The more things change, the more they stay the same. The
financial world loves focusing on some future event that they think will
change everything. There is always some economic data, an important meeting
like G20, the Fed, the ECB or a speech by Yellen or some other central bank
head who hasn’t got a clue what is happening or what will happen. So now at
the end of August, markets have all been focusing on Yellen’s speech at
Jackson Hole Wyoming. Jackson Hole is of course a very befitting name since
what the Fed is starring into is a massive black hole into which major parts
of the financial system will disappear.
Central banks speak with a forked tongue
The Fed like all central banks is speaking with a forked
tongue. They have talked interest rates up since December 2015 and for a long
time the market has believed them. So this time again, Yellen obliged and
made the market believe that there will be one or two interest rate increases
in 2016. To me it has always been clear since last December that there is no
chance of further rate increases at this moment. But the Fed has a problem
with not losing face. That’s way Fisher, the vice-chairman of the Fed last
Sunday delivered an upbeat speech about the US economy saying that the Fed
was “close to meeting its targets” of full employment and price stability.
Obviously, when you base your assessments on false data and thus make false
statements, you can tell the markets anything. And this is what the Fed does
together with all other central banks. Anyone who studies the economic
figures critically knows that they bear no resemblance to reality. Real
unemployment in the US is not 5% but 23%. The difference is changing the
method of calculation since the 1980s and to assume that anyone who has
stopped looking for a job after 6 months never wants to work again. Isn’t it
strange that 95 million people capable of working are not working and that
the labour participation rate has gone from 66% to 62% since 2006! Is that
full employment when 95 million people, most of whom who need a job, can’t
get one?
Same with inflation. Most of the things that people spend money on every
year like food, insurance, health, education etc are up 5-20%. Electronic
products, clothing and cars are not up but most of these are bought once
every few years. So the Fed is definitely not looking at real inflation but a
manipulated figure that suits their purpose.
I thought it would be fun to look back at some of my previous comments on
these high profile meetings of global heads. These are meetings that market
participants look to with great anticipation but in reality no decisions are
ever taken.
Here is what I said in March 2009 during the great financial
crisis:
This week there will be a meeting between G20 leaders and central
bankers in London to save the world economy.Let us make it very clear – the
meeting is bound to fail. There is no chance that the
G20 leaders will reach an agreement that will save the world economy. Even
two world leaders can’t agree on how solve the biggest global financial
crisis that the world has ever encountered, never mind twenty. Each one
of twenty leaders has a different political agenda and they will all blame
each other, so there is no possibility whatsoever that the meeting will
result in more than the normal platitudes about cooperation to solve the crisis.
Both Merkel and Sarkozy have already rejected Gordon Brown’s proposed
stimulus package and that is before the meeting has even started.
But the main reason why the meeting will fail to reach a result is the worthless
derivatives of over $ 1 quadrillion and unlimited amounts of toxic debt which
will never be repaid with real money.
In September 2009, the Pittsburgh Summit announced G20 as the
premier forum for international economic cooperation. So from that time, the
G20 is in theory another “powerful” group of world leaders that discusses all
the catastrophic problems that the member countries afflict on the world
economy but achieves nothing in the form of solutions.
Yes, the world economy stabilised and stock markets did pick up after
2009. But this had nothing to do with real improvements but was merely due to
the fact that panicking central banks printed, guaranteed and lent at least
$25 trillion to temporarily stop the financial system from falling into the
black hole. In 2006 when the Great Financial Crisis started, global debt was
$140 trillion. Today ten years later, global debt is up a staggering 60% to
$230 trillion.
But as I repeatedly say, you cannot create wealth by printing worthless
pieces of paper and you cannot solve a problem by the same means that caused
it in the first place.
There is another G20 meeting in China this coming weekend. But we
shouldn’t hold our breath. The world leaders can’t even see that the world
economy is on the point of collapsing all around them. And if you can’t see
or recognise a problem, there is very little chance that it can ever be
solved. As I have stated many times, only Deus ex
Machina could solve this problem but that is a very unlikely outcome.
