Christopher Wood, author of Greed & Fear, discusses the global economy including China, Europe, the US, and the collapse of the US dollar paper standard:
My view is that there is an inevitable end game as a result of all this massive spending of taxpayer money in the West and Japan to bailout bankrupt banking systems, so my view unfortunately, is the end game will be a systemic government debt crisis in the Western world. It will probably happen in Europe but I think it will climax in the US and I’m expecting in a five year view the collapse of the dollar paper standard.
In the short-term the European crisis will cause dollar strength against the Euro. Ultimately the crisis will happen in the US. The key point: Investors who want to hedge this risk need to own gold bullion, they need to own gold stocks and they need to own Asian and emerging market equities.
We often discuss the potential for an economic collapse. While such a collapse, especially one that involves a crisis in the US Dollar, could happen very quickly in a period of mere weeks or days once it begins, the point at which the dollar reaches event horizon may take years to play out and has been outlined by Mr. Wood.
The global economy is massive and there are a lot of different elements involved. For the time being and since March of 2009 the place to put money for growth has been the stock market. With sovereign debt issues in Europe coming to the forefront and the potential for a massive real estate meltdown starting later this year the next phase of the crisis will likely involve a transfer of capital wealth from stock markets (including China) back into the US dollar via the purchase of US debt instruments like bonds, bills and notes. After this short-term dollar pump, the severity of the crisis will set in as US job losses continue to mount, US GDP goes negative, real estate prices spiral downward and US government spending continues to expand unabated. This is where the endgame will take place — when domestic and foreign investors lose all confidence in the US government’s ability to manage the crisis.
The public has been told that we are out of recession and that a depression was completely avoided. This head fake is only going to work once. Next time, lip service will not be enough and those with any money to invest are more likely to know they are being scammed by economic experts and government officials.
As a result, capital will flow into the last safe haven asset on the planet – precious metals.
It is impossible to predict the exact time frames involved. As we saw with the 2008 crisis, things can happen very quickly. Bob Chapman has suggested a time frame of about 12 – 18 months before the US Dollar begins to fall apart. Mr. Woods and well known investors like Marc Faber believe it will take a bit longer with time frames in the five year range.
In any case, the math is irrefutable. A US Dollar detonation is coming and along with it we may very well see an economic collapse unlike any other in the history of the world.
Watch the CNBC Interview with Christopher Wood: