But the credibility of both western governments and their currencies is waning, and has been ever since the gold standard was abandoned in 1971, says Mr Paul. And that means even “safe” investments are far from safe, he claims.
“People will start to abandon the dollar as current and past economic policies create a steep rise in interest rates,” Mr Paul says.
“If you are in Treasuries, you will need to be watchful and nimble to time your escape.”Unfortunately, cashing out will not protect the value of investments, he insists, because “fiat” currencies will all decline over the coming years as measures to try to haul the world economy out of recession fail. “The current stimulus measures are making things a lot worse,” says Mr Paul.
“The US government just won’t allow the correction the economy needs.” He cites the mini-depression of 1921, which lasted just a year largely because insolvent companies were allowed to fail. “No one remembers that one. They’ll remember this one, because it will last 15 years.”At some stage – Mr Paul estimates it will be between one and four years – the dollar will implode. “The dollar as a reserve standard is done,” he says. He sees little hope for other currencies where central banks have also created too much liquidity dating right back to the early 1970s.
“Europe and the US will both have to fundamentally change their money systems,” he adds.
And don’t even mention shares to Mr Paul: “The last place you want to be is in the stock market,” he says. “It may not bottom out for 10 years – just look at Japan.”
(...)
However, his views are, for the first time, being taken seriously in Washington. Like another politician who recently aimed for high office, Al Gore, Mr Paul’s uncomfortable truths are starting to be deliberated at elevated political levels. “Before last summer, in meetings nobody really knew I was there. Now they often defer to me on economic matters. But you won’t catch any of them admitting that publicly – not yet at least.”
Read it all, but it would be best to pour a scotch first.
I just read this on the Daily Reckoning. I think if you look at Japan and how their bailout did not work, 15 years is a reasonable conclusion.
ReplyDeleteI agree with Paul and Schiff, that you have to let bad companies and bad debts go under. It`s painful, but that is how the business cycle works.
Having the government introduce trillions in new debt is just going to pour gasoline on the fire. There is also a very real possibility of a US default. In the 1930 at least the government`s balance sheet was in the black.
Our money system has only been around since 1971. You have to wonder if it will survive its first real test.