Unlimited debt and negative rates – The ultimate Ponzi scheme
So here we are in 2016 with most sovereign states being bankrupt with no
ability of ever redeeming their debts. But even worse, they
can’t even service their debts without negative interest rates. Talk
about a sick world. First bankrupt nations issue worthless debt that they
have no intention of repaying. And then, since they have no chance of paying
any interest on their debt, they demand that the borrowers pay them interest
instead for the pleasure of holding their worthless paper! This must be the
ultimate Ponzi scheme in financial history.
When this mega bubble of all bubbles collapses, there won’t just be the
wealthy experiencing a massive destruction of their wealth but the masses
will lose their jobs, social security and pensions. Sadly, the inevitable
consequence of this will be major global civil unrest.
Gold – the only money which will survive
Gold certainly will not be the only solution to the coming problems. But
just like in the last 5,000 years, gold will be the only currency which
survives the coming global catastrophe.
Looking back to what I wrote about gold in April 2009 when gold was $950,
this is what I said:
Back in 2002 we told investors to buy physical gold
for up to 50% of their liquid assets at $300. Since then gold is up between
220% and 280% depending on base currency.
Thus it was very clear to us back then what the effect of the disastrous
mismanagement of the world economy would be. But it is even clearer what will
happen next. We are now going into the phase of recognition. This is the
phase when the world at large is slowly waking up to the fact that printing
unlimited amounts of money will make many currencies – and in particular the
US dollar – worthless. We have repeatedly stated that
you cannot solve a problem by making it bigger – i.e. to print colossal amounts
of dollars, pounds etc. will only add fuel to the fire and exacerbate the
already insoluble credit/derivative bubble.
So we already told investors what to buy years ago. Now as we are
approaching the point of recognition when investors are starting to wake up
to the fact that they need to protect themselves. Gold is the only currency
and asset which will give protection against collapsing currencies and
assets. Within the next two months the investment world
will wake up to this fact and gold is going to exceed $ 1,000 and never look
back.
Right now is likely to be the last chance to buy gold under $ 1,000. We
expect gold to go up quickly in the next few months and never look back. So
today is probably the last chance to buy gold under $ 1,000 for many years
and maybe for ever. But remember that for wealth preservation purposes it
must be physical gold in your own possession and stored safely outside the
banking system.
Gold has resumed uptrend to new highs
Gold closed at $1,100 in December 2009 and then temporarily topped at
$1,900 in September 2011. Since then we have seen a very long correction that
ended in December 2015 at $1,050. But gold in most other currencies bottomed
in 2013. Gold in many currencies like Canadian and Australian dollars are back
near the 2011 high and in pounds and euros gold is around 10% form the peak
(all monthly closing rates). It is totally clear that the correction in gold
which has taken place in a manipulated paper gold market is now finished.
Just like I forecast in 2009 that it was the last chance to buy gold under
$1,000, I now believe that gold will soon resume its uptrend to new highs.
But investors must remember that gold is not bought for capital gains but
to preserve wealth in a world economy and financial system which is totally
rotten. Physical gold is insurance and also money when conventional paper
money becomes worthless due to unlimited printing.
Gold is for the wealthy as well as for the less wealthy
I regularly get emails from people who don’t have major assets to invest
and wonder what they can do to protect themselves. Wealth protection is all
relative. Many people can afford to spend say $40 per month or more to buy 1
gram (1/30 of an oz). If you do this every month for a few years you will
have built up a nice little nest egg as the gold price goes up many times
from here. Thus there is no excuse not to save in gold even for people with
less capital.
The risks in the financial system and world economy are now at an extreme
and it is most likely that one of several of these risks will turn into
serious problems for the world in the next few months.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management AG
matterhorn.gold
goldswitzerland.com
