Jordan Eliseo, chief economist with ABC Bullion, has gone on record as saying that global economies are in even worse shape today than they were at the onset of the Global Financial Crisis.

He points to record budget deficits being run up by governments around the world, red-lining levels of public debt, flat-lining interest rates, and the ‘creation’ of currency without any basis on real wealth.

His comments echo those of HSBC economist Stephen King, who likened the global economy to an ocean liner without lifeboats.

King warned governments around the world that all traditional recession-fighting ammunition was currently gone. Combine this with slower than expected recovery from the GFC and the consequences of another financial crash would be devastating.

Mr Eliseo believes current global financial markets are “totally divorced from economic reality.” The debt-fuelled consumption-driven wealth that led to the GFC has not yet been fully paid for. Because of this the day of true reckoning is yet to come.

“It (the GFC) was merely the beginning of the end,” writes Eliseo in his new book ‘Dire straits: Money for Nothing – Debt for Free’. And the resulting hangover has barely begun.”

He believes the property sector has the same ‘too big to fail’ mentality as the banks prior to the GFC. Plus the rising cost of commercial and residential properties is retarding private sector job creation – integral to any long-term recovery.

This is because the money tied up in mortgages is not flowing through to the real economy. Interest rate cuts by the Reserve Bank of Australia have only thrown fuel on the housing fire and resolutely failed to kick-start business investment.

“All they’ll (the RBA) be doing [if they cut rates further] is following the rest of the world down a dead-end path.”

Elisio’s advice is to limit your debt as much as possible; start by paying down (or off) your mortgage. Spread whatever assets you may have left over as evenly as possible amongst shares, bonds, cash and gold.

The big concern for Eliseo is superannuation.

“As it’s invested now, I would not be surprised to see those funds lose at least half of their real value in the coming years. That’s because all the funds follow exactly the same models with very few tweaks.”

If at all possible Eliseo recommends managing yor own super fund. The savings from fees alone, he says, make it an attractive alternative.

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