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‘Titanic’ Global Economy May “Collapse” Warn HSBC - Gold Is Lifeboat

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‘Titanic’ Global Economy May “Collapse” Warn HSBC - Gold Is Lifeboat

-“The world economy is like an ocean liner without lifeboats ...” - HSBC
- Four areas of high risk identified by HSBC
- Risk of stock market crash
- Pension funds and insurers may not meet obligations
- Chinese recession may drag U.S. into recession or depression
- Premature rate rise would expose very fragile global economy
- “There aren’t enough lifeboats to go round”
- Gold vital lifeboat when global ship strikes iceberg  

 

goldcore_chart1_22-05-15
The chief economist of the world’s third largest bank, HSBC’s Stephen King, has compared the global economy to the Titanic.

In a note to clients on Wednesday he wrote “We may not know what will cause the next downswing but, at this stage, we can categorically state that, in the event we hit an iceberg, there aren’t enough lifeboats to go round.”

“The world economy is like an ocean liner without lifeboats.” As we have been warning in recent months, when another recession arrives, governments do not have the ability or the reserves to prop up the economy like they did in 2008.

Global debt has soared by 40 percent since the Great Recession. We now have a staggering $200 trillion of debt globally, or almost three times the size of the global economy. It would be a “truly titanic struggle” for policymakers to right the economy, King said.

He believes that we are now nearer to the next global recession than we are to the last one which ended six years ago. In that time, however, the world has amassed mountains of new unpayable debt - expanding 25% in the last six years - and the U.S. economy has been sluggish despite an unprecedented wave of money printing which was intended to boost the economy. Indeed, post recession growth has never been so anaemic in recent history.

goldcore_chart2_22-05-15

This weakness has left policy makers ill-equipped to deal with the next crisis,

“Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery - both in the US and elsewhere - has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out."

Elsewhere in the note he describes the problem facing policy makers as “titanic”. He identifies four areas as being of particularly high risk,

- The equity bubble may burst as increasing wages impair corporate profits. This would lead consumers to lose confidence triggering another an economic contraction.

Pension funds and insurers may not have cash to meet future obligations causing them liquidate assets. This may cause a scramble for liquid assets and mass panic-selling in an environment of low demand causing a collapse in asset prices.

- A recession in China would likely force the PBOC to weaken the Yuan. This would cause a consequent rise in the dollar further undermining the ability of the U.S. to export. In such an environment the Fed has typically dropped rates by around 5%.  As the Fed’s base rate is currently at 0.25% it has absolutely no policy tools left to deal with such an event. King concludes “The U.S. is eventually dragged into a recession through forces beyond its control.”

goldcore_chart3_22-05-15
- If the Fed were to raise rates too soon it could expose the very fragile nature of the “recovery”. Neither governments, nor corporations nor households would have the strength to absorb the costs of servicing their debts should the Fed begin raising rates.

King is extremely doubtful that policy makers will be able to cope with the next crisis:
“The world economy is like an ocean liner without lifeboats. If another recession hits, it could be a truly titanic struggle for policymakers.” Reports do not indicate if King speculates on what the next crisis would look like in the absence of adequate policy tools.

We do not know how it will unfold either. But we suspect that after more that twenty years of Fed intervention to protect too-big-to-fails and a gargantuan build up of debt a monumental day of reckoning may then be at hand. In such an environment we would once again understand the true value of gold as a currency which is finite and which has no counter-party risk.

HSBC’s chief economist does not mention gold as a potential life boat to protect from a titanic economic collapse. However, HSBC’s precious metals team are currently very constructive on the long term outlook for gold prices.

In reaction to their chief economist’s warning, their precious metals analysts said, that any of the scenarios outlined by Stephen King would be positive for gold bullion.

goldcore_chart4_22-05-15
Given the significant and growing economic risks of today, it is prudent to have an allocation to physical bullion stored in reliable vaults in the safest jurisdictions around the world.

Have you got your lifeboat ready?

Must-read bullion guides below:

Essential Guide to Bullion Storage in Switzerland

Essential Guide to Bullion Storage in Singapore

 

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Sun, 05/24/2015 - 13:08 | 6127039 umdesch4
umdesch4's picture

So many strawman arguments against gold. I'm sure (or I hope) that nobody is seriously thinking that if you sink 100% of your assets into PMs, you'll be safe. It's about diversifying for many different possible scenarios. It's one aspect of what you prepare for. It's for the hope that if there's an economic crash, there's something you won't lose, and if there's something bigger and nastier, then eventually there will be some kind of recovery or transition to another set of systems you can buy into with your physical assets.

