On the heels of seven weeks of chaotic trading in markets, today the man who has become legendary for his predictions on QE, historic moves in currencies, and major global events, just issued a dire warning about a terrifying future and the trigger for total global collapse.
Egon von Greyerz: “Eric, the world is likely to enter the worst economic downturn in history at any time now. There have been depressions in many countries and regions before, but the world has never been in a situation when every single major economy is on the road to bankruptcy.
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The Fed, A Dire Warning And Total Collapse
Egon von Greyerz continues: “During the last 100 years, the Fed and their partners in crime have created a system based on false prosperity. The damage they have caused the world economy will sadly lead to total collapse. As von Mises said:
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe
of the currency system involved.”
The final collapse is not one event. It is a long process. John Galbraith describes in his book “The Great Crash – 1929,” that people at the time did not see it as one event like a stock market crash but like a series of events. Things just got gradually worse month after month until the whole of the US was in a depression. And this is what we are seeing today. There hasn’t been a spectacular market crash yet but that might or might not come. Instead, it could also be a series of crashes over a longer period.
The Beginning Of The End
Eric, since the gold standard in the US was ended in 1971, we have seen a build-up of debt and a destruction of many currencies. For example, the dollar has lost 77% against the Swiss Franc since 1971. Then in the late 1980s Greenspan started the process of irresponsible monetary policy. Markets, politicians and investors loved it of course because so many people became rich on paper. The 2000 market crash was a hiccup that was soon forgotten with more money printing and more debt. Greenspan’s Crown Prince Bernanke was even more productive and doubled US debt during his reign. The 2007 – 2009 crisis led to unprecedented credit creation worldwide. So from the time Greenspan embarked on the disastrous policy of printing money, global debt has increased more than tenfold from $20 trillion to $230 trillion.
In the meantime, in most countries we have bubbles in stocks, bonds, property and debt. We have massive political and economic problems in Europe with the EU and with a banking system that won’t survive. Japan is a disaster, China is a credit bubble and all emerging markets are now failing due to the unsustainable combination of collapsing commodity prices and debts that can never be repaid.
We also have massive geopolitical dangers in the Middle East, Ukraine and the South China Sea and we have a serious migration problem in Europe.
All these things are part of the process. The world has never before seen a confluence of problems and risks of this magnitude. In spite of that, very few people realize the dangers that the world is now facing.
The Trigger For The Global Collapse
And although this has, so far, been a very long and drawn out process, there are many indications that we will reach the acceleration stage in 2016. The triggers are likely to be collapsing currencies with the dollar taking the lead. Gold and silver will be the biggest beneficiaries of the currency implosion. Simultaneously, stock markets will fall strongly. But the worst problems will be in the banking sector and the credit markets, including derivative failures. Currencies falling precipitously could lead to high inflation or hyperinflation a lot sooner than most people expect.
Pensions Will Disappear
If events unfold quickly, governments will lose control in many countries and social unrest will be a major problem. Social security and pensions will be dramatically reduced or even disappear. Today, even before markets have come down, many pension funds are on the verge of insolvency. In Kansas, for example, the Central States Pension Fund needs to make 55% cuts in pensions and it is still questionable if they will survive. And that is with stock and bond markets near all-time highs.
As markets start falling, there will be no more pensions. Most pension schemes worldwide are in s similar dire state. The demographics in Japan will make it impossible for a decreasing working population to support the old and the sick. But the majority of the global population has no pension at all and very few countries, if any, will have sufficient revenue to look after their old.
World Trade Has Collapsed
Eric, looking at world trade, it is contracting very fast as evidenced by various indices such as the Baltic Dry or Container traffic. Exports are also declining fast in many countries. And global bellwether companies such as Caterpillar have had falling sales for 38 months in a row.
Also debt is continuing to increase fast. China’s debt is already up by $1 trillion in 2016 and distressed debt issues in the US are the highest since Lehman.
The War On Cash And…
Governments worldwide are now extremely concerned about a failure of the financial system and bank runs. This is the main reason why country after country is restricting cash transactions. In both Italy and France €1,000 is the maximum cash withdrawal. The €500 bill will probably be banned in the Eurozone and in the US, Larry Summers is proposing to get rid of the $100 note. At the same time two Swiss Members of Parliament are proposing a change in the Swiss law in order to introduce a 5,000- franc note. The highest today is 1,000 francs. This is to ensure that the Swiss Franc maintains its status as a safe haven currency.
The proposers draw a parallel with every Swiss man keeping military firearms at home thus guaranteeing freedom for Switzerland. It is really reassuring that there are many libertarian politicians in Switzerland even though this initiative might not succeed.
…A Terrifying Future – Act Now Before It’s Too Late
In most other countries politicians are blaming terrorism, drugs and money laundering for restricting cash when the real reason is that they are trying to stop bank runs as people panic to get their money out of the bank. But nobody will get their money out as banks leveraged up to 50 times will not be in a position to pay anyone. Instead there will be bail-ins and bank failures. 2016 will probably be the last year when it will be possible to access bank accounts without restrictions.
There are likely to be weekly or monthly limits of withdrawal or payments and also forced investments into government bonds. As currencies fall, there will be exchange controls. With the dollar weakening rapidly, only commercial payments will be allowed out of the US. It will not be possible to transfer money out for leisure or for investment. It is likely that 2016 will be the last year of unrestricted capital movements so it is crucial to take action before it is too late.
We constantly tell investors that it is essential to keep assets outside their country of residence. Since there are few safe banks in the world, it is preferable to keep physical gold and maybe some silver in private vaults outside the banking system.
Eric, gold and silver have definitely turned now after a four-year correction. The next move up could be very strong and could start any day now. For wealth preservation purposes we believe it is better to hold gold. The weight and volatility of silver makes a less suitable for most investors. Having said that, I believe silver will move up a lot faster than gold, so around a 20% allocation to silver probably gives the right risk reward.
Gold & Silver Will Reach Price Levels That Are Unimaginable
What very few people realize is that there is very little gold and silver available for investment. All the gold and silver produced today is easily absorbed by China, India and a few other buyers. Since we have reached peak gold and silver production, there is no possibility to produce more. Also remember that only 0.5% of world financial assets are invested in gold.
As inflation increases and gold appreciates, there will be virtually no supply to satisfy the increased investment demand from institutions and private investors. The existing gold stock is unlikely to be sold as prices rise. I could easily see within the next few years that there is no gold available for sale, and this could unfold much faster than people realize. The only regulator will then be price. And that is why both gold and silver are likely to reach levels that are unimaginable today.”
***KWN has now released the extraordinary audio interview with Dr. Marc Faber, where he discusses the greatest threat to the world, his stunning predictions for the rest of 2016, gold, and what investors can do with their money right now, and you can access it by CLICKING HERE OR ON THE IMAGE BELOW.
Also, the long awaited audio interview with London metals trader Andrew Maguire has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO RELEASED: A World On The Edge Of Chaos CLICK HERE.
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