Greyerz:  “Eric, we are in a very dangerous period for the world economy.  There is a high level of complacency among most investors.  For people working in the financial world and for the wealthy, it’s like being in Shangri-La.  Virtually all asset markets are going up and many stock markets in the West are at all-time highs.

I recently went to the John Mauldin Conference in San Diego, which was excellent.  But it surprised me to see how many of those top economists and fund managers were totally bullish on the global economy based on their view of growth in the United States.

I also went to a conference for ultra-high net worth individuals in Singapore, and I noticed very little fear or concern about the risks in the world today....

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“So this is a very dangerous time with the people who control the investment markets having very little regard for the risks and the dangers that the world is currently facing.

Eric, we have discussed the massive risks which are present in the system and they are more ubiquitous now than ever -- Japan, EU, UK, US, China, and geopolitical risks.  The financial system has the same problems today as it had in 2008, but the money printing over the last few years has achieved a calm and complacency that will lead to massive shocks in the world financial system in coming years.

In China, the property market bubble combined with the shadow banking system, which is out of control, will lead to massive problems for the Chinese economy.  Many of these problems will be contained within China, but the fact that China will stop growing at these very high levels will have a negative impact on world trade and on the world economy.

Eric, Japan has massive debt, an aging population, a collapsing savings rate, and big deficits.  Last month retail sales in Japan were down 14 percent, the largest fall ever.  Household spending is down almost 5 percent year-over-year, and industrial production was down 2.5 percent last month, the biggest decline since the tsunami.

There has been some false optimism about the conditions in the EU.  Spanish long term unemployment has increased 500 percent since 2007.  There are now 1.2 million people in Spain who have had no job since 2010.  It was estimated that 25 percent of the Spanish population is now at poverty or at social exclusion levels -- that’s an astounding 12.4 million people.

So there is no real improvement in the EU, and today the EU banking system is more vulnerable than in 2008.  Portugal’s biggest bank is in serious trouble.  But there is also a great deal of misplaced optimism in the United States.  I have never been in the fracking camp and now we are getting confirmation that those forecasts for production were wildly optimistic.

The Monterey Formation was supposed to produce 64 percent of all the shale oil in the United States.  Well, the output estimate has now been revised from 15 billion barrels to only 600 million barrels.  That’s a 96 percent reduction in output.  What is also happening in the U.S. is that the shale debt is exploding.  Debt has doubled, while revenue is only up 5 percent.  So we have a classic example of costs soaring and productivity falling.

Also, a lot of the economic indicators in the U.S. are very weak.  Retail sales are plunging, bank profits are falling, home sales are falling fast, both existing and new homes, and 56 percent of Americans have sub-prime credit today.  So the average person in the U.S. is suffering badly, and they are seeing none of the benefits of inflated asset markets which is all due to money printing.

Debt is also increasing across the world.  Global debt is now around $275 trillion, or 385 percent of world GDP.  That’s $38,000 of debt for each and every person in the world.  Even the average American is one paycheck from bankruptcy.  So how does anyone ever believe that any of this debt could ever be repaid?  Well, it won’t be, that’s absolutely guaranteed.

All this will lead to unprecedented money printing and hyperinflation.  Thereafter we are likely to see a deflationary collapse of the financial system.  We will certainly be looking at a very different world in coming years.”

Greyerz added:  “Right now there is very little buying of physical gold in the West.  Refiners and vaults in the West are reporting very low activity.  But countries like China and Russia are of course continuing to buy.  This could lead to a further decline in the price of gold to the $1,180 to $1,225 area. 

But any decline from current levels will be seen as an incredible bargain in coming years.  The 2008 correction lasted 8 months and bottomed at $681.  Thereafter gold tripled to $1,921 in September of 2011, which was a 33-month up-move.  Interestingly, the correction since 2011 is exactly 38 percent, and will also have lasted 33-months in June.  So there would be some cyclicality to the gold market finishing its correction after 33-months because it was the same length as the up-move.

It looks like global stock markets will top sometime between now and July, and that will begin a secular bear market in stocks.  When that happens it will lead to fear that will spread to all markets, and gold will be a major beneficiary of this fear.  The bottom line is gold is the best protection for investors in the coming wealth destruction the world will endure but time is running out for investors to protect themselves.”

© 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 MEP Nigel Farage, Michael Pento, Dr. Paul Craig Roberts, Gerald Celente, John Mauldin, Eric Sprott, Egon von Greyerz, James Dines, Andrew Maguire, David Stockman, Art Cashin and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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