This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Economic Slowdown Bullish for Precious Metals

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Bullion Bulls Canada) -- As our economies slow down, it is inevitable that inflationary pressures will worsen -- not ease. This is a function of extremely simple arithmetic.

We start with the fact that few Western economies (and none of the larger ones) are solvent . What this means is that an economic slowdown does not imply mere deflation. It implies debt default. While we could plug in virtually any Western economy to demonstrate this principle, two current examples should suffice: Greece and the U.K.

Greece is obviously the most blatant example of Western insolvency. However, what has taken place in Greece directly implies that all major Western economies are hopelessly insolvent.

Greece has now benefitted from two official rescues, not to mention numerous minor operations to try to stabilize its debt market. In the last futile bailout, bond investors had a 75% haircut imposed upon them , with the option being to turn down the "offer" -- and end up with a 100% loss. In other words, Greece has just suffered a near-total default.

Yet mere days after this latest final solution to the Greek debt crisis, here is what the bankers were saying :
The restructuring deal doesn't do anything to put Greece on a sustainable path. A third bailout will become necessary.

Let me repeat this, so there can be no confusion about what this directly implies. Even after lighting a match to 75% of Greece's national debt, the banking community isn't remotely convinced that Greece is solvent, reflected by them maintaining their "junk" rating on Greece's debt.

If Greece is still insolvent sitting with only 25% of its debt load, what does that say about all of the other Western economies being crushed under the weight of 100% debt loads? It's very simple. Any nation which was less than four times as "solvent" as Greece prior to its default is now less solvent than Greece today. That is not an opinion. That is arithmetic.

Are there any Western nations that were (or at least might have been) more than four times more solvent than Greece? Yes, but the list is short enough to mention them all: Denmark, Norway, Sweden, Switzerland, and perhaps Canada. Apart from Canada, they are all small economies. However, with Canada's current government producing nothing but record deficits, its inclusion on that list is highly dubious.
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $121.30 0.00%
FB $94.01 0.00%
GOOG $625.61 0.00%
TSLA $266.15 0.00%
YHOO $36.67 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs