The Oil Drum

US treasure bonds will be not a safe investment if China drop all its US Treasure bonds and if the countires that have petrodollars don't have power to buy these US TB. By the way, next year we problably will see an inverted yeld curve for the US Treasure Bonds, be warned that it is not a good thing.

The thing is that we will not see dollar deflation. The federal governemnt will continue to have a huge deficit while there are the tax cuts, so if no one buy US Treasure Bonds they will need print money. The consequence is that we can have a recession with inflation, not the better of worlds. while that, GM and Ford aren't at good health now and who know how recession and inflation will affect other US big companies. That can be disastrous to US economy (think Katrina hiting US economy ...)

Hmmmmm.... "slavering mutant hordes" coming to eat our brains can be better than what we will see when the Dollar Crunsh come.

I would say that short term treasuries should be safe for the forseeable future, but I certainly wouldn't bet on an insured bank account. IMO there's too high a risk of a run on the banking system during the kind of financial crisis I envisage, and insurance wouldn't be worth the paper it was written on under those circumstances. Remember what happened to bank accounts in Argentina during their financial meltdown?

The only reason I can think of for buying precious metals now would be as a hedge against that sort of collapse (in which case I'd choose silver, not gold), but that raises many other issues. What do you do with it? How do you trade it in if you need to at a later date (especially if you live in a rural area and are fuel constrained)? Would there be a confiscation order (as there was during the Great Depression)? If so that makes the first two questions even more pertinent.

Personally, I don't think there's much point for ordinary people (myself included) in owning precious metals. The money I could afford to spend has been sunk into a small farm with solar panels, generators and deep-cycle batteries instead (even though I expect the price of all those things to fall in the future - I had a learning curve to deal with and that takes time).

After all, you can't eat gold, and if you live on a farm you can't easily use it for anything you might need. I reckon providing for the necessities of your own existence at a practical level is a far better hedge against social upheaval caused by deflation than metals would be. As far as I'm concerned, a strategy of combining provision for the basic necessities with holding adequate liquidity makes the most sense.

Debt, by the way, is a no-no. Inflation eats away at savings and debts, but deflation increases both as the real rate of interest (the nominal rate minus a negative inflation rate) is potentially quite high even if the nominal rate is low. Today's low nominal interest rates are a trap.