Another Global Economic Crisis - Gold Going Parabolic

Three momentous events occurred this week that deeply affect the global economy:

The United States has lost its sterling credit rating of AAA for the first time since it was granted in 1917. And there is even a chance of a further downgrade within the next six months to two years.

The Dow Jones industrial average fell 699 points this week, the biggest weekly point drop since October 2008.

Gold soared to a new high of $1666 per ounce.

This downgrade will likely drag the world into a depression. Borrowing costs for countries, banks, you name it, are likely rise everywhere. These costs will ultimately be passed on to you, the consumer, with the prices of mortgages, loans and credit cards going up.
The crisis is set to deepen. In Europe, the sovereign debt crisis has escaped from the peripheries and spread to Italy and Spain while parts of the European banking system have frozen up.
There have been warnings that we may be in for a repeat of the crisis of 2008. However, this time it’s going to be much, much worse. Back then, policy makers had at their disposal a whole range of powerful tools to remedy the situation which are simply not available today.
In 2008, interest rates were comparatively high, both in Europe and the United States. This meant that central banks were in a position to avert disaster by cutting the cost of borrowing. Today, rates are still at rock bottom, so that option is no longer available.
Second, the global situation was far stronger three years ago. One reason why Western economies appeared to recover was because China responded with a substantial economic boost. Today, China is plagued by high inflation and is not in a position to help.
Finally, in 2008, national balance sheets were in reasonable shape. In Britain, for example, state debt, according to the official figures, stood at around 40 per cent of GDP. This meant that the UK had the balance sheet strength to step into the markets and bail out failed banks. The national debt has now surged past the 60 per cent mark, meaning that it is impossible for the British government to perform the same rescue operation without risking bankruptcy. Many other Western countries face the same dilemma.
The consequences are dire. Policy-makers have run out of tools to change the situation and the Western leaders are obviously out of their depth.
The Euro is very close to collapse. It will come as no surprise if some Italian and Spanish banks are forced to close their doors in the course of the next few weeks. If you are travelling in Europe, hold only the minimum of the local currency, and treat with especial suspicion Euro notes coded Y, S and M (signifying they were printed in Greece, Italy and Portugal respectively). Take plenty of dollars with you, which shopkeepers will certainly accept if there is a run on the banks, or if Euros suddenly cease to be legal currency. It’s best to be prepared just in case.
This is a wake up call. What can you do? You can prepare. Just as we try to prepare for earthquakes, tornadoes or hurricanes, you should also prepare for a huge economic downturn. If you don’t own any gold, you should buy some. The price as I am writing is fast approaching $1700 an ounce…and it may soon be too late as there is a strong possibility that as confidence dips worldwide, the price of gold could go exponential. i.e. $2000 an ounce and more. If you cannot afford to buy gold, silver is a great alternative, currently priced at just under $40 an ounce and it provides all the same protections as gold.
The other major thing you can do is educate yourself. If you don’t know what is going on and why, you need to find out. If there is one thing that can help allay your fears it is information. Download my free ebook: Getting Rich While The World Falls Apart: http://www.financemoneybusiness.com/ or my Handbook For Surviving The Global Financial Crisis ($4.99 for download).

Things could unravel very quickly from here and remember it’s better to be a year early than a day late.