Actions have consequences…
by Egon von Greyerz of Gold Switzerland
The coming 5-10 years are likely to see asset prices decline by at least 90% in real terms. Yes stocks, bonds and property prices will in coming years collapse. But that’s not enough, the whole structure of society will also fall. There will be no or negligible pensions, there will be no social security system and the standard of medical care will fall dramatically.
So is this another sensational prediction by a Cassandra or Doom and Gloom know-it-all?
100 YEARS OF A FALSE AND CORRUPT HOCUS POCUS SYSTEM
Hardly, it is just the consequences of 100 years of a false monetary system based on corrupt principles, fake money and unlimited credit, only backed by inflated asset prices in a vicious cycle of self-destruction.
All actions have consequences but the creators of our current Hocus Pocus monetary system never worried about the negative effects. And why should they since they for over 100 years have been the major beneficiaries of the Hocus Pocus system they created on Jekyll Island.
The current monetary system was created on Jekyll Island in November 1910 by some influential and disingenuous bankers backed by a couple of duplicitous influential politicians. They were guided by Mayer Amschel Rothschild’s motto – “Permit me to issue and control the money of a nation and I care not who makes its laws.”
It was a genial system that allowed them to control not just the US financial system but eventually also the global financial system as the US dollar became the reserve currency of the world.
The system was based on unlimited debt and fiat money creation. Politicians quickly learned that there was an unlimited source of money that they could tap in order to buy votes.
WIN-WIN FOR THE BANKERS
What a beautiful system! Politicians have access to all the money they need to please the people whilst the bankers both issue and control the money. A real win-win for the bankers with unlimited financial benefits and power by total control of the politicians and the financial system in one fell swoop.
It is only with this ingenious Hocus Pocus scheme that the politicians have been able to increase the US federal debt every single year for 90 years without a financial collapse. And at the same time the scheme has allowed the politicians to stay in power without the system going bankrupt.
Obviously the politicians are only given the illusion by the bankers that they are actually in power. The bankers constantly make the politicians insecure by letting the opposing party win regularly. The bankers know that fear and insecurity combined with financial power give them perfect control of the politicians.
US debt to GDP is now at 135%, the highest in history and above the WW II level. The average debt to GDP since 1790 is 35% so the current level is 100 percentage points above that. In the next few years, I would expect the ratio to go substantially above 200% in a banana republic fashion.
For the sake of good order, let me confirm that there were two years in the 1940s and three in the 1950s when the debt actually didn’t increase. But they were the only exceptions. Don’t be fooled by the Clinton surpluses that actually never happened. Debt continued to increase in the late 1990s and the claimed surpluses were only achieved by moving deficits to debt thus creating the illusion of surpluses. It seems that there are neither honest bankers nor politicians.
WHY WARNING SIGNALS DON’T WORK
So the above Hocus Pocus scheme explains why a country can run deficits for 90+ years. The conventional red warning signals of deficits and debts leading to economic collapse are temporarily not functioning. Almost 100 years of disequilibrium, with the conventional laws of nature such as supply and demand seem set aside, seems longer than possible.
Thus for a period, manipulation, deceit and the will of the people to be fooled can be stronger than the natural laws of nature. The warning signals can therefore be ignored as the momentum of debt and deceit, by its sheer force, can drive the system forward. That is, until the whole Hocus Pocus scheme dissolves itself by the pure weight of the falsities.
All this has happened many times before, for example during the Roman Empire when it took 100 years between 180AD and 280AD for the Silver Denarius to lose 100% of its value and silver content.
So there are always CONSEQUENCES as history proves!
CURRENCY DEBASEMENT TO ZERO NEXT
And history gives us a good indication where we currently are in the cycle. If we take the creation of the Fed in 1913 as the start of the current monetary system and Nixon’s seminal decision to close the gold window in 1971, as the beginning of the end, we are now at the end of the end game.
We could easily point to the economic, political and social decadence as clear evidence of the coming global collapse. But the easiest method for measuring where we are is obviously the debasement of the currencies.
As I frequently stress, all currencies have lost 97- 99% in purchasing power since 1971 and around 85% since 2000.
The final fall of 1-3% since 1971 to reach a ZERO value for the fiat currencies is likely to take place in the next 5-10 years. But remember that this is a 1-3% fall means 100% from today.
TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED
So the destruction of money is now accelerating in parallel with the deficit and debt expansion. This is the typical course of events for the end game.
As the currencies collapse, debt explodes.
Ludwig von Mises described this process as follows:
It took the world 2000 years to take global debt from virtually $0 to just under $100 trillion. Most of that $100 trillion was obviously since 1971.
And in the last 21 years debt has trebled from $100 trillion to $300 trillion.
Presidents and Prime Ministers can stand on their soap boxes and tell their people about all their good intentions.
But we mustn’t believe one word of what they say. Because they have forgotten one simple little fact – HISTORY.
Because history would teach them some critical lessons, if their arrogance permitted them to look. They would learn as they reach the end game that global debt of $300 trillion will in the next circa 5 years grow to not just $500 trillion but quadrillions as the financial system reveals its true problems. This will happen as gross derivates of $1.5 quadrillion turn into debt when counterparties fail. As this happens, banks will also need to be propped up to the tune of $100s of trillions together with most sovereign debt as bond markets collapse and interest rates surge. So total global debt in the next 4-9 years is likely to exceed $2 quadrillion.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45
Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 70 countries.
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