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Doug Casey: The Day of Economic Reckoning Draws Near
Pinnacle Digest writes: To quote Doug Casey and his level of caution at this time, in an interview last week he stated 'We're heading into unchartered territory."
Casey recently travelled across the country in a car from Florida, up the East Coast to New York and west to Colorado. On his journey he was shocked to see the highways packed with cars and the hotels and restaurants full with patrons. He likened it more to a boom rather than a depression. All the while our real unemployment rate sits somewhere between 16-20%. This can mean only one thing. People are living off their credit cards. He believes the same is occurring in Europe.
Casey explains that the bond market is at the end of its cycle and is a bubble that will burst before long. The bond market is much bigger than the stock market. The warning Casey gives is this: When interest rates start heading up, trillions in bond values will be wiped out, in addition to causing a lot of corporate bankruptcies – that's why deflation is such a realistic threat. And if the Fed lets the economy collapse before stepping in with more easing, it may be too late to prevent prolongued deflation.
Casey also mentions that higher rates could likely further devastate the real estate market, which has been making a mild recovery. Higher interest rates, as we all know, are the enemy of high stock prices. Our team at Pinnacle is confident interest rates will be kept low indefinitely until we see a sustained recovery or uncontrollable inflation.
Casey explains one of the biggest problems with inflation: It forces people to direct their attention to gambling in the markets, as opposed to productive business. We have seen this before in 2009 and continue to see it in the Dow and in bonds.
Casey was asked if - as we approach 2013 - we will see gold mania again (as we did in 2010)?
His response was as follows:
"It's not likely to happen until we reach much higher levels of inflation and we have something approaching financial chaos – but that's exactly where we're headed, and soon. The mania is likely to be fear-driven much more than greed-driven. Gold is still in the climbing-the-wall-of-worry stage. Mania is still in the future. It's going to happen. I feel confident of that."
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