Gold and Energy Advisor: Gold, Oil & Energy Markets Investment Research
James DiGeorgia, Mr. Macro
- Chief Editor -
Mr. Macro
Geoff Garbacz, Mr. Micro
- Chief Strategist -
Mr. Micro
Dan Hassey, Mr. Retirement
- Senior Stock Analyst -
Mr. Retirement

Gold and Energy Advisor's Real Wealth

Real Wealth #218  02/16/2009



The Danger of a World Wide Financial Meltdown Continues to Grow!


Dear Gold & Energy Advisor Subscribers,

There are three stories in the news that deserve your attention if you’re holding any stocks, bonds, or large sums of cash...

Federal obligations exceed world GDP Does $65.5 trillion terrify anyone yet?

As the Obama administration pushes its $800 billion deficit-spending economic stimulus plan through Congress, the American public is largely unaware that the true deficit of the federal government is already measured in trillions of dollars, and in fact, its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

Failure to save East Europe will lead to worldwide meltdown

The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point.

Irish government faces growing fears of debt default

Fears are growing that Ireland could default on its national debt after the cost to insure against possible losses on loans to the country rose to record highs at the end of last week.

Credit ratings agency Moody's recently followed rival Standard & Poor's in warning it might downgrade Irish debt, amid fears that one of Europe's former success stories is falling into a deepening recession. The cost to hedge against losses on Irish debt tripled last week to a record 355 basis points - meaning that for every 100 of debt, investors have to pay 3.55 to insure against default, according to data firm CMA Datavision. It was about 262 basis points at the end of January.

Moody's has warned there is a more than 50% chance Ireland will lose its triple A rating within 12 to 18 months.

While most people are buying into imagery of President Obama riding to the rescue of the U.S. economy with his stimulus plan, the fact is the danger of a complete worldwide monetary, financial collapse is growing.

My concern remains!

If all we had to worry about is dealing with a recession, I’d be among the many predicting an economic turnaround in the next 12-18 months. The problems however, are so much more immense.

The credit crisis, derivative meltdown is worldwide and may involve toxic debt amounting to $41 to $65 Trillion dollars worldwide. This leads me to believe that we may be on the precipice of an unprecedented worldwide economic and monetary collapse. It’s for that reason I am increasing the allocation of physical gold investors should hold from 15% to as much as 50%. The danger is too great to ignore.

I am very concerned about the potential reaction of Wall Street to Obama’s foreclosure prevention program which will be revealed this week. If it comes off as being too socialist in nature, we could see another big sell off in the financials and a break of the 7500 DOW support level, which could very well trigger an even more serious investor panic than we have seen in recent months. The danger cannot be ignored.

Best Wishes,

James DiGeorgia

Editor

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