With continued uncertainty around the globe, today the man who has become legendary for his predictions on QE, historic moves in currencies, spoke with King World News about London’s terrifying $64 trillion rabbit hole in a world headed for total collapse.
“What if I should fall right through the center of the earth…oh, and come out the other side,
where people walk upside down.” — Alice in Wonderland
No One Will Escape
Egon von Greyerz: “As we approach the beginning of the greatest wealth destruction in history, it is an absolute certainty that no one will escape the suffering that will be brought upon the world…
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The ones who will suffer the least financially are of course the poorest since they have very little to lose. At the same time, many of the poor will die of famine and disease. The middle class will also suffer since many will lose their jobs. They will also lose their pensions because pension funds will become insolvent. Also, there will be no social security since governments will run out of money.
In financial terms, the wealthy will lose the most since virtually all the assets they own will go down by at least 90% in real terms. This includes stocks, bonds and property. In addition, a lot of trophy assets like art and collectible cars will collapse in price. The holders of productive, real assets like agricultural land will fare a lot better. The holders of physical precious metals such as gold and silver will also do extremely well as long as they are held outside the financial system.
In the last 100 years, governments, central bankers and bankers have created a Supernova. “A Supernova is an astronomical event that occurs during the last stellar evolutionary stages of a massive star’s life, whose dramatic and catastrophic destruction is marked by one final titanic explosion.” — (Wikipedia)
Supernova
The Great Collapse Will Engulf The World
The only question is will this final and titanic explosion will be slow or happen very quickly? What is clear is that the $500 trillion or more of debt and unfunded liabilities will need to implode along with the $1.5 quadrillion of derivatives. In addition, central banks will have to print quadrillions of dollars in a futile attempt to save the world. All that will of course disappear as the Great Collapse engulfs the world. And as the Supernova of debts explodes, the assets backed by these debts will implode. The consequence will be a wealth destruction of massive proportions, making the world suffer for a very long time.
But a cleansing of the over-indebted and corrupt system is the only way for the world to start from a sound, debt-free base. It is like a having a fire of an old forest to clear out the deadwood and create the right conditions for green and strong shoots. As long as the debt is still there, the world can never grow soundly. In the last couple of decades, there has been no real growth because for every one dollar increase in GDP, several dollars of debt must be created. This is not just the law of diminishing returns but the law of negative returns. We have a world running on empty and until the debt is cleaned out, it will never be possible to show real growth again.
The transition to a sound financial system is likely to take a long time but hopefully not as long as the Dark Ages, which took 500 years. The coming period is likely to include social unrest, wars, famine, disease and a major reduction of the world population. But all of this is not new in history. There have been long periods of wars, economic downturn or disease. In the mid-14th century for example, half of Europe’s population and at least 25-30% of the world population died from Black Death.
For most people, it will be impossible to prepare for this when it comes because it will already be too late. Family friends will be the best support system. For the very small group that has some savings, physical gold and silver will be the best form of wealth preservation and money to hold. Ordinary paper money will become worthless as governments print unlimited amounts of fiat money until it becomes worthless. Throughout history gold and silver have always been the best form of real money in periods of crisis.
The gold and silver markets today are corrupt and artificial. Around 3,000 tonnes of gold are mined every year and another 1,500 tonnes of scrap gold are refined. All the physical gold produced annually is absorbed easily by the market. China and India take the majority of the gold produced. There are no stockpiles of gold anywhere, or excess stocks that need to be dumped. Thus, every year around 4,500 tonnes of refined gold is produced and sold. That equates to $180 billion worth of new gold sold annually.
However, the gold price is not determined in the physical market but instead in the paper market. The Comex is seen as the most important paper gold market with a major influence on the gold price. It is true that the Comex is important for the determination of the gold price, but what few people realize is that the trading on Comex is only 8% of global gold trading, whereas the London OTC cash gold market accounts for 80%. Thus, while many believe that Comex is the big culprit when it comes to gold price manipulation, the real trading takes place in London.
London’s Terrifying $64 Trillion Rabbit Hole
In 2016, 638 tonnes of gold were cleared or settled daily. That means a total volume of 160,000 tonnes is settled annually in London. This is equivalent to all the gold ever produced in history. But the 638 tonnes per day is just the net volume, and one can safely assume that the gross daily volume traded is 10x that amount, which equals 6,380 tonnes daily. Remember that annual mine production is 3,000 tonnes, so more than 2x that amount is traded in London every day. That makes the annual traded gold volume in London a staggering 1.6 million tonnes or $64 trillion.
Just to put this amount in perspective, global GDP is $70 trillion. So the gold traded annually in London is over 500x greater than the annual mine production. Only 5% of the gold settled in London is physical. In addition to the London OTC gold market and Comex, there are other cash and futures markets and the derivative market in gold, which increases total global trading volumes significantly.
The total physical gold held in London is 6,500 tonnes, which equals 1 day’s trading. The total gold stock in London is only 0.4% of the annual turnover.
London OTC Gold settled daily – January 2017 $25 billion
To summarize in table form the London OTC Gold Trading:
Gold Price Headed To Levels That No One Can Imagine Today
With just the London Gold OTC market trading 500x annual gold production, total global paper trading including all futures and derivatives will be several times that amount. Since no paper gold market can ever deliver a fraction of physical gold against its commitments, it is totally wrong that the paper market determines the price of physical gold. Without this artificial and corrupt paper gold market, the price of physical gold would be many times higher. Within the next few years, as gold demand increases, we are likely to see the holders of paper gold run for cover. This will lead to defaults in many paper gold markets including Comex and the London market. At that point there will be no physical gold available at any price. Eventually the physical gold market will settle at prices that no one can imagine today.
Last week Trump signed another Executive order which calls for examination and punishment of foreign trade abuses. In the coming week, Trump is meeting Chinese President Xi Jinping in Florida. He will then reiterate that the US can no longer have massive trade deficits and job losses. Continuous US trade deficits since the early 1970s have nothing to do with Chinese dumping, but with the US living above its means and spending money it doesn’t have. There is of course a very elegant solution to this problem. All the US needs to do is to go back to the pre-August 15, 1971 days and settle all sovereign debts in gold. That will eliminate the trade deficit overnight. It will also stop money printing and debt creation or at least reduce it significantly. The trade deficits accelerated from the late 1990s. If the US had settled its sovereign debts in gold from 1999 to date, it would have paid with 453,000 tonnes of gold. (See my interview on KWN last week).
The only problem with that amount of gold is that it is 3x all the gold ever produced in history. The official gold holding of the US is (supposedly) 8,000 tonnes but the real holding is probably less than half of that. But even if we take the 8,000 tonnes of gold as the real figure, the US would have needed to pay the world 56x that amount in the last 17 years in order to settle their imports. Since only a fraction of that gold would be available, ongoing demand of that magnitude would have led to a gold price which would be multiples of the current price.
So if Trump goes back to the gold standard, the trade deficit will disappear and he will devalue the dollar and revalue gold significantly. This must be a very tempting solution for Trump since it would, overnight, solve many of the US problems of deficits, debts and an overvalued dollar. Only time will tell as the world continues to head down the darkest of rabbit holes.”
***The KWN audio interview with Andrew Maguire has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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