Société Générale Tells Clients How To Prepare For '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.

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.

'Debt levels risk another crisis' "As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario, 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.

>> don’t get nervous though

Can’t help it, I was born that way. :-)

Nerve wracking though it may be, I too get insight from reading both sides.

I have my opinions and am making my bed based on how I judge it will all turn out... but I’ll be the first to admit I DON’T know the answers!

Thanks for your posts. I find them VERY useful.

FRegards

So one way to value gold, therefore, is to ask at what gold price the value of outstanding central bank paper would be completely backed by gold. The US owns nearly 263m troy ounces of gold (the world's biggest holder) while the Fed's monetary base is $1.7 trillion. So the price of gold at which the US dollars would be fully gold-backed is currently around $6,300.

Another way to price it is to ask what if central bank paper is never backed by gold?

Do not assume that inflation and deflation cannot happen at the same time.

Right now, 10-20% of the US population is unemployed, and with little prospect in the near future of being employed. This radically lowers their standard of living expenditures, that is, they are down to buying what they need instead of what they want. In turn, it means that the businesses that make what they aren’t buying are in overproduction.

This means deflationary prices and more layoffs. But at the same time, the US is printing money like an insane gambling demon. This should by now be causing massive inflation, but instead it is just building up, and being used for even more gambling.

The end result is going to be bizarre. I read it described as an unemployed man who has scraped enough money together to buy his hungry children hot dogs. A ridiculously wealthy man wants a hot dog, but the unemployed man got the last ones. So the ridiculously wealthy man offers him a million dollars for one of his kids hot dogs.

As much as he would like a million dollars, he says “no”, because his kids are hungry, and those are the last of the hot dogs. So the wealthy man says, “a billion dollars?”, then “a trillion dollars?”

At that instant, his money has inflated to the point of worthlessness. Even if the hot dogs only cost a nickel each, nobody can bust the rich guy’s hundred dollar bill, which is the smallest note he has.

So the rich guy goes hungry, because he can’t eat money. Substitute the US government for the rich guy, and you have an idea of what we’re looking at.

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