As the world is standing on the precipice of a total breakdown, both
economically and geopolitically, an obvious question is: “Where is the money
coming from” to save the world from perdition. The same question was asked to
Maharishi Mahesh Yogi in the 1970s when he was starting a global spiritual
project. Maharishi was the founder of Transcendental Meditation and known as
the Guru of groups like the Beatles and Beach Boys. When asked “Where is the
money coming from”, he replied “from wherever it is now.”
PAPER MONEY HAS ZERO VALUE
That principle would work well in a system of sound money. Money would
flow to sound investments and causes. But the financial system has
not been based on sound money for a long time. Instead we have false money
– money which is fabricated by central banks and commercial banks. This money
has zero value and is backed by nothing, zilch, nada! So governments and
individuals have spent money that doesn’t exist. This is why the world is
sitting on a debt mountain including derivatives of around $2.5 Quadrillion.
The world is now facing the risk of a total breakdown of the world economy
and the financial system as I outlined in my article last
week. The article covers the reasons for the monumental change the world
will soon experience.
WHERE IS THE MONEY COMING FROM
As banks collapse, governments default, companies go bankrupt and
individuals become destitute, “Where is the money coming from”
that will save the world? There are only two possible sources:
- A miraculous improvement in the world economy
whereby most countries would produce surpluses to the extent of $100s of
trillions in the next few years and the debt would be repaid. Fat chance
that this will happen. Before that we would see elephants fly too.
For years the world has had to print and borrow more money to stand
still. We have now reached the point when false money creates a negative
real return. And it should be self- evident that printed money can never
create wealth but sadly this is understood by few.
- The only other solution is to borrow and print
more money in order to repay existing debt. This is what most
Keynesians will recommend. What a wonderful scheme. You borrow
more money in order to solve a debt problem. Why don’t we all
stop working and just print money. Sounds like a great system. The
problem is that the world has reached the point of no return and the
current system ain’t working.
Thus there is no acceptable solution.
THE FRAUD WILL SOON BE REVEALED
As the financial system implodes, there will initially be unlimited money
printing by central banks, but this time it will have no effect. The world
will finally realise that creating wealth by putting ink on pieces of
paper, or pressing a button to fabricate trillions of dollars or euros is a
massive fraud. This fraud has been going on for most of the last 100
years but ordinary people will soon learn the hard way how governments have
ruined their lives and the world economy.
The current fragile state of the world and the dire consequences of the
coming breakdown would never be printed in a newspaper, nor discussed on
television. Ordinary people, indoctrinated by governments and the media are
as bullish today as they were in 1929 before the crash or the crashes of
1973, 1987, 2000 or 2007. Nobody understands that the world is facing
insurmountable problems that can no longer be repaired by corrupt hocus pocus
wizardry. Virtually nobody will prepare for the imminent collapse.
This is because neither the so-called experts, nor ordinary people can see or
understand the risks. Then there is also the belief that governments will
save the world once more by flooding it with printed money.
So where is the money coming from for:
- Food – There is likely to be major food
shortages in the world. Food prices will hyperinflate and many people
will not get sufficient food, leading to famine and malnourishment.
- The unemployed – In the US for example,
real unemployment is today not 4% but 23%. That could easily grow to 50%
or more. Same in most Western countries.
- Social security – Governments will be
insolvent and have no money for social security, unemployment or other
benefits.
- Pensions – Most people in the world
don’t have a pension today that will provide adequately for their old
age. And for the ones who do, most existing pension schemes are severely
underfunded. Also, pension funds are mainly invested in stocks, bonds
and real estate. These three bubble markets will collapse and pension
funds will become insolvent. This will be one of the many disaster areas
for the world.
- Medical care – The level of government
supported medical care will deteriorate dramatically and many hospitals
will close. There will be private care for the ones who can afford it.
Payment could be in the form of barter, like food or a bottle of whiskey
and gold of course.
- Government – Both Central and Local
government will run out of money and many departments will close down.
Most of that will be beneficial as bureaucracy and waste disappears. A
lot of services that socialist governments have provided will cease to
exist.
