Monday, August 13, 2007


Now what if all the bearish predictions come true?

I think the problem is -- we can't imagine what the world would be like. Just like we couldn't imagine 9/11 before 9/11.

A derivative meltdown would probably be worse.

It could start with a stock market crash of 20% or more.

But that would mostly affect the wealthy.

The true horror would be the sudden collapse of the dollar. Gold would skyrocket as all the goldbugs predict as banks go into default, causing untold bankruptcies. The U.S. Gov't would face an enormous deficit -- no tax revenues.

The national debt goes into default.

Nobody is willing to buy Treasurys.

Interest rates skyrocket -- killing the economy.

People are laid off in the millions.

They can't afford basic needs. Food, oil, medicine jump in price.

Why are all these banks pumping so much liquidity into these bad loans?

I think the alternative is the beginning of the nightmare.

But I get a sense -- if you've read enough history -- that the collapse of world powers occurs just like this.

The fall of Rome was almost precisely about debt. Too much expansion, not enough economy, too many poor people, and just a small elite class to rule them all. Doesn't work in a democracry.

Is there hope? And if so, who could save the Republic? Not the politicians. Not the brokers who trade fake papers.

If there is a day of doom coming, what can we do now to protect ourselves until it washes over?

I don't know either.

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