The French Signal a Financial Collapse and Offer Advice on How to Cope with such a Disaster. Armageddon?

Abstract: We have allowed cheap credit world wide to expand debt beyond belief or our ability to pay it off. An economic tsunami engulfed our house asset base and deleted about 1/3 of our assets and wealth. The far left now spends wildly on bigger government and prints money with abandon while trying to seize healthcare and more. The national debt is now 12 trillion and headed for 20.  The interest on the debt alone will soar to 1 billion dollars a day. The economy is sinking and the far left will not stop spending and they just allow the debt to rise to levels we cannot ever reverse. Only massive inflation will ‘fix’ this.  Printed monies pumped into phony stimulus programs like the Cash for Clunkers and other subsides give only a false illusion of economic growth. All our big banks are hollow zombies. The French have offered some three scenarios for their clients of Société Générale to cope with each level of potential disaster and selling the dollar is key to a workable strategy. Meanwhile our worthless Senate lies about their HC bill and gives us 34 hours to digest the wreckage of their 2,074-page mumblings before they want to put it to the floor of the Congress. The French follow the Chinese and others like India who confidently predicts that the US economy is collapsing and our currency will be destroyed in a whirlwind of worthless paper. It may be time for a revolt.

The giant 15 decade old French bank-investment house Société Générale[1] is now offering some suggestions as how their clients can manage their investments under three scenarios in the looming world’s potential financial collapse led by the United States. Many of us have been issuing warnings on this matter for months.[2][3][4][5] Our government, animated by the puppetry of our Secretary of Treasury Tim Geithner, offers us lies[6] about the strength of the dollar[7] and the effect of our debt and how some economic ‘recovery’ is in progress.  Unemployment and debt continue to soar. An analysis by the international economic authority follows:

An expert view by Ambrose Evans-Pritchard:

“In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.”[8]-- Société Générale tells clients how to prepare for potential 'global collapse' Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction. By Ambrose Evans-Pritchard 18 Nov 2009 [Emphasis is mine in all quotes.]

To put this in perspective, there are three cases studied and a scenario given for each case with the worst case being the "Bear Case." Our government is now trying to print money to restore lost wealth on defaulted mortgages and other improper uses of credit to rescue their political basis.

“Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.”—Prichard 18 Nov 2009

There is only 6 trillion in capital left.[9][10]

“The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.--[Ferman quote]

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.”—Ferman comment

So, if we put all our US domestic savings into debt relief it will take almost a decade to do so and there will be nothing for investment and hence no growth.  If we raise taxes then savings rates will plummet and more businesses will fail. Higher taxes will lower tax revenues so the government will have to spend more by printing more money. We have to cut spending, but the left-wing nuts currently in power until, hopefully, 2010, are stating flatly that this is not an option. Inflation, now in progress, is the apparent ‘solution’ to the problem by our worthless government. All this argues for the ‘Bear Case’ scenario cited above.

The survival options suggested by Ferman:

“The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time”-- Société Générale Ferman comment

Apparently, we expect to debase our currency and export into China and the rest of Asia. China will resist this and other panicked nations will also debase and follow suit in a competitive devaluation war like we had in the Great Depression.

Specific investment maneuvers:

“SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.”-- Société Générale Ferman comment

Background on the problem—massive debt

There is a most important problem[11] with the world economies at this moment and little future opportunities to correct unremitting problems with the astronomical debt levels according to the widely-respected economic analyst Ambrose Evans-Prichard of the Telegraph, London.  The debt levels are a direct result of unacceptably and dangerously low interest rates and excess and unsound credit resulting in defaults on loans and the subsequent collapse of subprime and other mortgage bundles now known as ‘toxic assets.’ The toxic assets are still with us and governments had to stuff liquidity into the capital reserves of banks all over the planet to stop the financial world from collapsing. This is the correct explanation of the “… transferred private liabilities onto sagging sovereign shoulders…” comment above. The government is trying to sustain ‘affordable housing’ and failing miserably.  Subprime mortgages, for example, are becoming even more toxic as time passes with even the AAA mortgages of 2007 falling to 28 cents on the dollar and AA at only 4 cents.[12] Equity lost by homeowners is capital lost almost forever with now nearly 8% of all FHA loans in default and Fannie Mae and Freddie Mac having an unknown pile of hollow mortgages probably in the region of 3-5 trillion dollars.[13] Home foreclosures continue to burn down wealth and savings here and abroad.[14]

Each trillion dollars in debt is $16,000 in tax liability to the mere 60 million who pay federal taxes.

Our worthless government is currently treating the debt-driven deflationary spiral[15] with more debt and that solution is novel in itself.  We can justify a defense of the banks and a fight against a massive deflationary debt spiral[16][17] but in end the debt has to be handled properly. The current debt levels cannot be sustained and printing money as the sole choice is not an option to economic recovery—it would be even worse than a depression if hyperinflation launches off. Our currency would collapse.  There is a debt chart below based on several assumptions and you can judge for your self how this affects all of us. See Details of the Debt below.  I cannot find a translation of this report in English. My French is worse than my German or Latin or  my English is some cases.

From Evans-Prichard:

“Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.”-- Société Générale tells clients

“Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone.”-- Société Générale tells clients

From rising interest rates? Probably.

“Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.”-- Société Générale tells clients

Electrified is probably some idiomatic French understatement. It is clear that our debt is unmanageable and that Obama and his loony leftists only want to spend more and transfer as much wealth to the government as possible for distribution to key supporters in the last election such as SEIU and other unions. The government now owns some banks and a couple of auto manufacturers and much of our private real estate now. The healthcare scam is the best way to soak up taxes from all of us. Cap and trade will cap us all.

The Reptile[18][19] or some similar inhuman slithering being frequently  known as  Spartacus [20]-- in honor of the Marxist heroine Rosa Luxemburg--the former chair of the Marxist Progressive Caucus[21], Nancy Pelosi, now wants an international tax on transactions so that people cannot escape Wall Street taxes and socialist regulations  and do business elsewhere.[22] I expect this serpent or some of her drug-whacked familiars in Sacramento to attempt to enact such a law to keep California’s[23] citizens captive to her slimy, perverted Marxist taxes too.

It is revolt time….

This is a mockery of the democratic process and justice and law, but that describes the liberals—does it not? Get ready to defend your homes and assets against misappropriation as your government is trying to grab it all with taxes and spending and a “redistribution” of wealth.

rycK [a 5^th generation Californian in exile]

Comments to: ryckki@gmail.com

General footnote to the above: Details of the Debt:

You can peruse this chart below and see if any of this data presented are unreasonable. If only half of this is true then we are clearly busted and the hysterical quest for our money and wealth by the left will begin soon. They have no problems with crime, sloth, sodomy and assorted perversions but they do have major problems white people having wealth that they cannot grab. Numbers are in trillions in the left columns.

Prepare for the worst…..

rycK

Comments to: ryckki@gmail.com