A Publication of Delray Publishing
How to Profit from the
Great Oil Shock Ahead
By Charles Del Valle
Delray Publishing
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Editor..........................................James Dale Davidson
Managing Editor.........................Charles Del Valle
Strategic Investment
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The Next Big Crash
And Six Ways to Prepare for It Now
The suburbs used to be a part of the great American dream.
But unfortunately, they’re slowly turning into the new American nightmare.
Over the last decade, the poverty rate in the suburbs has shot up 53% faster than in the cities, which
saw an increase of 26%.
This is a first in America. It’s also a sign of things to come.
Some may tell you that the increase in suburban poverty had to do with the crashing housing market… or ever growing income inequality. After all, housing prices are down 35% from the peak we saw
in 2006. And income inequality in America is reaching highs we’ve never seen before.
But those two consequences are mere symptoms of what is tearing the American Middle class apart.
The real problem with America is how our country is structured. This great country of ours was built
for cheap oil.
But oil is no longer cheap. And this is changing the whole dynamic of the way Americans live.
In this special report, not only will we explore how expensive oil is changing America for the worse,
but we’ll also give you our predictions for how this will shape the America to come.
Unfortunately, the future of America won’t look like the boom years we enjoyed in the 50s and 60s.
It’s going to be a time where either you become wealthy, or you become poor, with very little middleground.
Our goal is to prepare you for the changing times, so that you’re not caught off guard. In order to do
that, we’re going to outline a 12-part strategy that will help you keep your finances and family safe
before the great crash, and actually prosper in the changed times that will come after it.
But before we outline this plan, you need to understand…
How Oil Backs the Dollar Instead of Gold
Throughout most of American history, the U.S. dollar was always backed by either silver or gold.
But it wasn’t just America that had a gold-backed currency. Thanks to the Bretton Woods agreement in
1944, most countries in the world adopted the dollar as their de facto reserve currency.
Since the dollar was backed by gold, that meant their respective currencies were also backed by the precious metal. But in the 1970s, this relationship between the dollar and gold completely changed.
Why did the U.S. drop the gold standard? Because of the Vietnam War.
Before the war, each U.S. dollar was backed by 55 cents of gold. But as war spending ramped up, so
did the U.S. printing press. By 1970, each dollar was backed by only 22 cents of gold.
3
This triggered a loss of confidence in the U.S. dollar and the government’s ability to pay off its debts.
As confidence dwindled, countries began to demand that their dollar holdings be converted back
into gold.
To put this in perspective, the world essentially started believing that 22 cents of gold was worth more
than 1 U.S. dollar.
So in the first six months of 1971, over $22 billion worth of assets left the U.S. The first country
to completely abandon the Bretton Woods system was West Germany. The Germans didn’t want to
devalue their currency to prop up the dollar. Doing so would have increased the rate of inflation there,
which was simply unacceptable.
So West Germany abandoned the Bretton Woods system, plunging the dollar by 7.5% against the
Deutsche Mark. And within three months, West Germany’s economy began to improve.
As the Europeans saw the West German economy improve, they too decided to start demanding gold
for their dollars.
In July of 1971, Switzerland demanded $50 million be switched into gold. France demanded $191
million worth of gold.
And every time a country would trade in its dollars for gold, the gold reserves of the U.S. would deplete further.
Congress was worried. So in August of 1971 they decided to drop the gold standard.
Instead of gold, the dollar would be backed by the “full faith and promise of the U.S. government.”
Not long after, Switzerland abandoned the Bretton Woods agreement. And by 1976, it no longer ruled
monetary policy across the globe.
Everyone decided to float their currencies instead of pegging them to the dollar. And the dollar was
becoming more and more devalued because of it.
After all, the end of Bretton Woods meant that other countries didn’t have to use the dollar as a reserve
currency. They only needed dollars to the extent that it would allow them to engage in trade with the
United States.
Most currencies would have crumbled under this kind of pressure. But the U.S. dollar didn’t.
Why not?
The key answer is oil.
A Secret Oil Deal Temporarily Saves the Dollar
In 1974, the U.S. Treasury established a secret agreement with the Saudi Arabian Monetary Agency
(SAMA). This deal was finalized in February of the following year.
In essence, this agreement asked Saudi Arabia to invest a good portion of its oil money to finance the
U.S. budget deficit.
4
Saudi Arabia obliged because, at the time, the U.S. was its largest oil buyer. But this agreement had a
second, more important effect.
Every country in the world uses oil.
But OPEC — the world’s largest oil cartel — was pricing its oil in dollars. So if any other country
wanted to purchase the oil needed to fuel their society, they needed dollars to buy that crude with.
And the only way they could get those dollars was by borrowing money from the United States.
Since Saudi Arabia was investing much of its oil wealth back into the U.S., this gave American banks
the capital needed to leverage and lend money to other countries so they could buy oil.
This ensured that there would always be a stable demand for U.S. dollars, effectively putting a bottom
in for how far the price of a dollar could fall.
In essence, the dollar switched from being backed by gold, to being backed by oil. And it kept the dollar as the world’s primary reserve currency.
But there was also a far more sinister plan at play here…
In 1974, Henry Kissinger issued a security memorandum which pointed out that population growth
across the globe could lead to national security issues in the U.S.
Kissinger realized that as emerging nations grew and modernized, they would demand more oil. As
demand grew, the expense for a barrel of oil would grow. And since America was built for cheap oil,
expensive oil would devastate the country.
This realization was one of the major catalysts that led to the SAMA accord with Saudi Arabia a year
later.
The U.S. realized that if they controlled oil… they could control the world.
So as dollars were lent out to third world countries so they could purchase oil, the U.S. gained more
and more power.
By the late 70s, the U.S. decided to turn up the pain and slow these countries down. And it did that by
jacking up interest rates in excess of 15%.
All the emerging nations that had borrowed dollars would now need to make these exorbitant interest
payments in order to keep the dollars necessary to buy oil. And this limited their growth.
By limiting growth in the emerging markets, the demand for oil could be controlled and cheap prices
were insured for U.S. domestic demand. And the U.S. benefited from this arrangement immensely.
Foreign demand for U.S. dollars allowed the country to enjoy low interest rates from the 1980s until
today. It also allowed the U.S. to not only acquire low oil prices, but essentially control the world’s
demand for oil through its interest rate mechanism.
With cheap oil, the last thing the government thought about was energy efficiency. So bigger, faster gas
guzzling cars were produced. Houses were built far away from the cities. And urban sprawl became a
staple of the American economy.
5
In essence, the country was built on cheap oil. And by consequence, it needed that cheap oil to keep
things moving along nicely.
But the good times wouldn’t last forever.
First of all, having the world’s reserve currency can be a boon, unless politicians squander away the opportunity of it. And that’s exactly what happened.
From 1970 to today, the Federal debt grew from less than 40% of gross annual product (GDP) to
over 100% today.
U.S. Federal Debt as a Percentage of GDP
90%
70%
50%
30%
source: www.usgovernmentspending.com
1970
1980
1990
2000
10%
2010
Our national debt was allowed to grow like this because interest rates in America stayed low. And
again, interest rates stayed low because foreign countries demanded dollars for trade and oil.
It didn’t matter if dollar bonds were paying 5% or 10%, if a foreign country wanted to grow and buy
oil it needed dollars to do so.
Politicians seized on this opportunity by plunging the nation further and further into debt.
Which leads us to the current problem today.
As more dollars flood into the global economy, the value of our currency goes down. Since 1970, the
dollar has lost 80% of its purchasing power. But since oil is priced in dollars, it also means that the
price of oil has to move higher to compensate for the drop in purchasing power of the buck.
So if you live in the suburbs and drive an hour into the city, your transportation costs have just gone
up at least 80%.
This is just one part of the problem.
The second part comes from arrogance of the U.S. leadership.
How Emerging Economies Are Bankrupting America
It was foolish to think that the U.S. could control the emerging markets forever. But in the 1970s, it
seemed possible.
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For decades, the only countries that grew their demand for oil were the ones that were already developed.
Europe, Japan, the U.S. and others.
And as you’ve just found out, that’s exactly the way the U.S. wanted it.
But over the last 20 years, the global landscape has considerably changed.
Thanks to the spread of free trade agreements, countries that were once written off are now growing by
leaps and bounds.
Complicating matters further, these emerging nations — like China, India and Brazil — hold 40% of
the world’s population.
Is it any wonder why Henry Kissinger wanted to try and limit how fast these countries grew?
Free trade essentially turned Henry Kissinger’s plans upside down.
As these emerging economies grow wealthier, their citizens are starting to splurge on the luxuries
Americans have had for well over 50 years now.
Consider that China has now become the world’s largest market for car sales. And even though it is the
biggest today, by 2020 China could account for half of total car sales in the world.
That’s 40 million cars a year — in China alone.
Most of these new cars will need gas to run. And oil producers are already struggling with increasing
global production. Consider that global oil production peaked in 2005.
Global Average Annual Crude Oil Production
75
73
71
69
67
2001
2004
2006
2008
2010
And even though production may increase in the years ahead, those increases will be slow. And the oil
that will be produced is much more expensive.
No longer are there vast oil fields where we can grab cheap $10 oil, like in Saudi Arabia.
All that’s left is the difficult-to-refine oil, found in shale deposits around the world… or miles under
the ocean floor.
This oil will cost considerably more to produce and refine — some estimates range from $50 a barrel
to over $100 a barrel.
7
And this cost increase of oil doesn’t even account for the increased demand that the world will have for
oil in the next decade.
By 2035, the emerging markets may help to increase global oil demand anywhere between 48% to
60%.
That’s a lot of demand. And there simply isn’t enough oil supply out there to meet it.
This will virtually guarantee that the oil prices we see today will seem extremely cheap in the next 10
years. And as a consequence, it will tear away at the fabric of the U.S. economy.
In fact, it’s already happening. High oil prices are a big reason why the poverty rate has grown in the
suburbs much faster than within the cities.
If you lose your job in a city, you can take public transit (or even walk) to a new job. But in the suburbs, the rising cost of oil could make driving to work in the cities simply unaffordable.
So as people lose their jobs in the suburbs, the cash crunch also limits their ability to work at all.
It’s not like an unemployed person could just pick up and move to a city (where it often costs two to
three times more to live than the suburbs). And someone who is unemployed will have a hard time getting the credit needed to buy a more fuel efficient car.
So suburbanites suffer. And as they suffer, the prices of homes in the suburbs plummet. And because
these homes are on banks’ balance sheets around the country, American banks suffer too.
Not to mention, rising unemployment translates into more government spending for unemployment
benefits and less revenue coming in from taxes.
So this puts the government in a big crunch too. And the only solution Washington will use to solve
this problem is to print up more dollars, which in turn makes oil prices even more expensive and the
American affordability problem even worse.
But the ultimate consequence of this will be…
The U.S. Dollar’s Fall from Grace
Remember how the Bretton Woods agreement collapsed because the U.S. kept printing money? We
believe that something similar will happen again.
The first big chink in the dollar’s reserve status happened after the mortgage crisis in 2007-2008.
Consider that in 2008 French President Nicolas Sarkozy said: “We must rethink the financial system
from scratch, as at Bretton Woods.”
That same year, British Prime Minister Gordon Brown said: “We must have a new Bretton Woods,
building a new international financial architecture for the years ahead.”
Yet since 2008, little has been done to establish a new financial monetary system.
That’s because, right now, there is no simple alternative that could replace the dollar as the world’s
reserve currency.
8
The dollar capital market is the largest and most liquid in the world. Not only that, but the relative
stability of the U.S. since the Great Depression has established the country as a “safe haven” for investors to turn to when the markets get panicky.
That’s the reason why the dollar increased more than 22% in value from 2008 to 2009.
