Greyerz:  “Eric, everyone in the mainstream media is telling us that things are improving in Europe and in the US.  They are living in Fantasyland.  Governments and the media are feeding us with good news because this is what people want to hear.

But the news they are telling people is not the true picture of what is really taking place....

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“The news releases are manipulated and adjusted so that they have very little to do with the real situation.

Looking at Europe, there are some minor pieces of good news which are quite meaningless, such as PMI for example.  But if we look at the real figures they are disastrous, especially in the Mediterranean countries.  The Mediterranean countries are in an absolutely dire state. 

Debts are rising massively.  If you take Portugal, Spain, Ireland, Greece, and Italy, debts as a percentage of GDP are going up this year alone by between 15% and 25%.  So all of these countries now have massive debts.  The lowest Debt/GDP ratio is 100%, but if you look at Greece’s Debt/GDP ratio, it’s at a staggering 180%.  This is an absolute disaster.  Italy has over 130% of Debt/GDP.  This is of course totally unsustainable, especially because interest rates are going higher. 

The problem these individual European countries have is that they can’t print money.  GDP is also going down in these countries.  In Greece, for example, GDP since 2008 is down tremendously, and if you add to that the youth unemployment, which is between 40% and 65% in the Mediterranean countries, you are looking at a situation that will have very serious consequences. 

Many people in these countries are already suffering.  And since things in the real economy are already starting to get worse, something major has to happen soon.  There has to be a massive money printing package by the ECB, supported by the Fed and the IMF.  But we all know this won’t solve anything because printed money adds no wealth and only debt.

The other problem many of these countries have is that they are not competitive.  The Mediterranean countries are 20% less competitive than the northern European countries.  Now you have the problem that the euro has been rising.  The euro is up 30% against the yen, and 25% against the rupee.  This just makes the situation even worse.

The other solution is that some of these countries break out of the eurozone, devalue their currencies and renege on their debts.  This is what they should do, but I’m sure the Eurocrats will do everything they can to stop them.  This will be stopped in order to continue their failed euro project, which is based on illusions of grandeur, rather than sound economic principles.  So the situation in Europe cannot be solved because whatever solution is attempted because it will still mean a continued collapse of the European economy. 

If we turn to the US, things are no better.  The combination of manipulated data, one trillion dollars of printed money every year, and exploding credit, such as subprime car loans, has given the US the illusory improvement of the economy.  But look at the real facts, Eric, 7 out of 10 Americans receive more government benefits than they pay in taxes.

Unemployment figures came out today, and if we look at the job participation rate at 63.2%, this is the lowest since 1978.  There are currently 90 million Americans not participating in the labor force.  And the real unemployment is not the 7% the US announced, instead it’s around 24%.  Just last month, 516,000 people dropped out of the labor force.  Real wages have also fallen consistently since 1970 in the US.

If you look at the Fed, they have monetized 117% of the debt issued in 2013.  Eric, these are not the signs of a sound economy.  Instead, these are the signs of a disaster waiting to happen.  But in addition to the world’s economic problems, we now have war drums, which could have very serious consequences for the world. 

So, investors must take action now to protect themselves and their assets against what is coming.  Obviously that involves getting major assets out of the financial system.  Bail-ins will happen everywhere, that’s absolutely guaranteed.

Also, I’ve stressed many times that pension funds won’t be safe, whether they are private or state run.  The latest example of that is now Poland.  They have just announced they are taking $37 billion of government bonds out of the state run government pension fund.  They then canceled this debt, making the retirees $37 billion poorer, and reducing government debt by $37 billion.  Many governments are likely to do the same thing as Poland.  They will use the pension funds to prop up their debt.  I’m sure that will happen in Europe, as well as in the US. 

Now, if we look at the precious metals, physical gold and silver are still the best way to preserve wealth, as long as they are stored outside of the banking system.  This is probably the only way people will be protected from what’s going to happen.

There are still shortages of physical gold.  Also, the cost of mining has gone from $300 an ounce in 2004, to $1,200 today, and if we add to that the strike in South Africa of 80,000 mine workers, all of this will serve to reduce production even further.

There is no change in my forecasts for gold and silver.  I see a very strong 12 months coming.  My short-term targets are still the same -- $2,500 for gold and $70 for silver.  Of course they will be much higher thereafter.”

© 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.

The audio interviews with Bill Fleckenstein, Pierre Lassonde, Dr. Paul Craig Roberts, Art Cashin, James Turk, Eric Sprott, Egon von Greyerz, James Dines, William Kaye, Hugo Salinas Price and Marc Faber are available now. Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf to listen CLICKING HERE.

Eric King

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