Contrary to developed countries where stimulus plans only brought a halt to the economic
meltdown, emerging market's stimulus plans, specifically China's, are working very well. Debt
is not a problem for emerging markets as debt/GDP is below 50% in most countries (apart
from India where it stands at 80%). The most visible success of these plans has been in China
which returned to an 8% growth estimate for 2009, and is driving the recovery in commodity
prices. But, emerging market economies may no longer be prepared to finance the western
world's exponential debt, particularly that of the US, as borne out by recent declarations from
Chinese officials.

A last resort....sovereign defaults

Although it is the last survival option in the bag, sovereign borrowers may have to default; and
could do so with limited strings attached as they are not subject to bankruptcy courts in their
own jurisdiction, and would hence avoid legal consequences. One example is North Korea,
which in 1987 defaulted on some of its government bonds and loans. In such cases, the
defaulting country and the creditor are more likely to renegotiate the interest rate, length of the
loan, or the principal payments. During the 1998 Russian financial crisis, Russia defaulted on its
internal debt, but did not default on its external Eurobonds.

Further back in history, European countries frequently defaulted - Spain did so 13 times in the
Middle Ages. The damage to the country's economy can be harsh as it will suffer from higher
interest rates and capital constraints in the future. But remember that all major economies
apart from the US have a long history of sovereign defaults.

Though it certainly makes
things more difficult for the savers of the world or those who are living on a fixed income, for
the US, with an $11 trillion public deficit, and half of its publicly traded debt issued outside of
the US, inflation would play the role of a necessary evil. Thus as the lesser of two evils,
inflation could avoid an otherwise painful deleveraging process at unsustainable costs. But the
interest rate hikes needed to control the inflation would hurt the average consumer as debt
servicing costs would surge.

Implications of a Bear scenario on Metals & Mining and forecast returns

Gold: under the bear scenario, the markets would remain nervous about fiscal imbalances and
the timing, or effectiveness of exit strategies, raising fears of stagflation. This would point to
sustained investment in gold, although perhaps not enough to push long-term prices higher
given weak fundamental demand. On a relative basis, gold would be expected to outperform,
being a hedge against dollar risk.

Implications of a Central scenario on Metals & Mining and forecast returns

Gold: slow recovery improves market confidence and thus reduces the purchase of gold as a
risk hedge; longer term it may even see some reduction in market length. This reduction
investment activity would not be offset by recovering physical demand as the latter would take
a lot longer than the former and the equilibrium gold price would have to come down.

Determining the implications of a Bull scenario on Metals & Mining and forecast returns

Gold: investors continue to use gold as a hedge against inflation while recovery in economic
conditions spurs a rapid improvement in physical demand. Scrap return tempers rises from
time to time, but gold remains positive. Project finance and higher contango may increase
mine hedging, but not in enough volume to contain price increases

Okay, below is their entire 68 page document that reads, well, frankly like a horror show. And you know what, it’s the closest thing I’ve seen to the truth in a long time that comes from a commercial bank. Of course this is their worst-case scenario, not their favored one. Well, I don’t think anyone favors economic collapse, except when it can potentially bring down the oligarchs who brought the debt slavery to the world… yeah, on the other hand maybe it will be cheered!
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Now, GDP is NOT calculated today like it was back then... today’s GDP number is VASTLY OVERSTATED.
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That’s where I’m headed, I think you’ll find that freedom is much closer to you when your money doesn’t come into being as an interest bearing instrument of debt.

Nice to find your inflation/deflation matrix in a Societe General research paper. Overnight USD/DOW/Gold action. When will the crisis be over and end? Is it more important to find out who, what, where why and how than it is to stop the crisis from eating away at us until we are gone. Starving the beast may be the only option from speeding the end of the greatest fraud mankind has ever known.