But the longer the world holds on to the dollar reserve standard, the more at risk it becomes of falling
into another big market panic, because demand for dollars gives Washington a license to not only print
money, but increase the national debt as well.
This is forming the largest financial bubble we have ever seen. And it will end in tears, with the end of
the dollar as the world’s reserve standard.
The average American’s life will change forever. And most people simply aren’t prepared for what’s to
come.
But you will be…
The Six Steps You Must Take BEFORE the Great Crash
In order to protect ourselves from the coming crash, we should look to the past as a guide.
STEP 1: Get Out of Risky Long-Term Positions
During the crash of 2007-2009, investors dumped stocks en masse.
The stocks that were dumped the most were by far the riskiest.
That means if the company…
• Had too much debt…
• Couldn’t generate a consistent profit…
• Depended too much on Middle-Class consumer spending…
• Was a stock listed in the emerging markets…
It got sold off. Some even went bankrupt.
We suggest you get ahead of the curve and get out of stocks that you think might be risky.
The biggest catastrophes will come from emerging market stocks. These typically grow the fastest when
the global economy is doing well, but during a crash, they also fall the hardest.
Why? Because of the China connection.
China is growing so rapidly that it is essentially feeding cash into most of the other emerging nations.
Brazil’s natural resources, for example, are sold in mass quantities to China.
So when China slows down, it will demand fewer resources from Brazil. Not only will this hurt Brazil,
but it will hurt any country that relies on China as a primary engine of growth (like Australia, Canada,
and most Asian nations).
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This will in turn slow the global economy down, and the value of most emerging market stocks will collapse.
Right now, we have a pretty big position in Brazilian stocks.
These plays have done tremendously well for us (some are up over 140%). But you can be sure
that as soon as we suspect the crash is on its way, we’re going to get out of all of our open Brazilian stock positions.
Once you receive that alert, you should get out of them too.
STEP 2: Bet Against China with a Short Position on the
iShares Trust FTSE China 25 Index ETF (FXI)
Want to know why the globe saw any kind of recovery after the mortgage crisis hit? One word: China.
China, being a communist country, wants to have tight control over its people. And for good reason. The country has more than one billion citizens. If the government doesn’t remain in control, the
people will revolt and overrun the government.
To prevent that, the country spent an unprecedented amount of cash to stimulate its economy. In
doing so, it started demanding natural resources from other countries, which helped to buffer their
economy.
This started a virtuous cycle that eventually led to growth across the globe. But this growth is extremely fragile.
Some economists point to the massive savings rate in China and say that China doesn’t have a debt
problem because it has plenty of savings.
But those savings are simply a mirage.
Consider that in China, there really is no social safety net. If you break your leg, you have to dip into
your savings to pay the doctor to fix it up.
If you lose your job, you have to dip into your savings to scrape by until you find another one.
And when you finally retire in China, you have to rely on your savings to live.
It’s no wonder there is such a high savings rate in China — people need the cash as a form of insurance.
What this does is prevent them from spending this cash into the economy. So domestic consumption
stays low. And the only thing propelling the Chinese economy is foreign investment.
But the fact is that the savings rate in China is also at risk because of a massive property bubble in the
country’s largest cities.
In 2011, Chinese citizens rioted in front of a building developer’s office because the developer had to
lower prices of its new homes by up to 30%.
The people who had already purchased a home at the expensive prices were ticked off. Now, if they
wanted to flip their home, they would lose 30% of its value.
But the big problem is these houses are being purchased thanks to the high savings rate in China.
10
So a drop in home values means that the Chinese homeowners just saw their savings account value
drop by 30%.
Black market lenders in China are also fueling this housing bubble. They generally charge between
30%-150% interest every year.
If this seems extreme, you are absolutely correct. But the growth of the housing market in China allowed
its citizens to profitably borrow money at these high rates, buy a house, and then flip it a year later.
This is a phenomenon that is happening across all of China’s biggest cities. But if home prices drop,
this scheme falls apart.
