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Greyerz:  “As stock markets are booming, fueled by unprecedented liquidity, the financial system is under more pressure than ever.  A couple of your recent guests have been talking about the Fed’s balance sheet, and the fact that it’s leveraged 70 times....


Continue reading the Egon von Greyerz interview below...




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“We know that the main component of the Fed leverage is Treasury bonds, which total $2 trillion, and mortgage-backed securities of $1.4 trillion.  We also know that neither the Treasury bonds, nor the mortgage-backed bonds can ever be repaid with today’s money.


The only way the Fed can repay them is by printing more money, not less money.  So it’s absolutely certain that they will.  Then, if you look at US federal debt, it was only $1 trillion back in 1981, and the tax revenues were $1 trillion.  Now, today federal debt is $17 trillion, and tax revenue is $2.5 trillion.


So, tax revenues have grown by 2.5 times since 1981, and debt has grown by 17 times.  All of this additional, massive increase in debt is not creating much in the way of tax revenues.  All it has been doing is artificially keeping the country afloat on life support.  Without the $4 trillion federal balance sheet, and $17 trillion debt, the United States wouldn’t be standing on its feet today.


And both of these are continuing to grow -- both the Fed’s balance sheet and the federal debt is growing by $1 trillion each year.  There is no chance whatsoever that the US can stop money printing.  They have not only to continue with it, but they will have to accelerate it in 2014.  So, all of this nonsense talk of tapering is absolutely ridiculous.


In 2011, I wrote an article called, “Apres Nous Le Deluge,” which means, “After us, the deluge.”  From history this is when the mistress of Louis the XV said to him, “After us, the deluge,” because they lost the war and they knew France was going to have real problems, and the economy was going to collapse.




And that’s exactly what is happening in the US.  But instead of Bernanke, we will now have Yellen, and she will crank up the printing press even more.  Unemployment in the US just came out and the headline figures look good, but of course they are all seasonally adjusted, and taking into account the layoffs during the debt ceiling crisis.  So, we can’t trust any of these figures.


What we do know is that the Labor Participation Rate is falling again, now to its lowest ever since 1978 -- at 62.8%.  There are now 91 million people who are no longer in the labor force.  We are soon going to be at the stage in the US where there are actually more people not working than there are working.  So, there is no point focusing on the short-term employment figures because they are totally meaningless.


Taking a look around the world, S&P just downgraded France because the economy is extremely weak.  Unemployment is going up, debt is increasing, and government spending is massive.  But every country in Europe is under the same pressure.  Speaking of ‘downgrading,’ the US should also be downgraded.  There is no way the US should be rated AAA, even though most rating agencies have it rated that way.  The situation in the United States is a lot more serious than in France.


Then, take a look at the UK:  The government talks about a slight improvement in the economy, but it’s not true.  It’s all consumer driven, and there is no growth in the real economy.  And like the US, the economy in England is totally supported by QE -- to the extent of a staggering 25% of GDP.  The current account deficit is also bigger than ever, which shows that people are simply living above their means.


The BIS just came out with a quarterly report, and they are saying that the situation in the banking and financial system is worse today than it was pre-Lehman collapse.  I agree with that totally.  Nothing has improved since 2008.  The European banking system is under massive pressure.  This is of course why the ECB just lowered interest rates by .25%.  They blamed this rate cut on ‘deflation,’ but it’s because of the enormous problem that exists inside of their banking system that they initiated the rate cut.


However, it’s not only in Europe that the banking system is under pressure.  The US banking system is slightly better, on balance, than the European banking system, but if you include derivatives, the US banking system is extremely vulnerable as well. 


Moving on to Japan, they are totally failing with their reflation program.  The economy is not growing, and personal savings is at the lowest since 1963.  Of course Japan used to be a nation of high savings, but wages have now dropped 16 months in a row.  That means people have to use their savings in order to live, but they are running out of savings.


Turning to global stock markets, they are booming.  Property markets are also booming in most countries.  So, right now there is the 1% that believes in wealth preservation and precious metals, and there is the other 99%, which is now caught up in chasing the last of the global stock market run.  But we can see the inevitable outcome.  So, even though the rest of the world is benefitting from the boom in equities and property values, they don’t understand that it is simply because of the massive liquidity injection and increasing credit.


These investors don’t realize that stocks and bonds are in an enormous bubble, and they will begin a massive fall starting in 2014.  So, there is no fear amongst investors right now.  In the midst of all of this short-term thinking, the people in the wise countries, the Indians and the Chinese, they are buying enormous quantities of physical gold, and even silver. 


But in the West, people continue to chase stocks as the Western central planners continue depressing the paper price of gold in order to keep the short-term party in equities going.  This will all change in 2014, and the paper players will be left with a disastrous hit to their portfolios as the next wave of massive wealth destruction kicks into high gear.  That is when gold and silver investors will see the tide turn dramatically in their favor.”


IMPORTANT - KWN will be releasing interviews all day today.


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The audio interviews with Bill Fleckenstein, James Turk, Andrew Maguire, William Kaye, Gerald Celente, Dr. Paul Craig Roberts, Eric Sprott, Grant Williams, Rob Arnott, Art Cashin, David Stockman and Jim Grant are available now. Other recent KWN interviews include Marc Faber and Felix Zulauf to listen CLICKING HERE.


Eric King

KingWorldNews.com

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