This is it! The autumn of 2018 will be momentous in the
world economy, markets and politics.
We are now seeing the Last Hurrah for stocks, bonds, the dollar and most
asset markets.
The world economy has been living on borrowed time since the 2006-9
crisis. The financial system should have collapsed at that time. But the
massive life support that central banks orchestrated managed to keep the
dying patient alive for another decade. Lowering interest rates to zero or
negative and printing enough money to double global debt seem to have solved
the problem. But rather than saving the world from an economic collapse, the
growth of debt and asset bubbles has created a system with exponentially
higher risk.
Problems start in the periphery – VAT Countries – Venezuela, Argentina,
Turkey
So here we are on the “Eve of Destruction” when the fake measures that
governments and central banks have taken have not saved the world, as the
Keynesians believe, but instead created an even bigger bubble that is now
about to burst. Curing a sick world by the same means that created
the disease in the first place was always bound to fail.
Global problems of the magnitude that the world will experience in coming
years normally start in the periphery. We are seeing multiple examples of
local wild fires that will soon spread to the core of the world economy.
Take for example the VAT countries. Not Value Added Tax, but Venezuela,
Argentina, and Turkey. Deficits, debts and
currency collapse are the normal warning signals and these are certainly
present at varying degrees in the VAT countries. As always, the best single
indicator which reveals these problems is of course gold. As the chart below
shows, gold in Venezuelan Bolivars is going up exponentially. Since
May 2018, gold has gone up 23,000x or 2.3 million percent.
Argentina goes from one crisis to the next and gold is up 14,500%
this century. Only since December 2017 gold is up 74% in Pesos.
Finally in Turkey gold is up 26% since May this year and 3,500%
since 2000.
No wonder governments around the world hate gold. Because gold reveals
their deceitful actions in destroying the economy and the currency.
There is blatant manipulation in so many areas including fake money, fake
paper gold, fake news, fake politics and fake governments.
The VAT countries are just one example but a very important one. Because
they are giving us the signal that a global crisis has started.
Most emerging market countries are in the same situation. In the next few
months, emerging markets will drop one after the next.
Europe is bankrupt
The situation is the same in the West too. Europe is totally bankrupt. The
EU elite is desperately trying to keep a collection of disparate nations
together by coercion combined with forcing debt onto any nation who threatens
to exit the EU or Euro. Greece and Italy should have left the EU
long ago, introduced their own devalued currency and renege on the debt to
the EU. But they were stopped by Brussels. Now they will fall with the rest
of the EU. The UK people voted to leave the EU but Brussels are using any
means to stop that happening.
An artificial collection of nations with very different people, cultures,
history, ambitions, financial systems, growth rates etc was always doomed to
fail. To have this hotchpotch of countries governed by an unelected
and unaccountable elite in Brussels makes it even worse.
The Swiss system with direct democracy and people power together with
distribution of power to the Cantons (local States) is a much more efficient
system.
US debt has doubled overnight from $21 trillion to $42 trillion
The world could possibly cope with the major problems in Emerging Markets
and Europe if the world’s biggest economy, the US, was sound. But sadly that
is far from the case. The biggest economy is also the sickest. Federal debt has
doubled every 8 years which puts the US on target for a $40 trillion debt by
2025. I am well aware that this is substantially above the official forecasts
but why pay any attention to these since they have always been wrong. And the
Federal debt seems to be $42 trillion rather than $21 trillion if the $21
trillion “lost” dollars are accurate based on Catherine Austin-Fitts
findings. More likely is that problems in the economy combined with a
financial crisis will lead to unlimited money printing and surging interest
rates. So a US Federal debt in 2025 of $100 trillion or in the quadrillions
is not impossible, especially when the derivative bubble blows up.
A collapsing infrastructure
Having personally crossed the collapsed Genoa bridge three days before the
accident, one is reminded of the major underinvestment in infrastructure
worldwide (and also how ephemeral life is). Italy will now spend EUR 80
billion, that they don’t have, to improve the country’s infrastructure.
Driving around Italy you realise that this will be a drop in the ocean. Most
countries have neglected infrastructure investments for a very long time. In
USA for example, it is estimated by the American Association of Civil
Engineers that $5 trillion needs to be invested by 2025 to fix roads,
bridges, dams and other infrastructure. That is another $5 trillion that will
be printed out of nowhere.
