Thursday 18 February 2010

A dire warning

Egon von Greyerz of Matterhorn Asset Management lays out his reasons for investing in physical gold. You may or may not accept his argument, but his analysis of worldwide economic problems is deeply troubling.

Whether or not gold is the right prescription, I am very much afraid that he may be making the right diagnosis and prognosis. Do have a look.

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OldSouth said...

He is predicting general societal disruption. Do you concur?

Sackerson said...

I suppose it depends on the severity of societal stress, and the degree of social cohesion / internalisation of social rules, especially by the young. On a minor level, with growing unemployment (about 25% for youngsters in the British Midlands at the moment) we may see the spread of gangs of bored, penniless youths, with an increase in vandalism, opportunistic theft from cars and burglary, fights etc. But this can be dealt with by police and community action.

It's if the middle class see their savings wiped out, that would be the dangerous time, because millions of previously responsible people would cease to support "the system" and start looking for a Leader. It's not so much disorder that's the danger (we'll all become community-minded if our survival is threatened), but Order with a capital O.

Paddington said...

Germany in the 1930's comes to mind.

Paddington said...

What made it take so long (and thus made the problem worse) in the US is that almost all of that inflated money from the credit expansion made its way to the top 1%. Otherwise, we would have had significant inflation over 30 years or so, which is a little easier to fix than our current mess.

Sackerson said...

I guess what we've seen is asset inflation, plus borrowing lower down to reflect the general rise, so that as assets deflate, the poor are wiped out and the rich, even though they may lose 50-90% of nominal wealth, will have most of the real wealth of the country because they're not (or not so) leveraged.