Economic Collapse

Paul Tustain, founder & CEO of BullionVault.com just put out this talk in writing. He has been touring Asia talking to investment professionals in Tokyo, Singapore and Hong Kong. It’s a very well written talk and gives you a comprehensive overview of what might be coming our way. Download the 12 page PDF here. He talks about US consumers and what an increase in interest rates would entail for the tax burden:

The cost of a $20 trillion national debt costing 5% per annum in interest rates would
be $1 trillion, or $10,000 per annum in taxes per year for every American family, just to
pay the interest, i.e. before a single government service was delivered. That is the cost of
maintaining a $200,000 per family national debt.
The unavoidable conclusion is that, on-plan, the US cannot react appropriately to a
developing inflation problem. The G20 pronouncement that interest rates would stay
low for the foreseeable future was true. There is no alternative to permanently low
interest rates on these budget figures.

He also includes a very telling graph of what is happening in Great Britain on how much of the UK Government spending in the “Quantitative Easing” program (a fancy term for printing money) is being bought by the Bank of England:

He concludes:

…on the basis of what you now know perhaps you would accept that the probability of hyperinflation has increased to – shall we say – 20% within 5 years? That is a level of risk which is material,
and that is why the early movers are already doing something about it.
If currencies are racing each other to the bottom the vital thing is to exit deposits and bonds. Some will exit to land, some will exit to equities, some will exit to real estate, some will exit to commodities, and some will exit to gold. They each have their merits, and their risks. They are already moving up in price. In fact there’s a lot to be said for a balanced approach involving them all.

I would suggest that the 20% risk in 5 years is probably accurate for most countries. For the US it is more likely this is 50% risk in 3 years. Who knows…