Sadly, gold is now on its way to heights which are unthinkable for most people.
To all the people who have asked me over the years why gold doesn’t go up, I have replied:
“Don’t wish for gold to go up substantially for when it does, your quality of life will deteriorate remarkably.”
And we are now at the point in the world when this is likely to happen.
Let me be clear, now is the time to protect whatever assets you have in order to avoid the total asset destruction that is coming next. More about this later in this article.
THE FINANCIAL SYSTEM WILL NOT SURVIVE
I came to the conclusion early in this century that a sick financial system was not going to survive the infestation of vermin in the form of debt that started just over 50 years ago.
Nixon’s closing of the gold window in 1971 was the signal that this currency system was going to end like all currency systems in history. And for the ones who haven’t studied the history of money, let me tell you that NO FIAT MONEY HAS EVER SURVIVED IN HISTORY IN ITS ORIGINAL FORM. So with all money going to ZERO, it has never been a question of if but only of when the dollar based currency system would die.
Dalai Lama said:
“If there is a solution to a problem, there is no need to worry.
And if there is no solution, there is no need to worry”
But in this case my view is THAT WE REALLY NEED TO WORRY.
So sadly, his wisdom doesn’t apply to the global problem that the world is now facing.
IS THE UKRAINE WAR COMING TO AN END
In early January this year I wrote an article called “OMINOUS MILITARY & FINANCIAL NUCLEAR THREATS COULD ERUPT IN 2023.”
I have covered the threat of a major war in many articles in the last 12 months for example “Will nuclear war, debt collapse or energy depletion finish the world”
Although it is too early to be really optimistic, it now looks like my prediction that Russia will never lose this war is getting closer.
Ukraine is making the Battle of Bakhmut into their Stalingrad last stand (WWII 1943).
Ukraine has committed the majority of their remaining forces to winning this battle against Russia. If they lose in Bakhmut, even Zelensky believes that this could be the end for Ukraine.
Here is the Associated Press (AP) article in which Zelensky is hinting that Ukraine could lose this war –
“Ukraine’s Zelensky: Any Russian victory could be perilous.”
If Bakhmut fell to Russian forces, Putin would “sell this victory to the West, to his society, to China to Iran” Zelensky said in the AP interview.“If he will feel some blood – smell that we are weak – he will push, push, push!”
Scott Ritter, the former intelligence officer and UN weapons’ inspector just gave this interview in which he believes that Ukraine is on the point of losing the war:
Scott Ritter – It is over!
THE END OF US HEGEMONY
At the beginning of the Ukraine conflict I and some others made the analogy with the Cuban Missile Crisis in 1962 (which I remember well) when Kennedy gave an ultimatum to Khrushchev to withdraw the nuclear missiles pointing towards the US or face war.
In the same way as with Cuba, Russia was never going to accept Ukraine becoming a Nato country. But sadly the US Neocons have seen this conflict as the last chance to save the US military, political and economic hegemony from total collapse. Defeating Russia was the last stand for the US. But it now looks like they will fail which seals the fate of the US empire.
The US neocons forced a much too willing Europe to not only agree to the sanctions against Russia but also make direct contributions to the war both with money and equipment.
This fatal mistake by Europe and especially Germany is totally crushing the European economy. But what the US neocons never understood is that the US sanctions would affect the whole world and in particular the debt infested US and the West.
At the end of an economic era, unexpected events take place which will seal the fate of a crumbling empire.
THE END OF THE CENTRAL BANKER
The script for the first 22+ years of the 2000s couldn’t be more perfect as the final glutinous feast of Gargantua The Central Banker. (Gargantua – book by Rabelais 1543)
Central bankers have been the principal creators of the current crisis which had its beginnings over 100 years ago.
Significant events in the 2000s created by fallacious Central Bank policies:
- 2000-2 Market collapse: Tech stocks down 80%
- 2006-8 Subprime banking crisis: Dow down 54%, massive money printing
- 2009-21 Stocks & asset markets exploding: Dow up 6X, Nasdaq up 16X
- 2006-20 Manipulation of rates: US 10yr treasury down from 5.4% to 0.5%
- 2000-23 US Debt explosion: Up 3.5X from $27t in 2000 to $95t in 2023
- 2000-23 Global debt explosion: Up 3X from $100t in 2000 to $300t in 2023
- 2020-23 Real inflation US EU: Up from 0% in 2020 to 10%+ in 2023
The extreme moves and volatility exemplified in the table above has nothing to do with free markets.
They are the manifest consequences of shameless manipulation of markets and market conditions by Central Banks. Such extreme moves could never happen if markets followed nature’s laws and the laws of supply and demand.
