Egon von Greyerz
Egon von Greyerz (EvG): Founder and Managing Partner of Matterhorn Asset Management AG & GoldSwitzerland – EvG forecasted the current economic problems over 12 years ago. In 2002 (gold $300/ oz.) MAM recommended to its investors to put 50% of their investment assets into physical gold stored outside the banking system
All Bank Deposits At Risk
Any money “lent” to a bank by a depositor in any country will be at risk. In my view investors should not keep major amounts in any bank. That money will either be bailed-in, lost in a bank failure or inflated away by massive money printing. Remember also that the exchange controls that are now being introduced in many emerging countries will soon reach the US and Europe. At that point investors will not be able to transfer any money out of the country or there will be a tax on foreign transfers like the 20% tax in Azerbaijan.
A Triple Threat To The United StatesBut the real dilemma in the US is of course the subprime problems that are now developing in student loans as well as in car loans and fracking loans. Add these three sectors together and we are already looking at several hundred billions of dollars of potential defaults. Before this credit cycle is over that will rise to trillions of dollars of real defaults, including derivatives in these markets.
I would have thought that by the time of the next one or two Fed meetings, there will be some extraneous event that will give the Fed the excuse not to increase rates but instead actually lower them. And that will soon be followed by full-blown money printing on a global scale. Central banks have no other tools left in their armory to avoid a total collapse of the financial system. The dilemma they have is of course that you don’t solve a $230 trillion debt problem and a $1.5 quadrillion derivatives bubble by producing more of the same that caused the problem in the first place. Instead, the inevitable outcome of their attempted rescue will be currencies going to zero and inflation to infinity.
Talking about debt, Eric, are you aware that US federal debt has already increased by $800 billion in the first four months of the current fiscal year? If you annualized that, the US would have a $2.5 trillion budget deficit in 2015-16. But that will of course not be the result this year and even if it was, the figures would be manipulated. Eventually budget deficits will go exponential as the government printing presses start glowing.
The IMF, World Bank And Global Crisis The IMF and World Bank are now rushing to Azerbaijan to discuss a possible loan package of $4 billion. The problem is that these two organizations have a lot of countries in crisis that they need to visit in the next few months, like Brazil, Ecuador, Venezuela, Nigeria and Saudi Arabia just to mention a few. But where the IMF and the World Bank will get their money from nobody asks. I suppose they can just increase world debt by a few hundred billion dollars. In any case that will be a drop in the ocean when the real global crisis starts.
Venezuela is of course another basket case with inflation expected to hit over 700% this year and with their benchmark bond at 27%.
Governments Now Preparing For Total CollapseGovernments are now preparing for total collapse, Eric, this is why investors must take action now to transfer funds to another country before exchange controls and before the dollar or the euro is totally inflated away. As I showed in my KWN article that I quoted above, physical gold is the best way to insure against the total currency destruction that we will see in coming years. After a 12-year bull market, gold has now corrected for 4 1⁄2 years. It looks like the correction has now finished and interestingly it has lasted for a typical Fibonacci 38% correction of the bull market.
Before the coming hyperinflationary phase is over, gold will reach levels that none of us can imagine. But what that level is becomes totally irrelevant. What is extremely important is that physical gold stored outside the banking system will act as insurance and protection against the total wealth destruction we will see in coming years.”