In the news today....
news.yahoo.com
Okay, I think by now anyone paying attention understands the US economy is on the verge of economic collapse. And, I think any reasonably market savvy person appreciates what's coming will make the Great Depression look like a minor financial wobble.
Here's the part I don't get. While Wall Street ANALysts are well known for hopelessly inane commentary, calling US debt a "safe haven" under the circumstances is ludicrous.
90 US banks are currently on the brink of failure. Somewhere between 20-25% of US homeowners are facing foreclosure. When those go under, you're talking about something in the neighborhood of $2 trillion in worthless paper held by Fannie and Freddy. In the mean time, no one is even whispering about all the unsecured credit card debt floating all over this country. Something on the order of 2/3rds of Americans have maxed out their cards and have no way to pay off the debt.
The current theory is "the government" will bail us out, but there's this funny kind of disconnect when people think or talk about "the government". You know, like "the government" is some sort of bottomless bucket of money that comes from some place other than we the people. I hate to burst this bubble of optimism, but we the people is broke too. Not to mention that the government that got us into this mess isn't likely qualified to get us out of it, even if the bucket really didn't have a bottom.
There is no such thing as a "safe haven" in anything denominated in the US dollar. Obviously that includes US real estate, although it does come in handy to have someplace to live.
As mentioned in the start post, metals are likely to be a safe haven against the kind of currency devaluation typically required to zero out uncollectable debt. US Treasuries are sold at the current dollar value, then repurchased with fiat money at pennies on the dollar - or more accurately, with dollars worth pennies. Metals such as gold should be immune to that kind of currency manipulation. For example, if an ounce of gold costs $1000, and the USD is devalued 10 to 1, the ounce of gold will be worth $10000. In terms of real wealth, it's worth what it was when you bought it, but that beats heck out of losing 90% of your assets.
To a lesser extent, foreign currencies not pegged to the USD and assets or equities denominated in those currencies should be safe havens.
The best bet would probably be to sell everything and go ex-patriot to some third world country where the cost of living is affordable. I don't know if things are going to get that bad, but it sure looks like they might. |
