Global Debt Crisis Intensifying
The global debt crisis is real and is not going away. Currently, all eyes are on the European Union, but it’s important to remember that eventually the debt issues we’re seeing in Europe will spread elsewhere and make situations like Greece seem small.
For example, California’s fiscal situation is hopeless. California has a massive budget deficit that really has no chance of being fixed. At the same time, CALPERS (California Public Employee Retirement System) is requesting an additional $600 million in funds to keep the fund solvent. If you’re wondering why the pension is so underfunded, check out the incredible projections by the CALPERS folks – hint: They projected the Dow to hit 26,000 in 2009 and 28,000,000 in 2099!! The reality is that California is I believe the 8th largest economy in the world, much larger than Greece. Once it becomes apparent that the only way out for California is a Federal bailout, which will become apparent and will likely be granted, you’ll see even more volatility in the markets. A Federal bailout of California will also cause gold to spike and continue its multi-year bull market.
Be assured that this debt crisis has years to play out as it has been building for decades. The situation is Europe isn’t over. Greece will probably end up defaulting and the Euro will probably be done away with – replaced probably with a newer and better fiat currency! Countries like the UK and Japan are also in terrible fiscal shape. Demographics in countries like Japan will doom their economy. Then, of course, the United States is heading down the same path. With our debts, when factoring in entitlements, north of $50-70 trillion, we have zero chance of paying this back unless we execute a massive devaluation of the dollar.
With all of this said, I expect major changes to the global financial system over the coming years maybe even the entire next decade. Financial systems come and go, so I do believe we could see a complete financial reset without the so-called “end of the world as we know it”. Just make sure enough of your assets are outside the mainstream financial system so that you’re good-to-go should the system go under.
The typical political response to this will likely be printing dollars to backstop too much debt. This will eventually be massively inflationary. Be sure you’re hedged against inflation. Use dips and pullbacks to buy precious metals – physical gold & silver is the way to go.
Then, just be patient and let this thing play out. It has a ways to go.
