The
Sword of Damocles is hanging over the world economy, held only by a single
hair of a horse’s tail. With such visible danger, the problem could have been
fixed easily by either using a gold chain or even removing the sword
altogether.
But the elite, and central bankers have had other plans. Instead of
replacing the hair with a solid metal chain, the sword is today hanging by a
very fragile thread that can break at any time.
The global financial system was on the verge of collapse a decade ago.
Central banks around the world, led by the Fed injected around $25 trillion
in loans and guarantees. Banks like Citigroup, Morgan Stanley, Merrill Lynch
and Bank of America got trillions. (see table below).
Today, more than ten years since the Great Financial Crisis started, the
debt problem has become uncontrollable. Global debt has doubled since 2006
and together with derivatives and unfunded liabilities risk has grown
exponentially. So $100s of trillions increase in debt and liabilities
has not bought the world enduring stability but instead weakened the
foundations on which the world economy rests to an extent that the next
rescue attempt will totally fail.
NEW WORLD ORDER GOVERNMENT
It is therefore inevitable that the Sword of Damocles will soon drop and
cause irreparable damage to the world. We can speculate if central bankers
are totally unaware of the risks or if they have a hidden agenda. There are
theories that the elite will orchestrate a collapse of the dollar and of the
financial system which will cause global panic. The purpose would be
to hand over political and economic power to a centralised authority with the
BIS (Bank of International Settlement) and the IMF playing a central role.
Social unrest and migration is all part of the plan. The ultimate goal would
be a NWO (New World Order) government and currency. Microchipping everyone
and eliminating private property would be also be part of the plan.
Whether this is all conspiracy theory or if a clandestine plan of this
nature actually exists, time will tell. For most people it all seems very
farfetched and unlikely. What seems more certain is that when the current
economic super bubble bursts there will be dramatic changes in the world
economy and in the political system. If governments and central banks
lose control over both the financial system and the political system then the
vacuum created could be extremely dangerous. If law and order cannot be
maintained, then the whole fabric of society will disintegrate. That
would also involve the breakup of national borders as well as mass migration
on a much bigger scale than we have seen so far.
A DIFFERENT WORLD
Whatever the exact course of events, the world will experience major
changes starting in the next few years. By mid-century our children and
grandchildren will live in a very different world to the one that the West
has experienced since WWII. Humanity has always adapted throughout history
and most certainly will this time too. But there is likely to be a lot of
suffering and hardship for a major part of the global population. The
explosion in the world population from 1 billion to 7.5 billion since 1850 is
likely to reverse. This will lead to a reduction of maybe 2-3 billion people
due to war, civil unrest disease, famine and lack of nutrition.
All forecasts are by definition wrong so only future
historians will get the facts right. What is going to happen in the shorter
term is easier to forecast with greater accuracy. When the Sword of Damocles
falls within the next 1-3 years, the damage inflicted to the financial system
will be of such magnitude that central banks desperately will print $100s of
trillions or quadrillions to save the system. But this time the
printed money will have no effect. Instead it will destroy the value of money
and create the biggest global hyperinflationary period in history.
GOLD REVEALS GLOBAL CURRENCY COLLAPSE
Major trends normally start in the periphery before they move into the
centre. There is no better measure of hyperinflation than gold. Because gold
reveals the mismanagement of the economy and the debasement of the currency
that has been rampant in most countries in the last 100 years. If we just take
the dollar, it has declined 97% against gold since 1970 and 80% since 1999.
HYPERINFLATION IN VENEZUELA
But that decline is nothing compared to the countries that are already encountering
hyperinflation.
By the end of this year, inflation in Venezuela is expected to reach 1
million percent!!
At that rate, Venezuela is now in the Weimar stratosphere. In
January this year the IMF estimated that Venezuelan inflation would be 2,400%
in 2018. Only the IMF can make such an incredible mistake in forecasting
2,400% when the actual will be 1 MILLION percent. What this also
shows is that when hyperinflation takes hold it increases stratospherically.
A cup of coffee cost 2,300 Bolivar a year ago and is now 2 million Bolivar.
From August they will take five zeros off the currency. We will see how long
it will be before hyperinflation adds them back again.
As Margret Thatcher said, “the problem with socialism is that you
eventually run out of other people’s money. And that is where
Venezuela is. An oil rich and previously prosperous economy turns to
socialism and has now totally run out of money”.
And the effect on the economy is totally disastrous. GDP is down over 40%
in the last 3 years. Just in 2018, GDP is expected to be down 18%.
The economic hardship is so severe that many people have no money and very
little food. Poverty was 87% in 2017 and 4 million Venezuelans have left the
country since 2016.
But when it comes to seeing the effects of printing worthless pieces of
paper and calling it money, there is no better measuring stick than gold.
Because gold reveals deceitful governments attempts at hiding the
truth from the people. A Venezuelan who had bought 6 oz of gold for 900
Bolivars ($1,800) in 1998 would today be a Bolivar billionaire. And
this is at the official exchange rate. The black market rate is many times
higher. As the chart shows, the exponential move up of gold in Bolivars and
the spike in hyperinflation started in 2018.
Although Venezuela is the only country currently in the Weimar league,
many are on their way. Just look at Argentina and Turkey below with 12,000%
and 10,000% inflation rate, measured in gold.
The chart of gold in Venezuelan Bolivars above is very typical for a
hyperinflationary pattern. It starts at a relatively slow pace and then
totally explodes like in Venezuela in 2018. And thus inflation this year will
be 1 million percent instead of the expected 2,400%.
WHEN DEBT BUBBLES BURST THERE WILL BE GLOBAL HYPERINFLATION
With debt bubbles in the US, Europe, China, Japan and Emerging Markets,
the world is likely to drown in printed money in the next 2-5 years. At
that point gold could easily be 175 million Dollars, Euros or Yen. That level
is of course meaningless in real terms. But what is very meaningful is that
gold will at least maintain purchasing power and more importantly protect
investors form the total wealth destruction that the poor Venezuelans are now
experiencing.
Just like most Venezuelans wish they had bought a bit of gold some time
ago, so will most people in the West and the East in the next few years.
It is now critical to own some insurance and not to be one of the ones who
says “I wish I would have……”
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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