BlockBeats reported on July 27 that senior macroeconomist and Goldmoney research head Alasdair Macleod warned the valuation bubble in the U.S. stock market may already be larger than it was on the eve of the 1929 Great Depression.
He said financial markets are facing the risk of an “ultimate total collapse.”
Treasury market strain could hit equity valuations
Macleod said supply-demand imbalances in the U.S. Treasury market, reduced allocation from overseas buyers, and rising U.S. debt pressure could keep Treasury yields climbing and eventually hit U.S. equity valuations.
In his view, if market confidence reverses, the S&P 500 could face a value drawdown of more than 90%.
$10 trillion to $11 trillion in pressure over the next 12 months
He also said the size of U.S. debt continues to rise, and the country may face about $10 trillion to $11 trillion in financing and refinancing pressure over the next 12 months.
As buyers of U.S. Treasuries decline, Macleod said the Federal Reserve may be forced to stabilize markets by expanding its balance sheet and printing money, which would further weaken the purchasing power of fiat currency.
Gold and silver seen as potential safe havens
Macleod argued that modern financial assets fundamentally rely on the credit system, and that stocks, bank deposits, and U.S. dollar cash all carry some degree of counterparty risk.
By contrast, he said gold and silver, as physical assets that do not depend on government credit, could become safe-haven choices in an environment of extreme financial risk.