"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Friday, December 24, 2010

Financial Collapse as Early as the End of the First Quarter, 2011... "If that happens, paper money is worth nothing anymore..."

Just a quick break from the MMT series and from holiday visits, from Bloomberg:

Gijsbert Groenewegen, managing partner and founder of hedge fund Silver Arrow Capital Management was on Bloomberg yesterday and discussed what 2011 may hold.  He covers commodities, precious metals, equities, and the possible collapse of paper money which could occur as early as next year.

I agree with his view that gold could drop significantly as hedge funds are forced to sell their most liquid investments to cover equity losses.  But I think gold's subsequent bounce would be much stronger than the $1,500-$2,000 range Groenewegen gives, especially if sovereigns get involved and use gold once again to back their currencies.


Anonymous said...

Happy Christmas, Misthos!

I think you might like this:


Dave Narby said...

I think at this point the only thing that will bring gold down is a rise in whatever fiat it's being priced in.

That being said, a significant collapse in equities could do that (either by a black swan, QE3 being used to prop muni bonds instead of equities), or a collapse in the Euro or Yen, or some combination.

I am expecting some sort of pain to be inflicted on goldbugs though. Pullbacks of 8-13% have happened pretty frequently the past several years.

Misthos said...

Fauvi - great find! I'll post it. Thanks!

Dave Narby - I agree, and this brings to mind what Jim Sinclair has often said: that in the future there will be extreme daily volatility in the price of gold. I believe he said $100-$300 moves.

Anonymous said...

Merry Christmas, Misthos! And that ALL our wishes are fulfilled!

Misthos said...

Merry Christmas to you too Fauvi!