The last Hurrah
Since the global crisis has already started, we might see a collapse of
markets, bubble assets and currencies at any time. Before that, it is
possible that the final minor leg up or the Last Hurrah will take place. That
would involve a final move up in some stock markets and a temporarily
stronger dollar.
The long term trend of the dollar is clear. It will go into
oblivion faster than anyone can imagine.
We must remember that measured in real terms, which is gold, the dollar is
down over 98% since the Fed was created in 1913 and down 80% since 1999. So
the dollar is already on its way to perdition but the next phase will happen
faster than anyone can imagine.
“Time to get rid of the US dollar” said the Russian Deputy Foreign
Minister recently. He added “Thank god this is happening …. We will
speed up this work”.
Russia, China, Turkey, Iran and many more countries are determined to
trade in their own currencies as well as in gold. This will precipitate the
fall of the dollar. But the major reason why the dollar will soon conclude
its 100 year move to ZERO is the dire state of the US economy as mentioned
above.
As we end a long and totally engineered bull market in the world
economy, we will be entering the Dark Years that I wrote about a few years
ago. Hard to imagine that the powers that be have managed to fool
the world for a decade. But this next time, their panic actions, using the
same medicine of massive money printing and lower interest rates, won’t work.
The world will recognise that printed money is not even worth the paper it
is written on, or that electronic entries called money can disappear as
quickly as they are created.
The clueless and the sage East
As the West has overtly and covertly reduced its gold holdings, the East
is continuing to add as much as they can at these bargain prices. Most
central banks have either sold or leased a major part of their gold to the
market. This gold is then bought by China, India or Russia through the
bullion banks. These Eastern countries obviously take physical delivery
rather than leaving the gold in London or New York. When you own gold, you
must have direct control.
Western Central bank gold covertly sold or leased ends up in the East
The chart below shows how central banks and bullion banks are losing their
gold. The Swiss refiners, produce around 70% of the gold bars in the world.
As the chart shows, they import their gold from a number of different
sources. Surprisingly to many, in July 2018, by far the biggest purchase was
from the UK with 67 tonnes. The UK is not a gold producing country. Instead
these are 400oz bars from Western central banks that have been bought by
China, India or Russia. The bars are sent to the Swiss refines to be broken
down to 1kg bars and then shipped on to the Eastern buyers. The Swiss import
statistics often show that the UK is a major exporter. This is very clear
evidence that Central Banks are continuously reducing their holdings.
Thus, it is likely that the real holdings of USA (8k Tonnes) Germany (3.3k
T) or the IMF (2.8k T) are less than half to their declared holdings. And
whatever they have leased to the market, they will never get back. All they
have is an IOU for gold from a bullion bank. That IOU can never be honoured
since there will be no physical gold available. And if it was available, it
would be a price that is 10, 20 or 100 times the current price.
Comex and Bullion Banks to blow up
In the next phase of the gold and silver markets, the LBMA banks and Comex
will blow up and be unable to honour their commitments which are at least 500
times the available physical gold.
I have shown in previous articles that gold should be at least
$16,000 based on the 1980 high of $850, adjusted for inflation. But many
calculations show a much higher price, whether it is $87,000 or $174,000 that
Jim Sinclair and Bill Holter have calculated.
These prices might seem like fantasy, but what we must understand is that
when the fake and manipulated gold and silver paper markets blow up, there
will be no price or no gold or silver offered by the dealers since they don’t
have any physical metals to settle their commitments.
Regardless of what price gold and silver will reach, the current prices of
$1,200 and $14.80 are totally ridiculous.
Gold and silver = Life Insurance
This is the biggest secret in the world that virtually nobody understands.
Just like a Venezuelan would have saved his and his family’s life, so will
people who buy gold today in the West today. Still nobody is buying. And even
the ones who are aware are waiting to see if gold and silver will go lower.
Take my word for it, to wait for the precious metals to go lower
will be the most costly mistake that anyone can make. Because when prices
turn up, most people will miss the boat. And they will be totally without the
protection they so badly need.
Physical gold and silver at current prices is the cheapest life
insurance premium that anyone can ever pay. Remember, precious metals is not
an investment, it is the ultimate form of wealth preservation.
But this time gold and silver will not just be wealth
preservation, it could save your life, just as it would have done for the
poor Venezuelans.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 442 136 245
Matterhorn Asset Management’s global client base strategically stores an
important part of their wealth in Switzerland in physical gold and silver
outside the banking system. Matterhorn Asset Management is pleased to deliver
a unique and exceptional service to our highly esteemed wealth preservation
clientele in over 55 countries.
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