June 28, 2014
August 30, 2012
Egon von Greyerz has issued a few warnings on this topic and again during an interview with King World News issues another warning to investors that their assets are not safe during the coming collapse. His points below make for common sense reading.
“I’m seeing how massive amounts of money are within the system, and people think they are safe, but they are not.” Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also warned, “This is the illusion that people are living under, and it’s very sad. That’s not going to be the case. The banks are going to close if there is a problem, and people are not going to get access to their assets.”
Here is what Greyerz had to say: “Right now the markets are in a waiting game. They are waiting for Bernanke’s Jackson Hole speech tomorrow. They are (also) waiting for the German court decision which is on the 12th of September. This is to decide if they are going to approve the ESM (European Stability Mechanism), which replaces the EFSF.”
“Now, the EFSF is running out of money, they’ve only got about $200 billion left. Spain and Italy, only, will need about $700 billion. We know for a fact that the eurozone and Southern countries are in desperate need of additional funds.
The US is (also) running a deficit of almost $1.5 trillion a year, plus they are increasing the unfunded liabilities by more than $10 trillion a year….
“So the US is running major deficits and money printing today. Will they announce official QE at Jackson Hole or not? It’s totally irrelevant. It’s going to make no difference whatsoever. The world economy will need massive amounts of money to survive. Whatever these guys say or decide in the next few weeks won’t make any difference. It (money printing) is going to come anyway.
Central banks are massively over leveraged.
These central banks are now leveraged to the hilt. The Bank of England is leveraged 100 times. So if they lose 1% (on their bets), they will lose everything. The Fed is leveraged 55 times. So a 2% loss, they’ve lost their capital. The ECB is leveraged 40 times.
So every central bank is massively exposed. On top of that, governments are borrowing massive amounts of money. So worldwide money is being created on a daily basis.”
100 years of creating debt and it will end in the system collapsing.
“What is interesting here is in the last 100 years we have created so much debt. For the first approximately 50 years of the last century, every additional $1 of debt in the US created $4.60 of (additional) GDP. In the last 10 years, every new dollar of debt has created 6 cents of GDP.
And for the last few years we are getting negative returns. It will still end in the same way, sadly, which is a collapse of the system. All of the assets that were financed by the credit bubble will collapse, in real terms, in the next few years. In real terms, that is against gold, they will collapse.
Note in the chart below from ZeroHedge, how the dollar has lost so much of its purchasing power over the last 100 years since the Fed took charge. In the previous 100 years it remained stable. The dotted line shows the periods when gold convertibility was suspended.
What is so remarkable about this chart is that the dollar’s purchasing power was still the same on the eve of the founding of the Fed as it was at the beginning of the 19th century. Clearly the decision to abandon the gold standard has hastened the collapse of the dollar’s value – at the point where the chart ends, 7 cents of the purchasing power of the gold-backed dollar of yore were left. Since then we have actually arrived at a paltry 4 cents.
So much for ‘stable prices’ under the fiat money regime – it has produced a 96% decline in the currency’s purchasing power over the past century, in contrast with the perfect preservation of purchasing power during the century preceding the founding of the Fed.
Gold may not protect you unless you have possession of it.
But even if you have gold you’ve got to worry about the counterparty risk. I was recently speaking to an American investment bank. They buy gold for their very high net worth clients, and they store it with major bullion banks. I asked (them), ‘Well, what about the counterparty risk?’ They responded, ‘There is no problem whatsoever because the gold is segregated, and creditors are totally protected.’
This is the illusion that people are living under, and it’s very sad. That’s not going to be the case. The banks are going to close if there is a problem, and people are not going to get access to their assets. We have seen the cases of Lehman, MF Global and Sentinel.
Sentinel was a company that went bust. There, like in MF Global, segregated assets were used by the bank, or the financial institution, as security for trading with other major banks. So the segregated funds were not segregated at all. Recently there was a court decision saying that the banks have the right to use the assets, i.e. the stocks or the bonds or whatever other assets (customers) have, as security for their credit lines they are granting to these firms.
What I am saying to investors is protect your counterparty risk. You are not safe within the financial system, even if you are told you are. There is only one way to protect yourself, and that is to store your assets, what we are talking about is mainly gold and silver, outside of the banking system.
You have to have direct control of it. I’m seeing how massive amounts of money are within the system, and people think they are safe, but they are not.”
Source: King World News