actually is the real currency.If prices for these recourse get to low new projects simply will not come online as they are needed in the economy well then the economy cannot faction.
They may get down there a while pricevice but longer term they will be kept at a level needed to get new production projects going. As these new project for a depleting recourse will be more complex, further away and deeper down that price overtime will increase until it will cost more to take it up than what you may earn. At that point that’s then when the real economy crash.
These commodities needed in the real economy not only will protect your worth and purchasing power and act as a hedge against inflation. As they also in many cases in fact are depleting and are not renewable thy will in addition and over time increase their worth relative everything else in the economy. Worth noting here is that gold maintains your wealth and purchasing power relative everything else in the economy. But that’s it noting more, nothing less.
For ordinary people then the implications of this is they have to pay far more than today in relative terms as part of their budget for items such as food and energy.
Last but not least one way unfortunately to clear debt is to go to war. The US certainly has that striking capability today, but not for very long..as its financial status deteriorates. So will the US be able to launch a war quick enough..? And is that really an option today? Well you be the judge.
Certainly a strike against e.g. Iran implying an escalated conflict agains china would make the oil price skyrocket. But let’s hope and pray war this time not is seen as the option history has told us is usually is in times like these.
Debt Deal – Economy Sacrificed for Military Bias
http://michael-hudson.com/2011/08/debt-ceiling-economy-sacrificed-for-military-bias/
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