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Debt Collapse is in the news today with the default of Puerto Rico on it’s debt. That follows other government debt crises like the Greek debt Crisis. This audio is the third part in our crisis series that was originally posted in a video you can find here at www.preciousmetalsinvesting.com You can still find that video on the site but many of our viewers wanted a way to get precious metals investing tips on the go. Let me know what you think.
In this audio interview Paul Mladjenovic, author of Stock Investing for DummiesStock Investing For Dummies Talks about corporate, government, and personal debt crises. As Paul says if there is a debt collapse and the borrower does not pay back what is owed the entity like a government still survives it the country just doesn’t disappear. What happens is the lender has to write off the debts and there are consequences. Many of those government bonds that are being written off are being held in retirement accounts. So of course that affects the yield on retirement funds that are paying millions of people. Or those debts are being held by banks and as in the case of Greece they have a buy-in which means they take money from their depositors accounts. Or again as in Greece the government imposes austerity measures which affects the like of millions of their citizens.
It always seems that the banks, hedge fund managers, stock brokers that made these risky bets that failed don’t pay. It is always the citizens that pay. Governments don’t produce any money – they spend other people’s money. They may make it appear that the debt’t are being paid through various “stimulus” methods such as the QE programs where trillions of dollars of new money are created out of thin air by simply making some changes in the digital digits on some computers. But the tremendous inflation of the money supply means that the value of each individual dollar is decreased. So some lenders are paid back – but they are paid back in dollars that are only worth a fraction of what they once were worth. Since 1903 the value of a dollar, in terms of real buying power, has lost 97% of its value.
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