Greyerz:  “Eric, all of the problems in the world have been solved and the risk of another global downturn is zero.  At least this is what the IMF has just pronounced.  The IMF points to the strong recovery in the U.K. and the U.S. as evidence of this.  Let’s first take a look at the U.K.....

Continue reading the Egon von Greyerz interview below...


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“The U.K. is a country running a major structural budget deficit, a massive current account deficit, with a subsidized housing market which is a bubble, and a country where ordinary people have problems making ends meet.  It’s only a massive consumer debt that sustains them.

The other artificially strong sector in the U.K. is the financial industry in the City of London.  Worldwide money printing plus the rigging of markets have greatly benefitted the City of London and U.K. tax revenues.  But both the housing market and the financial sector in the U.K. are major bubbles that will eventually burst.

What about the other strong economy according to the IMF which is the U.S.?  This is a country that has increased debt from $8 trillion to $17 trillion in the last 8 years, and whose central bank has printed more than $3 trillion during the same 8 year period.  This is also a country that has been running budget and current account deficits for decades. 

The U.S. is also a country where real wages for workers have been falling for decades, where 50 million people receive food stamps, and where real unemployment is 23%.  The IMF did not mention the U.S. is a country whose real GDP, when using a correct deflator, has been falling since 2008. 

The housing market is also extremely weak in the U.S..  Wells Fargo just announced that mortgage originations are down 67% since March of last year.  But the rich in the U.S. are of course benefitting.  And now the 0.01% of the richest own 11% of total wealth.  This figure is higher than in the roaring 1920s, before the 1929 crash.

And in the eurozone there is also great optimism.  Greece has just had a $3 billion bond issue at a 5% interest rate, and that was oversubscribed.  There we have a country which is bankrupt and can never repay its debts, where debts represent a staggering 180% of GDP.  Investors are just rushing to buy their debt because everyone is chasing yield.

Looking at other eurozone countries, Debt/GDP has gone from 70% to 94% in Spain in the last 2 years, and from 120% to 132% in Italy.  And in France, which will be the next big problem country in the eurozone, Debt/GDP has gone from 86% to 94% in the last 2 years.  So debt is increasing fast in the eurozone because none of the problems that started in 2008 have been solved. 

This makes one wonder why investors are chasing this debt that will never be paid back.  Also, banks in the U.S. are still bankrupt since 2008 if they value their toxic debt at market value.  This is why the Fed has just had to give banks extra time to implement the Volcker Rule.  This rule bans proprietary trading and forces banks to offload their collateralized debt obligations.  But clearly banks can’t afford to take the losses on these investments.  Nor will banks worldwide be able to take the losses on the over one quadrillion dollars in derivatives, a major part of which is worthless. 

So the world’s central banks will continue to issue debt in their futile attempts to save the world economy.  The ECB will soon start to buy bonds to save the eurozone from a deflationary collapse, and Yellen will soon come up with a new concept that won’t be called ‘QE,’ but some other from of money printing, in order to inject more money into the U.S. economy.

The wonderful thing for these central banks is that paper money costs nothing to produce.  But this also means that paper money has zero intrinsic value since unlimited amounts can be issued at no cost.  Central banks and people still attribute a value to this money because nobody wants to admit that the emperor has no clothes.  But at some point soon people will realize that they are being conned because worthless paper money can neither save the world economy nor the financial system.

We are seeing the ultimate Ponzi scheme before our eyes.  Central banks are printing worthless money to save banks that have asset which at best are massively overvalued, and at worse are completely worthless.  Then we have real money -- gold.  Currently the cost of this real money, or gold, is at production cost. 

So investors have a simple choice:  They can either hold paper money or paper assets, with virtually no intrinsic value, or they hold gold.  Eric, this is such an easy choice.  Investors should also realize that they can buy gold at ridiculously low prices.  But investors must not believe that gold and silver are just for the rich.  Ordinary people should also put some savings into gold and silver.

Last week I wrote an article for King World News called Trade Of The Decade, which is short the Dow and long gold.  This spread has already gained 5% since last week, with weaker stocks and stronger gold.  But I want to point out that this position should not be seen as a trade.  Instead, it should be seen as a strategic position for coming years.  Stocks and other assets financed by the massive credit bubble will collapse in coming years.  So, to preserve purchasing power during the coming historic wealth destruction, investors must hold physical gold and store it outside of the banking system.”

© 2014 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.

IMPORTANT - KWN has many more interviews being released today.

The audio interviews with Bill Fleckenstein, Gerald Celente, Dr. Marc Faber, Egon von Greyerz, Rick Rule, Ben Davies, Rob Arnott, Dr. Paul Craig Roberts, Andrew Maguire, Art Cashin, Eric Sprott and John Mauldin are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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© 2014 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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