Chris Wood: Gold to $3,500, etc

A few folks have sent this, so here you are, Chris Wood from the Japan Forum making the case for immediate U.S. bank nationalization to forestall a crisis worse than Japan’s lost decade:

According to Wood, not only will gold more than triple in value by 2010 (”it’s the only form of money or credit not contaminated by the credit system” – and the fact it’s still money is that central banks still own a lot of it), the global paper currency system will steadily deteriorate, eastern and central Europe will face a full-scale currency collapse – putting huge pressure on western Europe – and the US will be dealing with a deflationary crisis far worse than that which derailed Japan in the 1990s. The only realistic course for the US is radical action to nationalise its most stricken banks and create one big “bad bank” to take on their toxic assets, he warned. Anything short of that will bring about more economic chaos and drag on other economies.

Monday’s reports about the proposed semi-nationalisation of Citigroup, with the US government considering a plan to take as much as 40 per cent of the group, represents “continued ad hockery” that would merely worsen the malaise and prolong the life of what would effectively become a zombie bank, Wood said.

To those who warn the US financial system would collapse if such radical measures were announced, Wood says “nonsense”. The real problem up to now has been inconsistency of the government’s responses – letting Lehman Brothers collapse while saving others. Of course, while bank stocks would “go to zero” under such steps, full nationalisation of troubled banks and a comprehensive restructure – regardless of who and what it wipes out – would ultimately revive equity markets and avoid a “Japan situation”, he added.

More here from FT Alphaville.