If you thought that Addison Wiggin and Bill Bonner, authors of "Empire of Debt: The Rise of an Epic Financial Crisis" ("FastForward," June 2006) were prophets of economic doom, then meet Robert Chapman. The 70-year-old former stockbroker, trader in precious metals and author of numerous books and articles on the economy believes world markets are on the brink of unprecedented disaster. Currently editor of the International Forecaster, a Web-based newsletter, Chapman blames the proliferation of hedge funds, derivatives and other such speculative instruments for saddling banks and investors with far more debt than they could ever pay back, in the event of a major disruptive event such as a natural disaster, currency crisis, or terrorist attack. (A derivative is essentially a wager between parties concerning the future level of just about any kind of economic index, such as currency and interest rates. Businesses use them to mitigate risks inherent in their operations.) As long ago as 1996, Chapman was warning that the combined face value of outstanding derivatives was at least $82.6tr, twice the world's gross domestic product at the time. As of December 2005, the notional amount (underlying value) of over-the-counter derivatives had reached nearly $285tr, according to the Bank for International Settlements. Chapman believes that a collapse under the weight of this crushing debt load is inevitable, promising economic crisis the world over. The only safe place for investors, he says, will be gold and silver. Although he has been predicting that result for more than a decade, the fact that it hasn't yet occurred is no indication that he's wrong, Chapman believes. It merely shows that government, thanks to the underlying strength of the U.S. economy, has been able to stave off disaster through the creation of more credit, by setting artificially low interest rates and printing more money. But such measures are not sustainable, says Chapman. So when will this financial meltdown take place? "Three to four years down the road, if nothing changes in Washington."

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