This Collapse Will Be Very Frightening—Because Once the Credit Stops, The Economy Stops
BullMarketThinking.com
By Tekoa Da Silva
February 16, 2013

I had the opportunity once again to connect with Longwave Analytics President, Ian Gordon, for a fascinating conversation. Ian has developed the “Longwave Theory” of perceiving markets and predicting future events, and based on his work, the world is moving into ever more dangerous economic territory.

During the interview Ian spoke about historical paper money collapses, why we’re nowhere hear hitting bottom globally, and why there will be a massive run to gold as the banking systems collapse.

Starting out with, Ian explained that the worst is dead ahead, for the reason that, “We really haven’t been allowed to experience the washing out of debt…total debt in the United States is now $60 trillion…we’re going to see that debt washout occurring as [things] really start to get bad. Also we’re going to see stock prices emulate the bear market between 1929-1932…the worst is definitely in front of us and not behind us.“

“We’re all in the same boat [globally],” he further explained, “and it’s going to be very difficult for any country to be able to survive, because there’s no country that’s going to be able to be resistant to the debt crisis that’s now a worldwide debt crisis.”

In discussing the history of France’s assignat crisis, Ian said, “When the printing presses were opened up much as they are being done right now, when the system ultimately collapsed, France returned to precious metals as money, because they knew that the paper money—nobody wanted it, and nobody trusted it. Farmers refused to bring produce into Paris and be paid in paper, so the whole system collapsed. I think we’re on the verge of such a collapse, and that collapse is going to be very frightening, because paper money being debt money, it means the whole credit system collapses along side the collapse of paper money. So once credit stops, the economy basically stops. It just doesn’t function, because the economy runs on credit…So it is going to be a very, very frightening process.”

Ian also commented on his expectations for a major gold shortage, saying, “I think that could happen this year, we’ve just seen that Germany wants to repatriate all the gold she has in Paris, she wants to bring back 20% of the gold that she has with the NY Fed, but she’s only asking for that to happen over the next 7 years. When one wonders why Germany is allowing that to happen—the reason apparently for the government to take back it’s gold was that they feared a currency crisis…If other countries also come and ask for their gold to be returned, and the Fed says, ‘I’m sorry we can’t get it to you right now’, that really will sort of call everything into question and that will start the panic.”

As a final comment towards the coming capital flight into gold and gold mining stocks, Ian said, “Going back to history, we know that after 1929, particularly as the banking system in the US collapsed, the run to gold was massive—effectively, ALL capital flowed to gold. A lot of capital was flowing to the exploration companies…There was a massive move to the gold mining industry as the debt bubble burst and collapsed the banking system.”