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Are We On The Verge Of Total Global Economic Collapse?

Posted Nov 20, 2009 11:13am EST by Henry Blodget in Investing, Recession, Banking, Housing
Related: spy, dia, ^n225, ewj, eem, gle, gld

Are we on the verge of total economic collapse?

Don't laugh.  The french firm Societe Generale thinks so.

The brokerage firm has put the fear of God in clients recently by predicting that developed economies and markets are going to collapse under a monster debt load and that gold is going to soar to $6,000 an ounce.

Fortunately, not everyone feels that way.  

Many on Wall Street, in fact, have suddenly gotten quite bullish after missing a lot of the extraordinary 65% rally we've had since the lows of March.  Hopefully, these folks--the "V-shaped recovery" crowd--are right, and the bad news of the last couple of years will soon be a distant memory.

Aaron and I are skeptical, though.  The aftermath of debt-fueled financial crises like the one we went through usually lasts for many years, if not decades.  Japan has been struggling to right its ship since its own bubble burst in 1990, and the country still isn't growing strongly again.  (Japan's stock market, meanwhile, trades at a fifth of its 1989 high).

With luck, we won't end up like Japan--or the SocGen scenario.  We doubt, however, that the economy and markets will just shrug off the last year as if nothing serious happened.

If you're curious, you can see highlights of the SocGen report here:

SocGen: Prepare Yourself For the Worst Case Scenario

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