I think the problem we are going to be confronted with is going to be much worse than a financial crisis. It is going to be a US dollar crisis, and it is going to be a sovereign debt crisis where the bonds people are worried about are not some sub-prime mortgages, it’s going to be the U.S. government that people are worried about and the solvency of the U.S. Treasuries.
If it’s a US dollar crisis and people are worried about the US dollar, the only thing worse than owning a dollar today is owning the promise of being paid in dollars in the future.
I don’t think we have the courage to default and admit to our creditors that we don’t have the money and we can’t repay. I think we will create all the money that we need so we can pretend to repay, but what we end up doing is wiping out the debt with inflation.
Related trading instruments: SPDR Gold Trust ETF (GLD), iShares Silver ETF (SLV), iShares Barclays 20+ Year Treasury Bond ETF (TLT)