On January 15, the Euro lost 30% against the Swiss Franc
and the Dollar lost 25% in a few seconds. All stops in the market will have
been triggered at the maximum loss level. At the end of the day the decline
settled at around 15% for both the Euro and the Dollar.
Many hedge funds will have made considerable losses and
also several banks. One Forex broker at least went under and several will
have suffered irreparable losses.
Although this event was not major enough to shake the
world it will be another nail in the coffin of the vulnerable financial
system, as well as a sign of the exponential rise we will see in volatility
and market failures during 2015.
Secular downturn
The triggers for major changes in history always seem
insignificant at the time. This was the case with the shot in Sarajevo or the
fall of the Creditanstalt in Austria. The shot in 1914 was the catalyst for
WW1 and the failure of the Austrian bank in 1931 the beginning of the 1930s
depression.
It is hard to say today what in history will be seen as
the catalyst for the worldwide downturn that is now about to start not just
in the economy but also politically, geopolitically and socially. And this
will not just be a temporary cyclical downturn but a secular downturn that
could last for decades or even longer.
The creation of the Fed in the US in 1913 was the start
of the final bubble phase that would end with a collapse that is likely to
make the world a lot less of a happy place to live. Economic and financial
collapses will be next and so will a breakdown of social structures with
civil wars. We are also entering a critical period for wars with war cycles
indicating major conflicts starting in the next few years.
Economic serfdom for the masses
So we are now ending a century when bankers and the elite have created
massive power and wealth for themselves but only economic serfdom for the
masses with a colossal debt burden.
The private bankers who formed the Fed in 1913 knew what they were doing.
They took control of the US financial system and eventually of the world
financial system. They followed the “wise” words of their mentor Mayer Amshel
Rotschild: “Give me control of a nation’s money and I care not who make its
laws.”
Unreal world
We now live in an unreal world based on unreal money to the extent of $300
trillion of debt and printed money plus over one quadrillion dollars of
worthless derivatives. This has created unreal asset values but also
unreal people whose primary desire is to dominate the world. But we
know that unreal things do not last, whether it is a £200 million flat in
London or a bonus for a Wall Street banker of $100 million.
Real wealth cannot be created by printing worthless pieces of paper. If
that was the case we could all stop working and just print money. For the
originators of a Ponzi scheme it works if you stand nearest the source or the
printing press. This is why the bankers and the elite have amassed unreal
amounts of paper wealth in the last few decades. During the next few years or
decade we will see a wealth destruction and asset implosion of proportions
which today are difficult to imagine.
Unlimited money printing
But central bankers and governments will not give up easily. Before the
implosion of the financial system, we will see massive money printing
worldwide. This is the only tool that central banks have left to postpone the
inevitable. But the art of pushing on a string is now becoming impossible to
perform for the central banks. QE is likely to start next week by the ECB.
Later on the Fed will follow assisted by the IMF. And the bank of Japan will
continue to do what they can until the Japanese economy sinks into the
Pacific. The Chinese financial bubble will also create major problems in
their banking and shadow banking system that could lead to not just economic
unrest but also social unrest. The result of all this money printing will be
collapsing currencies worldwide. Within the next few years most currencies
will finish the move that started in 1914 and eventually reach their
intrinsic value of ZERO. Historically a collapsing currency has always led to
hyperinflation and this is what we will see in many major economies in the
next few years including the USA, EU, UK, Japan etc.
The currency wars are now in full force and the Swiss National Bank (SNB)
yesterday confirmed their incompetence by capitulating. This was of course
inevitable. During the Swiss Gold Initiative I predicted this. In a TV debate
I also told the former SNB President Jean-Pierre Roth that this was the
likely outcome but in the pompous manner of a central banker he just
ridiculed our side as incompetent apprentices. As expected, Roth didn’t get
the last laugh. On Dec 1, 2014 I wrote a fictitious memo from Thomas Jordan
(I called him Jomas Thordan) to the SNB board in which the board was informed
that the policy of the SNB would lead to massive losses and the collapse of
the EURCHF peg. This is quite and entertaining and also totally accurate
memo. Here is the link: http://goldswitzerland.com/internal-memo-from...-national-bank/
We don’t know the final losses of the SNB on their forex positions of CHF
500 billion but it is likely to be at least CHF 80 billion which is more than
10% of Swiss GDP and a major disaster for the country. Add to that a Swiss
banking system which is 7 times GDP, which is in line with Cyprus before
their banks collapsed. This is likely to necessitate more money printing relatively
in Switzerland than any major economy. Thus the current strength in the Franc
is ephemeral and Switzerland will soon be a major contender in the race to
the bottom of the currencies.
So will relinquishing the EurChf peg be seen as the catalyst for the
world’s coming financial collapse, or will it be the fall of the oil price or
Russia or Japan or China or the Middle East or war in Ukraine or a major bank
failing or the one quadrillion derivatives exploding or …………? Well, the
list is endless and it is impossible to predict what the catalyst will be.
What is certain is that there are enough catalysts to cause the coming
crisis. Many people will use similar words to the former SNB President and
call us “incompetent apprentices” or just prophets of doom and gloom. Sadly,
and I mean sadly, we apprentices or doomsayers will have the last laugh
because we are now facing a very different world.
It will of course be impossible to protect yourself against all these
calamities. But what is certain is that the price of physical gold (held
outside the banking system) will reflect the destruction of wealth and paper
money that is coming and will act as financial insurance. Gold and silver
have now finished the correction since 2011 and have started the move to new highs.
Eventually the metals will reach levels which are unthinkable today.
My interview with King World News of Jan 15 sheds some additional light on
the matters covered above.
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Egon von Greyerz
