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.
“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 gloomiest of three possible outcomes), 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.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. “High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt,” it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go “up, and up, and up” as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays “compelling similarities” with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
SocGen advises bears to sell the dollar and to “short” cyclical equities such as technology, auto, and travel to avoid being caught in the “inherent deflationary spiral”. Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.
Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would “generate turbo-charged returns” mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan’s 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.
SocGen’s case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.
Mr Fermon said his report had electrified clients on both sides of the Atlantic. “Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried,” he said.
Rule 1.
“No State shall … coin money; emit bills of credit; make any thing but gold and silver coin a tender in payment of debts ….” — United States Constitution, Article 1, Section 10, Clause 1
Failure to follow rule 1.
“Of all contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money.” — Daniel Webster
“All the perplexities, confusion and distress in America rise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.” — John Adams, in a letter to Thomas Jefferson in 1787
“I see in the near future a crisis approaching. It unnerves me and causes me to tremble for the safety of my country … the Money Power of the country will endeavor to prolong its reign by working upon the prejudices of the people, until the wealth is aggregated in a few hands and the Republic is destroyed.” — Abraham Lincoln, just after the passage of the National Banking Act of 1863
“Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” — George Washington, in a letter to J. Bowen, Rhode Island, Jan. 9, 1787
“If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered.” — Thomas Jefferson in 1802 in a letter to then Secretary of the Treasury, Albert Gallatin
“Paper money eventually returns to its intrinsic value – zero.” — Voltaire (1694-1778)
We are in danger of being overwhelmed with irredeemable paper; more paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors, and a ruined people. — Daniel Webster
“If all bank loans were paid … there would not be a dollar of coin or currency in circulation. Someone has to borrow every dollar we have in circulation. We are absolutely without a permanent money system..” — Robert Hemphill, Federal Reserve Bank in Atlanta, in foreword to “100% Money” by Irving Fisher
“The few who can understand the system will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people, mentally incapable of comprehending the tremendous advantages that capital derives from the system, will bear its burdens without complaint and perhaps without even suspecting that the system is inimical to their interests.” — John Sherman, protege of the Rothschild banking family, in a letter sent in 1863 to New York Bankers, Ikleheimer, Morton, and Gould, in support of the then proposed National Banking Act
“.. we conclude that the [Federal] Reserve Banks are not federal … but are independent, privately owned and locally controlled corporations … without day to day direction from the federal government..” — 9th Circuit Court in Lewis vs. United States, June 24, 1982
“Money is the most important subject intellectual persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and its defects remedied very soon.” — Robert H. Hemphill, former credit manager, Federal Reserve Bank of Atlanta
“Emitting bills of credit, or the creation of money by private corporations, is what is expressly forbidden by Article 1, Section 10 of the U.S. Constitution.” — U.S. Supreme Court in Craig v. Missouri, 4 Peters 410
Ok, I could post many more, Here is a THOUGHT, and thinking is too dangerous There can never be a revolution in america we are not able to financially maintain one, For the moment it starts, the Banks that control the crap game will fold all the cards ie. paper money is collapsed, No one eats or buys anything, Anarchy will rain, ammunition will exhaust from the Chaos, and out of that, will come Total control.
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Rayme Reply:
November 22nd, 2009 at 12:44 pm
But wouldn’t we be using our ammunition to kill our political and corporate leaders? Who’s going to control us if they are dead. Seriously, are they going to control us by remote control in some distance country.
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This sounds good and yes you are on point. These people will do anything to keep building power and the Brass ring is Global Government..If they are able to send bio-grade weapons to Congress,take down buildings in New York,kill presidents throughout history,etc….They are also repopulating United States an have been for decades.We the people,see now what was going on for a long time on the GREAT WORK.
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tyler durden Reply:
November 20th, 2009 at 9:38 pm
repopulating with who?? Mexicans?
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in t shadow Reply:
November 23rd, 2009 at 8:43 am
They will create the new human.not what was but in a test tube,just like there GMO wake up,get your mind around this,because all of us are doomed to death,on our bellies or on our feet.
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The Parasitic Jew is a sick beast
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help,,,,,,,,,,,,, Reply:
November 23rd, 2009 at 8:51 am
Zion.Zion,Zion———that is it hu?The worship of Aion,Bion,Cion,Dion,Eion,Fion,Gion,Hion,
etc……A little deeper that just one people,its is spiritual.We are watching the rebuilding of the tower of babel.
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In 2010, most if not all Americans who took out a mortgage between 2001 and 2008 will be able to get their
mortgages wiped out completely because of a glitch in the way the mortgages were created and bundled
together in Note pools and sold on Wall Street as CDO’s. In effect, the
mortgages were separated from the
Notes and most of the Notes were
intentionally lost or destroyed to hide
the fraud of selling the same note pools multiple times. This is a fact,
even though it is difficult to comprehend for most people without
an understanding of real estate and law.
The net result of this will be the complete collapse of the banking system as we know it. On the positive
side, most people will own their homes free and clear. The net effect
is to make deflation a certainty since
trillions in nominal assets will be wiped out.
If you want to understand this process, go to Livinglies.com
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01/11/2010
01/11/2010
Watch the dates———————————————————————————————
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When the bankers who have taken over your government, who are feeding your kids to the Pentagon who will without blinking, offer you up for arabs, when “they” give you that 10 dollars for one hours worth of work (and they themselves decide how fast the hamster has to ru..), when those bankers give you that 10 dollars for an hours work, just remeber half of it belongs to the chinese for the debt THEY have put you in. So, not only have YOU allowed bankers and business men enslaved chinese to make them rich YOU HAVE TO PAY AND YOUR GRANDCCHILDRENS CHILDREN HAVE TO PAY FOR THEIR OWN RAPE. Clintons, Bushes etc etc etc ISRAEL ……WHY ?
Why would i allow rhese people to have this life style ??
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.almost forgot to give the DAGO WOPS the credit they deserve…dont forget the dagos.,.
Lane
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.and then there’s the inflation………had enough ??
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http://www.wntube.net/play.php?vid=84
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http://www.wntube.net/play.php?vid=3467
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Yo, cool blog, could you tell me what spam software you use for comments because i get a lot on my blog.
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Very good post! It really got me thinking more about this topic.
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Hello Guru, what entice you to post an article. This article was exceptionally interesting, especially since I was looking for opinion on this issue last Saturday.
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