Greyerz:  “The US is continuing with their grand charade and ignoring the debt limit.  So, now there is no debt limit -- not that there ever was one.  It’s just an illusion because the only thing the US politicians can agree on, and have agreed on for over 100 years, is to spend more money.  But since there is no money to spend it has to be printed out of thin air. 

So now, for the next three months, there seems to be a free-for-all, and then the American people and the world have to go through this same farce again.  But as the US stock market continues its irrational euphoria, the rest of the world has made its verdict regarding the problems in the United States.  And the rest of the world doesn’t like what it sees....

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“The bottom line is the nation with the world’s reserve currency continues to increase debt and money printing at an exponential rate.  Eric, the federal debt, the Fed’s balance sheet, and the money supply, are all expanding at a pace of trillions of dollars.  And every year the situation is getting worse.

But the rest of the world has spoken, and they don’t like what they see.  So, on Thursday they gave their verdict and started (aggressively) selling the dollar.  Since this summer the euro has gained 11% against the dollar.  And since 2000, the euro is up 65% against the dollar.

But don’t get me wrong, I don’t see the euro or the eurozone as strong, and I don’t see the euro surviving either.  However, in the race to the bottom between the major currencies, the dollar will be the winner.  The US dollar, with over $200 trillion of debt and liabilities attached to it, must be first to the bottom because the US is in a state of chronic default.  There is no cure for it.  So the dollar is now starting the last race to the bottom and will soon reach its true intrinsic value which is zero.  In fact, at some point in the not-too-distant future the US dollar will be replaced as the world’s reserve currency. 

It is no accident that China is building up its gold reserves at a very fast rate.  Remember, this is taking place at the same time the West is hemorrhaging valuable gold out of its vaults.  All of this means that China will want to have a strong hand in the formation of the world’s next reserve currency.

Circling back to the euro and the problems in Europe, Eric, they are of such a magnitude that it will lead to eventual destruction, or, at best, a major restructuring of the euro.  Right now the eurozone economies and banks are under enormous pressure.  In the last few years the ECB has injected $1 trillion dollars into the eurozone banks, but this is nowhere near the amount of money that is needed.

So, the EU banking system remains under intense pressure.  Spain just announced in August that their banks have bad loans of over 12%, or $250 billion.  This is a new record, and this amount will only increase.  There is no chance of these loans ever being paid off.

The IMF expects that Spanish and Italian banks will lose $300 billion just on their loans to companies in the next 2 years.  And if we add to that property loans and personal credit, it will reach into the trillions of dollars.  The reality is that eurozone banks are working with a staggering 26-times leverage, which guarantees they are completely insolvent.  It’s expected that the eurozone banks need another $1 trillion just to meet the stress test.

And look at Greece -- there is a $2 billion gap in their budget.  There is no chance of bridging that gap with Greek households having lost 1/3 of their incomes in the last 5 years.  And with the eurozone banks insolvent, it means that the ECB, as well as the eurozone governments, are also insolvent.  We also know that Japan is a basket case. 

So this is not a pretty picture, Eric.  Most of the major economies in the world are insolvent, and have no solution except to print even more money.  But this is no solution because you don’t solve a debt problem by adding even more unmanageable debt to the balance sheet.

All of this leads us to gold and silver.  In my view the real move in the metals is now starting.  The collapse of many major currencies, including the dollar, euro, and the yen, will be directly reflected in the value of the precious metals over the coming year. 

The debt ceiling uncertainties have only delayed the autumn rally in gold and silver, but I now believe the metals are off to the races.  2014 will be a very good year for gold and silver and that’s just the beginning.  But 2014 won’t be a good year for the world, and that’s why it’s so important to preserve wealth by holding physical gold and silver and storing it outside of the banking system.  This will help people survive the coming financial chaos.”

IMPORTANT - KWN will be releasing interviews all weekend long with Sprott, Greyerz, Grant Williams & others.

© 2013 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.

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Eric King

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