All I know is, in a serious emergency, if you come to my house wanting some of the electricty I'm generating, or water I'm purifying, I will barter with you, first for a trade in goods/services that I need, second for physical PMs, and not at all for pieces of paper or plastic.

Sun, 05/24/2015 - 11:19 | 6126755 OneTinTrooper
OneTinTrooper's picture

To exchange the gold they will require you to submit a thumb print to a machine.  Physical is not going to be quite what you all are prepping for.

Sun, 05/24/2015 - 08:54 | 6126535 Joenobody12
Joenobody12's picture

If it is just the US printing I would agree with Mr. King, but when the whole world is printing we have a different set of problem -  one in which things of value are disconnected from the value they assigned to the paper they call money. The ultimate solution for the world to come back to normalcy would be for a new Global currency to materialize - one in which no country can print at will. Until then, it is wise to exchange the funny papers for things that are real, like stocks of companies that generate profit, real estate and may be even silver and gold. There is no asset bubble, there is only the depreciation in the relative value of the funny money.

Sun, 05/24/2015 - 11:49 | 6126849 Quinvarius
Quinvarius's picture

The ultimate solution for the world to come back to normalcy would be for a new Global currency to materialize - one in which no country can print at will. 

It is called gold.

Sun, 05/24/2015 - 08:53 | 6126523 JRobby
JRobby's picture
I don't know, but I been told
It's hard to run with the weight of gold
Other hand I have heard it said
It's just as hard with the weight of lead (Hunter - New Speedway Boogie)

http://artsites.ucsc.edu/GDead/agdl/spee.html

Sun, 05/24/2015 - 08:23 | 6126477 Gab Timov
Gab Timov's picture

gold will solve nothing

Sun, 05/24/2015 - 11:41 | 6126820 crazytechnician
crazytechnician's picture

bitcoin will help to solve the problem.

Sun, 05/24/2015 - 08:15 | 6126465 6th of May
6th of May's picture

I believe, that the system will basically stay the way it is. Gold and Silver prices dominated by Options.

Many here believe the whole system will fail and they store bean cans at home to prepare for a apocalypse like storm - this is just too far fetched in my view.

 

What concerns me is that I hear so much about buying Gold and Silver the past few weeks.

 

I think it's better to look elsewhere for a nice save cosy haven, there are so much things you can invest in except gold and silver...

If Gold and Silver is pressured down during the next 10 years, Im not surprised... Think about it, we are at low levels interest rates, we can't go much lower, the environment we are in can go on for about 2 years of low rates, then a rise in interesest rates in needed... what happens to gold then?

Sun, 05/24/2015 - 06:52 | 6126389 Oscar Mayer
Oscar Mayer's picture

I bet I'll get more with a can of spam than you will get with a pound of gold when this system of bankster debt finally colapses and all those digits you thought was 'money' POOF!s out of existence.

Sun, 05/24/2015 - 03:11 | 6126282 Meremortal
Meremortal's picture

In a total collapse gold and silver will be accepted as currency. They just won't be worth much. 

Things in demand: Arable land with wells. Food, weapons, ammo. Batteries! Gas, motor oil, kerosene, propane. Cows, pigs, chickens goats, sheep, turkeys.

Things not in demand: gold and silver.

 

Sun, 05/24/2015 - 11:11 | 6126743 OneTinTrooper
OneTinTrooper's picture

That is the risk.   It will be no fun making the correct call on hyperinflation only to find out that gold and silver are not enjoying the ride.

Sun, 05/24/2015 - 10:13 | 6126615 snakedogs
snakedogs's picture

Sheep is where the $$$$$are ask the Mid-Easters!

Sun, 05/24/2015 - 02:03 | 6126244 luna_man
luna_man's picture

 

 

Don't know, but if it should come to fruition...I shall have a couple of pieces!

 

precious, that is

Sun, 05/24/2015 - 03:10 | 6126281 Setarcos
Setarcos's picture

OK but if you take a silver dollar into a shop, then all you can buy is something marked as $1.