For example, in an unmanipulated market it would be totally impossible for credit to expand exponentially and interest rates to remain at zero. The basic principle of supply and demand would force the cost of money up when demand for credit expands. And if there was no demand, the cost of money would obviously come down to the level where demand resumes.
If markets were allowed to follow the natural rhythm of nature, they would be self-correcting without extreme tops and bottoms.
This is so basic that a 7 year old would understand it. But the Central Bankers choose to ignore it.
The obvious consequence of markets flowing naturally without intervention would mean that we could get rid of Central Bankers. How wonderful! No Central Banks, No Manipulation and No Extremes in the economy or markets.
Sadly, such simple solutions are the exception in history with greed and power driving man rather than reason and logic.
The bankers clearly knew what they needed to do when they met on Jekyll Island in 1910 in order to control the US and global monetary system. At this meeting they schemed to create the Fed in 1913 and followed the axiom of Mayer Amschel Rothschild a German banker in the late 1700s: “Let me issue and control a nation’s money and I care not who writes the laws.”
From the Amschel Rothschild to Jekyll island to Nixon closing the gold window in 1971, the Central bankers and bankers have successfully taken control of issuing exponentially larger amounts of money and debt for their own benefit as well as for a very small elite who could take advantage.
Having created a structure that was above the law as Amschel said, they have so far been in total control of their own destiny with governments being dictated to by the central bankers and bankers. Thus in 2008, the Fed and a number of virtually bankrupt banks, including JP Morgan, Goldman, Morgan Stanley, Bank of America, Barclays etc dictated their own rescue terms to the US and other governments.
But we must remember that 2006-9 was just a rehearsal. The finale is starting now. The debt which has built up has now reached levels which means the financial system is now too big to survive.
Three US banks and one Swiss went under 2 weeks ago although two of the four were rescued temporarily at a high cost. The Swiss government could not afford to let Credit Suisse go under and is supporting the UBS takeover of the Credit Suisse at a potential extraordinary cost of CHF 209 billion.
Central banks are on standby to stop the next bank run. Many expected Deutsche Bank to be next. Governments will stop major banks from going under for as long as they can, to stop global contagion. But they will of course fail.
The FDIC (Federal Deposit Insurance Corporation) currently has a capital of $128 billion dollars to support a total of $18 trillion deposits. So with 0.7% cover, it is guaranteed that the US government will soon need to step in as the next lot of US of banks fail. Same in Europe where the most EU banks and the ECB are in a terrible shape.
Total central bank assets are $25trillion which is less than 10% of global debt before derivatives. Default rates in coming years are likely to exceed 50% which means much more money printing to come.
ALL ASSETS ARE PRICED AT THE MARGIN – PROTECT YOURSELVES
As the current asset bubbles are coming to an end, the exit doors will be totally blocked by panicking sellers.
All assets are priced at the margin and even more so since the current asset bubbles have been created by the most gigantic debt bonanza. To take an extreme example, if there is one seller and no buyer in the housing market, the price of all houses will go to zero. The same is true for the stock market.
But as investors run for the exit, most will not get through since there will at some point be no buyers at any price.
This is how the price of stocks, bonds or property can go down by 75% to 100% in real terms. Some market observers say that this has never happened in history so it won’t happen today either. Yes, of course I can be wrong, but what we must remember is that nor have we ever in history had a global debt and asset bubble of this magnitude. So we are in unchartered waters and conventional wisdom doesn’t apply and is just conventional without any wisdom.
In any case, investors shouldn’t worry how much their assets could decline. Instead they should worry about protecting themselves against the risk of this happening.
Firstly investors should go as liquid as possible. Secondly debts must be repaid. Nobody will want the bank to take their assets at a bargain price.
Short term government bonds could offer adequate protection. But medium and long term, governments will at best destroy the value of the currency and at worst also default.
Tangible assets are undervalued and a good investment to own.
Physical gold and silver held outside the banking system is the ultimate protection just as in any crisis.
It is absolutely critical to buy gold and silver now before investors panic into these metals. There is very little gold and silver available to buy. Currently all production is absorbed and any increase in demand cannot be met by increased supply but only by much higher prices.
But remember that gold and silver are also priced at the margin, so as demand increases, we could reach a situation when there is no silver or gold available at any price.
So my very strong advice is not to wait for the herd since you then are likely to be left with no silver or gold and no protection.
But in the end, as I have stressed, the $2 quadrillion debt and derivative liabilities, cannot be saved.
In the next few years the financial system will crash under its own weight in spite of and also due to the coming biggest money printing avalanche that the world has ever experienced.
Egon von Greyerz is the founder and managing partner of Matterhorn Asset Management AG.