Greyerz - We Are Headed Right Into A Global Financial Crash

According to Egon von Greyerz, founder and managing partner at Matterhorn Asset Management, “Wealth has never been created by printing money" and “This time the financial crash will be of a worldwide magnitude.” He advises investors to take a look at the big picture and protect their wealth.

Eric King
August 10, 2012
King World News

Today Egon von Greyerz told King World News, “Wealth has never been created by printing money, and this time, like it has before, it will lead to a financial crash.” Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also said, “This time the financial crash will be of a worldwide magnitude.”

Here is what Greyerz had to say: “The die is already cast for the world’s current situation. It was cast many years ago and it is irreversible. This is exactly why investors need to take a look at the big picture and protect their wealth. But focusing on the short-term for a moment, markets look poised for a big move over the next few months here.”

Egon von Greyerz continues:

“This move will include gold, silver and the HUI. The fact that this move is in front of us simply means that more money printing is on the way at any time in the next few weeks. I also expect global stock markets to top later this year, and then they should go through a precipitous decline.

We should note that right now Japan has the biggest debt to GDP of any country, over 200%....

“The demographic situation in Japan is also a disaster. But if the interest rates in Japan simply went from 1% to 2%, that will literally use up all of the tax revenues. That is just incredible.

So there is a hyperinflationary disaster looming in Japan, that’s absolutely guaranteed. I wanted to stress Japan because very few people focus on that, but it is yet another country adding to the many other existing risks in the world.

But even when you look at the US, with $15 trillion in debt, and roughly $1.5 trillion in tax revenues, it’s an enormous disaster waiting to happen. At 10% interest rates the US will use 100% of its tax revenues to finance the debt. So we will see many countries that will not even collect enough tax revenues to pay for the interest expense on their debt.

This is why money printing is guaranteed in Europe, the US, UK and Japan. History teaches us that a nation which runs large deficits and increasing debts could never create wealth in the long-run. Wealth has never been created by printing money, and this time, like it has before, it will lead to a financial crash.

This time the financial crash will be of a worldwide magnitude.”

Greyerz also added: “Gold’s rise has reflected some of the money printing up to now, it’s up 150% in dollar terms over the last five years. Over ten years gold is up 450%. This is because of the destruction of paper money, which will only accelerate over time.

But gold has risen with only slightly more than 1% of the world’s assets in gold. Right now the world’s assets are about $150 trillion. Of that number, $60 trillion is in cash, $40 trillion is in bonds, and $40 trillion is in stocks. But, remarkably, only $2 trillion or just a bit over 1% is in gold.

With inflation headed higher, institutions, which have virtually no allocation to gold today, they will have to increase their allocation to gold. There have been several studies over the last few months that have suggested that institutions will need to put part of their funds in gold.

If you look at world financial assets, a 1% increase in allocation to gold of the world’s financial assets would require 12 years of gold production at today’s prices. There simply isn’t the gold available at today’s prices to facilitate even a small move by institutional money into the sector. Of course they can never get a sizable commitment into gold at these prices.

I would also add that over time they will put a lot more than 1% into gold. The studies I reference also suggest that institutions will improve their risk vs return situation by moving money into gold. So I am convinced that there will be a big inflow of institutional money into gold over the next two or three years.”

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