Egon von Greyerz continues: 

“The Greeks are cutting down on their budget because the ECB is forcing them to do that.  The consequences are production is falling along with GDP.  People are hungry and businesses are going bankrupt every day, thousands of businesses.  And this will get worse.

Austerity is not a solution in Greece or the US or Europe because people are used to governments spending money they don’t have.  They do this in order to please the people and to buy votes.  So, the transition for the people is unacceptable, they will riot.  Those riots we have seen in Greece will spread to most other European countries and to the US.

Sadly, the austerity will not work and the economy will collapse and Greece, as an example, will never repay their debts.  Greece really has a stranglehold on the world now because if they default, and that’s the best solution for them, then all of the banks have to pay out on their credit default swaps worldwide.

If there is a formal default, there is no option for the banks.  Jim Sinclair has been talking about this, US banks are carrying the biggest part of these CDS’s....

Continue reading the Egon von Greyerz interview below...


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“The US banks, in total, have $250 trillion in derivatives.  Of the total derivatives, maybe $30 trillion is in the form of credit default swaps.  So that would be an absolute disaster for the US banks and for the US economy.

We have pressures coming out of Europe, but in the US we see no austerity whatsoever.  What is the US doing?  The US is basically increasing their borrowings by $2 trillion per year.  $2 trillion is the same as the tax revenue of the US.  They are borrowing as much as their tax revenue and they will never be able to repay the debt.

So the US is going in the other direction.  No austerity, instead spending themselves into bankruptcy.  This will soon have an effect on the US economy, bond market and the US dollar.  The fact that the US is not downgraded to junk is just ridiculous.  They should be.  But of course the rating agencies don’t dare to do that.

We are in a situation that cannot be fixed.  It may lead, as I’ve been saying, to a total collapse of the financial system.  Before that happens, governments will try to print unlimited amounts of money.  This will result in currencies worldwide losing their value and this will be reflected in the price of gold.”

Von Greyerz also added:  “The ECB and the eurozone governments are working on ring-fencing, but you can’t ring-fence these markets.  These markets are international and totally interconnected.  If Greece defaults, everybody will start attacking the other weak countries.

We are looking here at a situation where it is the last snowflake creating the avalanche.  You only need a little bit happening in Greece and it will spread everywhere.  If Greece defaults, they can’t ring-fence any other country for more than a short period of time.  So they don’t dare let this to happen because it would be catastrophic for the world.

My view remains they will print money because if they fail at that we will have no financial system whatsoever.  Printing money will not solve anything, but short-term it will again defer the problem and kick the can down the road.”

When asked about gold, von Greyerz responded, “Short-term the consolidation is finishing here.  We could see a move higher beginning next week.  Looking at our proprietary cycle system, that move could continue until the end of March and this would be a strong move before we had any correction.”

I would also add that I expect the gold shares to move faster than gold to the upside.”

To read the previous KWN interview with von Greyerz CLICK HERE. 

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

Eric King

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