And prices are already falling.
In 100 cities in China, home prices fell for the second straight month. This collapse in home values is
only just starting. And it will result in the same kind of economic slowdown that we saw in the U.S.
That’s why shorting the Chinese market is such a good idea. You can short the Chinese stock market
easily with the iShares Trust FTSE China 25 Index ETF.
Action to take: Buy the iShares Trust FTSE China 25 Index ETF (FXI) up to $38.73 a share.
Yes, shorting China will protect you. But it’s not the only thing you should do to stay safe in the coming crash.
STEP 3: Short the Euro with the Market Vectors
Double-Short Euro ETF (DRR)
Already, analysts aren’t even sure whether the euro can survive as is. In a recession, currency problems
come to the forefront and can cause even more uncertainty.
So why is the euro so susceptible to a global slowdown? Mainly, because the euro is a currency union
that lacks a fiscal union alongside it.
In other words, there are a bunch of countries that have agreed to use the euro, but there are no financial rules in place to unite these countries into a cohesive unit.
There have been absolutely no currency unions that have survived alone. In order for a currency to
work, it needs fiscal integration between the countries that decide to use it.
Already — during a global expansion — Europe is the first country to experience a recession. And this
is happening mainly because all the euro members are not integrated.
This lack of integration allowed countries like Spain, Italy and Greece to spend beyond their means.
This would never happen in a fiscal union like the United States. Our member states are forced to balance their budgets every year. So the debt problems that plague our states are minimal compared to the
ones that are destroying the Eurozone right now.
Will the euro survive this debt nightmare? That’s up for considerable debate. But the one thing we
know for sure is that if the EU members can’t agree on deeper integration, the euro is doomed.
And even if the EU can somehow agree to unite, they will have to print more euros to inflate away the
significant debt load they have.
11
This will batter the price of the euro against virtually all other currencies out there. And it’s the reason
why we recommend you short the currency before the big crash happens.
Rather than shorting in the Forex market, you can easily sell-short the euro in your stock account by
buying the Market Vectors Double-Short Euro ETF.
This ETF tracks double the inverse performance of the euro. So if the euro falls by 10%, this ETF
should rise by 20% (not counting fees).
Action to take: Buy the Market Vectors Double-Short Euro ETF (DRR) up to $49 a share.
Interestingly enough, a plummeting euro and a crashing market sets us up for…
STEP 4: Buy Gold via the Gold ETF (GLD)
As the uncertainty in the euro and China start to spread, investors will start snatching up gold as a way
to hedge themselves from the problems they see coming.
Already, the euro crisis has helped propelled gold to record highs in 2011. But as the crisis gets worse,
more people will flock to gold as a form of “currency insurance.”
If the euro were to fail entirely, gold could rise to well over $2,500 an ounce.
You can take advantage of this rise by buying a simple gold ETF through your stock account.
Action to take: Buy the SPDR Gold Trust ETF (GLD) up to $170 a share.
But gold won’t be the only asset to rise as the problems in Europe and China manifest themselves.
STEP 5: Buy a January 2013 Call Option on the
Dollar Index ETF (UUP)
As we mentioned before, during the last crash, investors dumped stocks and flocked into safe haven
currencies like the dollar.
But a collapse in the value of euro will intensify any rally that the dollar experiences.
Instead of a 22% climb, we could see the dollar rally 30% or more. By buying a long-term in-themoney call option on the dollar ETF (UUP), you can leverage this increase by 3-4 times.
So instead of realizing a 30% gain, you could see a 120% gain.
Action to take: Buy a January 2013 $20 Strike Call Option on UUP (UUP130119C00020000).
This leads us to the final step to take before the Great Crash…
STEP 6: Shift Your Money into Income Producing Stocks
Expecting high-flying stocks to fly higher during a severe economic downturn is not only foolish, it’s
dangerous.
Instead, you should allocate more of your money into the kind of steady, dividend-producing companies that have survived and thrived for decades.
