A full-scale collapse of the euro, China grinding to a crunching halt and the US plunging over the fiscal cliff are, we are told, genuine possibilities in a world faced by greater political risk than many investors can remember in their lifetime. 

The latest sign that the world is about to swirl down the financial plughole comes from the bond markets.

With negative yields on government certificates, investors are now willing to pay for the privilege of lending money to the likes of Germany, Switzerland, Denmark, Holland, Finland and France, just to get their capital into a perceived safe haven. 

"Such yields do not paint a particularly optimistic picture for the future, as low government bond yields are generally associated with a poor economic outlook and low inflationary expectations," said Signature’s Andrew Morris. 

"In the case of the eurozone, the money flowing into the stronger countries is also being driven by fear."

"For those investors living in the peripheral eurozone countries such as Greece, buying the risk of a small loss on German debt is much preferred to the risk of the potentially substantial loss of purchasing power, should the country leave the single currency and bring back the drachma." 

There have been numerous currency crises in the 20th century, with the hyperinflation of the mark in Weimar Germany in the 1920s, the Latin American debt crisis of the 1980s, and the 1998 Russian default among the most high profile.

While the collapse of the euro may seem attractive to UK residents looking for a cheap holiday, it would be disastrous for financial markets. 

Aside from British exporters struggling to sell expensive goods to the stricken eurozone periphery, an Italian and Spanish exit would see the collapse of systemically important financial institutions. 

Worse still, FE Alpha Manager Peter Walls, who heads up the Unicorn Mastertrust, worries that the crisis in the eurozone is distracting everyone from the real problem in the US.

Washington is already expected to reach the $16.4trn cap on its debt before the end of the year but the expiration of Bush-era tax cuts and $1.2trn spending reductions could push the US into recession at best and, at its worst, bring about a full US default.

"In such calamitous circumstances, the accepted rule book for assessing risk would be thrown out of the window," said Walls.

"The vast majority of asset classes would fall significantly in value. Liquidity in capital markets would evaporate, corporate bonds and property markets would re-price accordingly and equity markets would suffer a serious setback." 

"With the exception of physical assets, value would have been irretrievably destroyed in the asset classes that have traditionally been defined as offering the lowest risk."

"Inflation would take its toll on cash and some might then argue that capitalism itself should be consigned to the history books." 

Gold bulls, such as Angelos Damaskos, chief executive of Sector Investment Managers, argue that in this environment there is only one asset worth holding. 

"The US dollar index, based on a broad basket of international currencies, has recently reached a two-year high," he said. 

"Given gold’s historical inverse relationship to the US dollar, the latter’s recent relative strength is likely to have held gold’s price back." 

"In a less US-centric world, the significance of US real rates may be different. Chinese and Indian economic progress, for example, is likely to become much more important."

"The troubles of the eurozone and potential risks of instability are also anticipated to support gold as a hedge against asset devaluation and potential inflation." 

However, in a worst-case scenario where there will be no global system in which to trade, it may be more sensible for people to stockpile some hard assets in their garage that they can swap for useful items. 

In Weimar Germany, ordinary people quickly recognised that a flight from cash was the best option. There are tales of thieves emptying piles of bank notes from unattended wheelbarrows to make a faster getaway.

However, Walls explains that even in a post financial-apocalypse, a structure of trading equities will quickly emerge – particularly in industries where useful hard assets are being produced such as building materials, energy and even cigarettes and alcohol. 

"Trade and commerce are innate human characteristics which require a formal structure to succeed," he said.

"Key to this process is equity, the very asset class that is naturally viewed as higher risk but also has an ability to survive, which I am sure pre-dates documented history."

While few economic forecasters expect the economy to go into full-scale meltdown, it appears that if it does, it won’t be long before a new economy establishes itself.