 

No good arguing with the check out chick - nor her manager - that it is "really worth" $20 .  Neither of them are PM dealers.

 

Worse with a gold coin from some past period when they were in circulation, but only used by the very rich.

 

No use arguing with anyone that your coin is "really worth" $1200 now. You can oly exchange face 'value'.

 

Take it to a pawn broker who might give you 30% of exchangeable currency, i.e. bank notes, with some loose change in some metal coinage,

 

Sun, 05/24/2015 - 02:19 | 6126215 Setarcos
Setarcos's picture

You cannot  spend/buy with gold, nor silver,, nor copper, nor nickel, etc., unless minted as coinage with a stamped face "value".

 

Metals are NOT money otherwise.

 

Wake up "gold bugs" please.

 

No one, in all of history, ever tried to trade in bullion.

 

BTW Manic Max Keiser is interesting to watch and sometimes informative, but anyone who bought silver during his "Crash JPM Campaign" has lost a lot of spendable money/currency, likewise anyone who bought gold when he had that fad, let alone his bitcoin fetish.

 

I do not know why RT bothers with a self-promoter who has not changed his spots since ripping people off on Wall Str., by his own admission.

Sun, 05/24/2015 - 16:30 | 6127502 Tigg47
Tigg47's picture

"You cannot  spend/buy with gold" Yes you can, bitgold.

Sun, 05/24/2015 - 00:42 | 6126161 MATA HAIRY
MATA HAIRY's picture

GASOLINE and CANNED FOOD will be the post-collapse currency...come on...don't you guys even watch The Walking Dead or other post-apocalypse shows/movies?

 

Gold? No one wants it. Food. Water. Gas. 

 

That is why I always have a good supply of canned refried beans on hand. Takes care of the canned food AND gas issues right there....

Sat, 05/23/2015 - 23:55 | 6126105 Mariner33
Mariner33's picture

Look folks, it is really rather simple.  Come another teror attack on US soil-a "dirty" bomb in, say, Manhatan (so easy to do, and will render a ghost town for years), bomb in the Holland Tunnel (so easy to do), blow up several bridges (easy to do).  Launch cruise missiles with nuclear warheads from just outside territorial water limit of US into Nuke Yuuk, Warpington, AC/DC, Seattle, etc. and what will happen immediately?  Just bring in "suitcase MIRV nukes over the Mexican border.  So easy these days.  Huh?

What will happen if we experience a total electrical grid failure a la Electro Magnetic Pulse?  You have avoided this subject because it results in the projected deaths of millions.

Now, right after this happens and the ATM machines don't work (as they didn't for a week in San Fransicko during the big earthquake of what? 1990?), you may have a problem with getting the essentials with your Warren Buffet portfolio.  Or what if American Privileged Black Riders and Takers decide to really let it rip and start marauding into the nice uptown areas?

You need some gas, food, candles, bullets, etc, etc., all of which there will be frantic demand for.  Let's imagine you are the seller, the vendor.  The economy has collapsed, there is social anarchy, the electricity is either off or sporatic and people are clamoring for what you've got. They wave their credit cards in from of you.  They promise to cash their stocks LATER to pay you.  They wave paper money in front of you, money from a lost society of yesterday.

But, then comes someone that offers you......gold or silver, coins or stamped bullion.  The street price has soared.  You offer a discount.  The seller or vendor puts YOU in the front, top priority, uber allen.

Think it through, kids.

Sun, 05/24/2015 - 16:51 | 6127565 messystateofaffairs
messystateofaffairs's picture

9mm rounds are great for trade...

Sat, 05/23/2015 - 23:31 | 6126066 Magooo
Magooo's picture

Money = Energy.  When the economy collapses there will be no energy (other than trees for firewood)

 

I own lots of gold -- but I have under no illusions --- it will be worthless when the SFTF.  Chaos and starvation will be the game then.

 

THE PERFECT STORM (see p. 59 onwards)

The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel. http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

Sat, 05/23/2015 - 20:32 | 6125685 jonytk
jonytk's picture

next up if the recesion hits the US will be NIRP, and in a NIRP world bitcoin 0% interest rate is king.

Sun, 05/24/2015 - 08:44 | 6126516 agent default
agent default's picture

If Bitcoin ever begins to become widely used, the Fed will issue Fedcoin, and then declare everything else illegal.  You can then proceed to live in the cashless society hell you helped create.