- Law and order – With hungry and
dissatisfied citizens there will be civil unrest. There will not be
enough paid policemen so governments will use the army and introduce
compulsory conscription. If there is not enough money to pay the army,
they will be paid like in Zimbabwe with food coupons.
- Education – There will be major funding
problems for schooling and further education leading to closure of
schools.
These are just some of the areas which will be affected. Still, the
magnitude of the problems is so enormous that it will change the world for a
very long time.
WORLD POPULATION WILL DECLINE
The world has had many crises of various degrees in the past, be it the
Black Death in the mid 1300s when an estimated 75 to 200 million people died
in Europe and Asia. Around 50% of Europe’s population is estimated to have perished.
In WWI around 20 million people died and in WWII around 60-80 million. So major
catastrophes are part of history and the coming one could also see a major
reduction in world population be it from economic crisis, famine, disease,
social unrest or war.
From
the mid 1800s to today world population has grown from 1 billion to 7.6
billion. If we look at the graph it is a straight spike up in the last 170
years. From a technical perspective, spikes up are always corrected by a
spike down. We can’t tell when exactly that spike down will come but it is
likely to be connected to the coming collapse of the financial system. A
reduction in global population of 3-4 billion in the next few decades is a
real possibility.
POLARITY FLIP
Another risk which will materialise at some point is the change in
polarity of the North and South Poles. This normally happens every 200,000 to
300,000 years but the last time was 780,000 years ago. The earth’s magnetic
field has weakened 15% in the last 200 years and that is a strong indication
that a flip is due. Recent satellite data from the European Space
Agency also indicates that a flip is imminent. The problem with a flip is
that it would make some areas of the world inhabitable by knocking out the
power grids. People would also die from much higher radiation.
IMMINENT GEOPOLITICAL DISASTER?
In addition to the insoluble economic and financial problems in the world,
the geopolitical situation is now so serious that we might not need
to worry about the economy. The West led by the US seems determined
to push the Russian bear into a corner. A threatened Russian bear is a very
dangerous animal. Let us hope that the West comes to its senses. Otherwise we
might have a war with very, very severe consequences for the world.
RISK IS UNPRECEDENTED
All this might sound very pessimistic and it would of course be the
biggest disaster that the world has experienced. I am certainly not a
pessimist by nature. All I am doing is analysing the facts and the risks and
these clearly point to a major change in the world in coming years. I
sincerely hope my predictions will not come to pass. Because if they do,
there could be suffering on a scale that humanity has never encountered
before.
MARKETS ARE IGNORING CURRENT RISKS
The combined risks of economic collapse and a world war is not at all
reflected in markets. The investment world is much too lethargic and doesn’t
realise how quickly fragile asset markets will crash.
Jonathan Ruffer, one of the UK’s top fund managers, who correctly
predicted the recent share sell off, has said that it was only a taster and
that he is confident an “earthquake” will hit markets “within months”. (The
Telegraph April 12, 2018)
So that was a lot of “bad news” in one newsletter. But it is no use
worrying about things we can’t do anything about. Nobody can fix the broken
world economy. It is much too late for that. And nobody can stop the polarity
flip. Also, it will be impossible to protect yourself against a world war.
But if we “only” have an economic collapse, physical precious metals is the
best insurance.
But what we can do is to take some steps in our little micro worlds. For
the fortunate ones who have some savings, there is still time to protect
against the unprecedented economic risks.
The trends that I have been forecasting for a while in my newsletters are
still intact:
- Stocks have topped
- Dollar will crash together with other currencies
- Interest rates will go a lot higher longer term
- Gold and silver stocks are an incredible bargain
- Physical gold and silver are ready to move a lot
higher
Gold and silver are now breaking out and on their way to new
highs.
So get out of stocks, dollars and debt. Buy precious metals mining
stocks. But remember that they are held within the financial system
(if you don’t go for direct registration). Thus you are subject to custodial
and counterparty risk.
The best form of wealth preservation is physical gold and silver
stored outside the banking system. There is no better way to protect your
wealth against the risks I have outlined above.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management AG
GoldSwitzerland.com
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