Financial expert Egon von Greyerz says forget about making money in today’s global economy. The primary objective should be protection and wealth preservation, and von Greyerz goes on to explain, “It’s all about risk . . . what you are looking at now is a world where risk is unprecedented. We have bubble land. We have bubbles in stock markets. We have bubbles in bond markets. We have bubbles in assets markets, such as the art market, for example. On top of that, we have a banking system that is bankrupt. We have country risks that are enormous, but we also have geopolitical risks. It looks like we are in bubble land where bubbles can expand exponentially, but you cannot break the laws of science. At some point, bubbles will burst. You can’t buy fire insurance after the fire. Number one, from the point of investors, is to protect yourself.”
There are plenty of problem spots such as Greece and Ukraine, but there are no bigger financial risks to the global economy than the bond bubble. Von Greyerz contends, “The bond markets, in my view, are the biggest bubble in history. We are looking at a $100 trillion market of debt that will never be repaid. Most of it is issued by government that can never repay it in today’s money. I think this autumn is going to be quite dramatic.”
Manipulation is a given in all markets. This is what is propping up a failing global system, and it is not going to make things better. Massive manipulation of the markets, including the gold market, will have the opposite effect, and von Greyerz says, “Of course, they are making it worse. Manipulation is only delaying the inevitable. Of course, they (governments and central banks) hate, hate a high gold price because high gold price is a sign of mismanagement of the economy and destruction of the value of paper money. That’s why they are doing everything they can to keep it down. The physical market is strong and there is constant demand, but the paper market is thin . . . and there you see the manipulation. There’s a $10 move up and a $10 move down because they are playing with it. It won’t last. At the end of the day, they are going to have a much bigger problem to solve. At one point, the gold market will totally erupt.”
What could cause the gold market to erupt? Look no further than the bond market says von Greyerz, “I had somebody, in the last few days, say to me we should probably write off all that debt, and forget about it and write it off, but there is another side to every balance sheet. If you write the debt off, what about all the people lending against that debt? What about all financial institutions that are leveraged against that debt? You are talking about government bond market of something like $60 trillion. The total bond market worldwide is over $100 trillion. So, if you think about that $60 trillion just in government debt, then you look at what the investors have done with that debt. That is collateral for leveraging 3, 4, 5, 10, 20, 40, 50 times, depending on the institution, and if the values of that debt start declining and it is guaranteed to decline . . . and we haven’t even talked about the derivatives, the combination of all that, and the leverage of the implosion will be so big the world will never cope with that.”
So, if so-called collateral of the bonds (debt) is impaired, that leaves gold as the last man standing as the anti-debt. Von Greyerz contends, “The trigger will never be gold. The move up in gold is the consequence of these problems. The trigger can be anything. It can be a little bank. It can be Greece. The big moves will be when people realize these bond markets are just a massive bubble and it’s money and paper that can never be repaid. That is when the real problems are going to start. . . .Our clients are buying gold for wealth preservation purposes, not as an investment and not to speculate. They hold gold as insurance.”
Egon von Greyerz stores gold for clients in super-secret vaults, but he also sells physical gold at GoldSwitzerland.com. Von Greyerz predicts counterfeiting gold bars will be a big problem when the gold price takes off again. He says the counterfeits are very good, and they will burn investors who are not careful. He thinks everyone who can afford to should hedge with gold or silver.
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Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.