Sun, 05/24/2015 - 11:45 | 6126837 crazytechnician
crazytechnician's picture

fedcoin already exists , it's called the dollar.

How can the US ban a global de-centralised currency ? And why would they even want to ban it anyway ? Grow some balls FFS.

Sun, 05/24/2015 - 16:32 | 6127507 messystateofaffairs
messystateofaffairs's picture

The war on cash should mean .gov will have to keep the digital wires open to facilitate fed digital funny munny. I guess the darknet folks will find creative ways to keep using that, then the cryptocurrency folks will use darknet and the tax free supply chain trader folks will use cryptocurrencies. Neccesity is the mother of invention.

 

Sat, 05/23/2015 - 21:02 | 6125736 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

46% of Bitcoin exchange volume is with OKCoin, a dodgy as hell "exchange" in China, where it's illegal for merchants or banks to use it. Money laundering, contract breaches, take your pic:

https://imgur.com/a/DabzS

I wanted to believe, really I did. There are only four categories of reasons Bitcoin is bogus: technical, business, economic, and legal, other than that it's really cool.

 

Sun, 05/24/2015 - 11:47 | 6126842 crazytechnician
crazytechnician's picture

What you have just said is 100% bullshit.

You need to do more research before spouting such ignorant crap , makes you sound like a cave dwelling moron.

Sat, 05/23/2015 - 20:03 | 6125611 cpnscarlet
cpnscarlet's picture

I'll say it again -

Yeah sure, but I can't buy more gold because of all of the loses I took buying gold.

Ditto silver.

 

Now where did I hide all that stuff back in 2011??? Damn.

Sat, 05/23/2015 - 20:46 | 6125709 Lets Buy The Dip
Lets Buy The Dip's picture

They will not tell you mate. 

Everyone keeps talking about a crash on the market, and the FED raising rates. 

 

What baloney! Until I see evidence of this, I have to be skeptical sorry. 

 

One Market analyst I listen to ==> http://bit.ly/1fMcakI  his calls are rediculously accurate. He basically has a great knowledge on what is coming next and has been 99% right in this bull market. 

 

Janet yellen can kiss my arse, they keep warning about interest rates, and warning the market and bonds will crash, 

yet anyone knows that even in the first 12-24 months of interest rate rises the market does not crash - that going back 50 years

or so. 

 

For now their game is get everyone short, TRAP THEM and then take us up higher!! yes that old chest nut.  Fool me once, shame on you. Then....fool me twice SHAME ON ME!

Sat, 05/23/2015 - 22:07 | 6125875 JoWazzoo
JoWazzoo's picture

History don't mean shit.  Never have we had a market so pumped with such a pathetic economy.  EVER.  Every fucking number that comes out for 5 months with the exception of employment has been pathetic.  And with each pathetic number, the market gows up.  If you told this to someone when mrket had some sense to them, they would have said you are nuts. But the employment sucks as well.  Most of thge jobs are shitty ass part time.  In the last report, 230,000 FULL time jobs vanished.  That was not well reported.  But it was was a wonderful report.  Even shitty good news as well as bad causes stoicks to go up.  Everything makes stocks go up.  Recently.

 

Nevere have we had Monetary policy that is a fucking joke.  Never QE.  Never lots oif things. Including ZIRP and NIRP in real terms outr to several years.

 

The market will crash regardless of interest rates.

 

Keep buying and good luck.

Sat, 05/23/2015 - 19:02 | 6125479 lordkoos
lordkoos's picture

What about drug cartel futures? HSBC doesn't have any opinions on that?

Sun, 05/24/2015 - 15:00 | 6127298 Savyindallas
Savyindallas's picture

I think they had to sell off their drug holdings to the cartels. Fortunately, they still own significant holdings in cartel stocks and ETFs. 

Sat, 05/23/2015 - 18:52 | 6125456 35 Whelen
35 Whelen's picture

If global economic collapse is that bad, you can keep your gold and suck on it.  I'll keep my bullets and longterm stable supply of food and secure shelter.

Sat, 05/23/2015 - 18:40 | 6125431 sunshineguerilla
sunshineguerilla's picture

War

Sat, 05/23/2015 - 18:27 | 6125406 Rektors
Rektors's picture

<-- buy it behind her back using beer money

<-- beg her until she says ok

How do you accumulate physical silver when your spouse says "no more silver"?