12
One company you should buy is tobacco producer Altria (MO) up to $31 a share. The company has
generously paid a dividend to shareholders ever since its inception. As of this writing, it currently pays
a dividend of nearly 7%.
Over the years, you can use this income to buy even more shares. These shares are essentially “free”
since you used dividend income to buy them.
More stocks to get into today are California Municipal Bond Funds like the Van Kampen CA Muni Income
Fund (VCV) up to $15 a share and the PIMCO CA Muni Income II Fund (PCK) up to $11 a share.
When most people think of California, they think of its budget problems. But what they don’t realize
is that the state has a constitutional requirement that places municipal debt holders second in line to
receive tax revenue (after education).
This makes the income you’d receive from these well-diversified funds extremely safe. And right now,
they are paying nearly 7% a year and enjoying sweet capital gains.
Finally, if you have at least $50,000, you could purchase Brazilian Government Bonds (CUSIP:
105756BJ8) which mature in January of 2016. But don’t pay more than $122 per bond.
We say $50,000 because that’s the minimum amount a foreign investor (anyone living outside of Brazil) needs in order to buy them.
Any firm specializing in Foreign Bonds can get them. And believe us, they are worth getting.
Today, these bonds have a yield of 12.5%. And there’s a huge potential for currency appreciation, too.
Meaning, even larger income payouts.
Over the years, Brazil has transformed from a basket-case, hyper-inflated economy, into one of the
most diverse and fastest growing economies in the world.
Unlike China, Brazil has healthy domestic demand to keep things going should the “China miracle”
prove less miraculous then people imagine.
And the interest rates these bonds will pay you are far and above anything else you can find in the
developed world.
Since 2009, you would have actually made over 80% on your money thanks to the capital appreciation
of the Brazilian currency, plus its healthy dividend.
That’s tough to ignore. And because the 2014 World Cup and 2016 Olympics are coming to Brazil,
the government will do whatever it takes to keep the stellar economic growth going.
The last thing the country wants is to be embarrassed as the world comes to its doorsteps. It is going to
heavily invest in infrastructure projects to modernize the country, and create jobs at the same time.
During the Crash…
If you’ve taken the six steps I’ve outlined before the coming crash hits, then you should be well prepared to prosper.
But you should also know what this crash could look like, so that you are not spooked when it comes.
13
Now, it would be impossible for us to reveal the exact circumstances that will cause the next big market
crash. The fact is that it could come from anywhere. But we suspect that debt-levels will play a pivotal
role in tearing the global financial system apart.
Right now, the biggest risk comes from a collapse in the euro financial system. And what could happen
will look awfully similar to what already happened in the U.S. during our debt crisis.
In essence, global banking regulations dictate how much collateral a bank must have on its balance
sheet at any given time. This collateral is then held against all of the loans the bank has provided to the
capital markets.
For example, if Bank A has $10 million in capital, it might be allowed to provide loans for up to $100
million. As long as Bank A meets these capital requirements, it can continue with its current leverage.
But there was an important omission in these global bank requirements — known as Basel II.
A bank didn’t have to hold any collateral at all if the capital it held came from AAA-rated debt.
So if Bank A had $10 million in AAA-rated debt, it could essentially leverage that money as much as it
wanted to.
This was exactly the situation that undid the U.S. banking system. Mortgage-related debt was rated at
AAA. This allowed banks to leverage their balance sheets as much as they wanted to.
So when mortgage prices started collapsing and banks started realizing losses on their mortgage-related
assets, they quickly discovered that they didn’t have enough capital to cover those losses.
This will lead to the massive financial upheaval that we witnessed in the states.
European banks have the same kind of problem. Except, these banks weren’t exposed to mortgagebacked debt. Instead, they are exposed to sovereign-government debt of the other EU countries.
And now that sovereign-debt is dropping in price, the banks are finding out that they don’t have
enough capital to cover their losses.
Up until now, the sovereign failures have been enough to completely freeze the European financial
system. But there is reason to believe that we are seeing today is just the beginning.
