I wanted to put up these interviews with Robert Prechter, founder of Elliott Wave International, and Marc Faber, author of the Gloom Boom & Doom Report, because they explain how two gloomy scenarios could play out with the financial system and U.S. debt if things turn for the worst, and what to own.
Robert Prechter, a deflationist, believes the stock market will fall 90% from here, dollar denominated credit will implode, and the U.S. will eventually default on its debt and unfunded liabilities by repudiation (refuse to pay its debt or honor contracts).
Marc Faber believes the U.S. will just print money via the Federal Reserve to pay off its debt with a depreciating dollar. Meaning the U.S. will default by inflation or possibly hyperinflation (see the Weimar Republic in 1923). Marc Faber also said he could see the U.S. government defaulting on a portion of its foreign held debt, which could lead to trade wars or actual wars (w/ China for example). But, in the end, Faber ultimately believes that the system will collapse if central banks continue to print money globally. (Prechter and Faber both believe that the hundreds of trillions (USD) of derivatives outstanding won't help backstop the system either. Related: Marc Faber Is Convinced The Derivatives Market Will Cease to Exist (Video).)
To hedge against their disaster scenarios, Prechter likes the U.S. dollar and Faber likes gold (and farmland and some equities). I think it's interesting that they both think investors should stay away from Treasury bonds. (Related: Robert Prechter Makes a Huge Call on Treasury Bonds (Video).) Peter Schiff couldn't believe that Prechter thought the U.S would stop printing money if a deflationary collapse ensued. I found the interviews on Youtube.
Robert Prechter interviewed on Schiff Radio in October 2012
Marc Faber interviewed on Schiff Radio in October 2012