 

Sun, 05/24/2015 - 13:50 | 6127127 BoredRoom
BoredRoom's picture

find a smarter wife

Sun, 05/24/2015 - 09:40 | 6126570 farragut
farragut's picture

If you are intent upon keeping her, then barter with her...if you catch my drift.   :-)

Sun, 05/24/2015 - 07:56 | 6126450 CHX
CHX's picture

Buy a silver dildo.

Sun, 05/24/2015 - 10:48 | 6126698 bluskyes
bluskyes's picture

Good for yeast infection?

Sun, 05/24/2015 - 10:44 | 6126688 bluskyes
bluskyes's picture

Good for yeast infection?

Sun, 05/24/2015 - 04:48 | 6126333 Uber Vandal
Uber Vandal's picture

Discard all of the silverware in the house with new and improved silverware, and start adding serving pieces.

Sat, 05/23/2015 - 22:04 | 6125876 tarabel
tarabel's picture

 

 

Compromise.

Buy a dollar of jewelry and a dollar of specie.

Sat, 05/23/2015 - 19:06 | 6125491 TheReplacement
TheReplacement's picture

Trade her in for a newer model.

Sat, 05/23/2015 - 17:59 | 6125339 MrSteve
MrSteve's picture

The whole sales pitch here is upended by promoting gold stored "overseas". Historically, the Swiss have stolen banked goods from vulnerable people. World War II showed that. You are better off having a PVC pipe full of coins stuck in your wall than you are booking passage during a global crisis to go fetch your gold. Then, where would you go with a no title treasure where the first border guard could seize it for any pretext, say like the ones  the USA uses now for civil forfeiture theft.

If people fear nationalization (FDR's term for it) with the government seizing their gold, they could store platinum instead. Owning mines is also pretty much seizure-proof, except outside North America, so you have to watch where mining companies have operations. Governments wait until the ore is processed into metal and then seize it.

Sat, 05/23/2015 - 16:04 | 6125111 rsnoble
rsnoble's picture

Meanwhile HSBC is probably net long equities after the recent breakout, chasing everyone out, and patiently waiting on summer DOW 20k.

Sat, 05/23/2015 - 16:00 | 6125099 0b1knob
0b1knob's picture

Boating accidents happen.  Just read the comment on ZH.

Sat, 05/23/2015 - 16:27 | 6125129 Captain Debtcrash
Captain Debtcrash's picture

Of course gold is a lifeboat/insurance. I never could understand the financial advisors who say 0% is the proper allocation to PM's. Whenever someone talks in such absolutes, whatever they say should be taken with a grain of salt. Especially in this case, when it’s so clear gold has protected people in past situations that are so similar to the economic landscape which we are currently faced.

It makes no difference that gold over the long haul will not provide the growth of stocks.  It is their only argument.  Neither will bonds, and certainly not cash, but I don’t see the advisors saying that you should not hold any of those assets!  It’s an argument full of holes.  Precious metals will likely replace much of the flawed bond market as the preferred ‘safe’ asset.

Sun, 05/24/2015 - 12:06 | 6126891 indygo55
indygo55's picture

I have a friend who's son is now in the financial services industry. The son says that the managers are giving them structured products to sell, sell sell. If they don't push this junk they get fired. He also reminded us that there is still a windfall of 401K money blindly flowing into these funds and the owners generally have no clue what paper assets are safe or not. They read the quartly report and go back to their cubicles. This thing is on autopilot and headed towards mount Everest. 

Sat, 05/23/2015 - 22:46 | 6125972 Illya Kuryakin
Illya Kuryakin's picture

Exactly

Sat, 05/23/2015 - 17:31 | 6125287 Pancho de Villa
Pancho de Villa's picture

I knew I'd see you here, Cap'n. Keep on preaching the gospel of physical.  Ha, ha...  I see you're talking about my cousins husband, no?  It's OK, you're just telling it like it is.

 

People like him are just too naive to comprehend gold in any historical context.

Sat, 05/23/2015 - 18:18 | 6125391 El Oregonian
El Oregonian's picture

That is oddly curious, I too suffered a devastating boating accident but it was with my very precious metals...

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