Recently, Greek bondholders were forced to accept a 50% trim in the value of their Greek denominated debt. This, in turn, forced European banks to raise enough capital to offset those losses.
But Greece is actually the smallest problem the EU has to worry about. This country has a debt load of
around 120% of GDP. But Greece’s GDP is small —only $300 billion a year.
Spain and Italy, two countries with similar debt-problems, have debt loads that are about 10 times
higher than that of Greece.
If the EU is struggling to contain the debt-crisis in Greece, there is no doubt that it would utterly fail
to contain the EU’s debt problem if it were to spread to Italy and Spain.
Since these countries have so much more debt, the exposure that European banks have to them is also
much higher. Should these countries default, the capital shortfall these banks would experience would
be enough to completely bankrupt the EU financial system.
14
Currently, the EU is trying to deal with its massive debt overhand by instituting “austerity” measures.
In other words, countries with big budget deficits are being forced to cut government spending and
raise taxes to try and cover the shortfall.
But this creates another problem — recession.
As people lose their jobs, tax receipts go down and government benefit spending increases. This can
oftentimes offset any savings the governments hoped to make by implementing austerity measures.
So the governments have to come back to the table and make more spending cuts and tax increases,
which only amplifies the recession.
Sometimes, the only way to to cut debt down to respectable levels is by defaulting. But the EU is
hesitant to let its member-nations default because it would create a massive banking epidemic.
What this means is that Europe could stay in recession for years, until it can sort out the debt-problems plaguing it.
In the meantime, Europe is actually China’s largest trading partner. If Europe is in recession, it will
have less money to spend on China’s exports. So the recession which started in Europe, will spread to
China.
This in turn lowers Chinese demand for the commodities and goods it has imported from the rest of
the world.
A global GDP slowdown — or even a contraction — is then inevitable. And once investors see
this outcome as a true inevitability, they will flee the capital markets and the Great Crash will
begin.
Where will investors go? The U.S. dollar, which is the global safe haven currency. But this flight to dollars will have a big consequence for the U.S.
Demand for dollars will in essence keep interest rates low in America. And since the country will likely
face a nasty recession as the global economy contracts, it will also see pressing “spending needs” to try
and kick-start growth once again.
2011 Budget deficits in the U.S., which were already about 10% of GDP, will go even higher in future
years.
Total debt-to-GDP levels in the U.S. could quickly climb past 150%.
And at some point or another, the world will look at the way the U.S. is accruing debt and wonder
“Can the U.S. ever pay all of its debt back?”
Once this question is asked in earnest, among the leaders of all the other nations, we believe that will
be when a new global financial accord will come to fruition.
The world will conclude the U.S. dollar should no longer be the reserve currency, and that, to
protect the global economy from major shocks in the future, another currency standard must be
agreed upon.
What will this new reserve currency look like? We have no idea.
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There is some speculation that the world could move to a basket of currencies and hold that as a type
of reserve. Gold could certainly make up a small portion of this basket.
But the end goal will be to rely less on the U.S. — and its disastrous currency policies — and diversify
globally.
Once this is fully agreed upon by the world’s nations, we believe that the Great Crash will be near its
end. And it will be time for you to implement the next phase in our plan…
The New Global Recovery Will Offer Many More Opportunities
The six steps we have outlined here give you a way to begin taking advantage of the coming crash. But
over the next few years, with every issue of Strategic Investment, we will keep you up to date on not
only the problems facing the globe… but ways in which you can prosper.
What major economic crises typically do is move money from one part of the economy into another.
The bigger the financial upheavals, the bigger the losses. And while some people may give up hope,
there is always a light at the end of the tunnel.
After decades of following the financial markets, if there’s one thing we’ve learned it is this: As losses
grow, so too do opportunities. Because all of that money will go somewhere.
It is our mission to show you exactly where that money will go so that you can take full advantage of
what’s to come.
Take care and stay safe,
GOC.STI.PD.05.24.12
Charles Del Valle
Managing Editor, Strategic Investment
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