Egon von Greyerz, founder
of Goldswitzerland.com (Matterhorn Asset Management AG) and member
of the board of directors of Goldbroker.com published an article
headlined "3
Incredibly Key Charts For Battered Gold & Silver Bulls" :
"Last week we talked
about all of the storms on the horizon. Now we see that currency war
discussions have broken out again. Abe, the Japanese Prime Minister, is doing
everything he can to suppress the value of the yen, and therefore he’s going
to have Japan print unlimited amounts of money.
Of course the President of
the Bundesbank, Weidmann, has now begun criticizing Japan about starting
currency wars. He also said its monetary policy was totally
unacceptable. Many others have joined in this criticism. We have the UBS
Chairman, who was the former President of the Bundesbank, and Mervyn King
from the Bank of England also did the same thing.
They all say we can’t have
a deliberate policy to destroy a nation’s economy through currency
debasement. But that’s exactly what every country is doing. This is
just posturing by politicians because the game is to destroy the
currencies....
Debt in most countries has
been growing exponentially. Last year in Europe almost every single country
grew its debt. If they don’t grow the debt the political leaders will
be thrown out of office. Rajoy, the Prime Minister of Spain, had a landslide
victory a year ago. Now with austerity his approval rating is down to
15%. So we know austerity will not work.
As long as these countries
continue to run deficits, it’s guaranteed the currencies will continue to
decline in real terms, which is against gold. In 1965, Charles De Gaulle gave
a superb speech in which he said
most countries accepted that the dollar was as good as gold. He said that
will lead to the US going massively into debt.
De Gaulle, stated that “A currency system must be based on an
indisputable money base that doesn’t bear the mark of one country.” He said that “There is only one standard that meets
those criteria and that must be gold.” That was back in 1965.
A few years later De
Gaulle demanded the US pay all of their debts to France in gold. Of course as
we all know that forced Nixon to close the gold window in 1971. That was the
start of the monetary experiment and explosion in money printing in the
world, and this is only going to accelerate in the next few years.
I’ve included the gold
chart below which shows that gold is up almost 7-fold since 1999. During the
last 13 years gold has reached overbought situations a few times. We
saw it in 2006, 2008, and again in 2011. Every time gold has reached those
overbought situations we’ve seen a consolidation.
Compared to the previous
rises this has been a relatively mild consolidation. This last consolidation
has finished in my view. All of the major moving averages have caught
up nicely to the price of gold and it is now preparing for liftoff.
The balance sheets of all
central banks are continuing to grow and I’ve included a chart of the Fed’s
balance sheet (see chart below). The Fed’s balance sheet has now gone over $3
trillion. $3 trillion is an absolutely massive amount. The total
borrowings are now actually over $3.1 trillion.
So the Fed continues to
print money to finance the deficits. They are also there to finance and
backstop the precarious nature of the banking system. We’ve seen the balance
sheet of the Fed consolidating in the last year, just like gold. But now as
you can see on the chart above that it’s breaking out again and I think we
are ready for the next move higher in the Fed’s balance sheet.
What we are witnessing
right now is a perfect Ponzi scheme with the central banks buying up the
government debt. But like all Ponzi schemes it will fail and it will fail
badly. They will be constantly printing up new money to finance the debt and
as this accelerates we will see the hyperinflation I have been predicting for
quite some time.”
Not only are currencies
racing to the bottom, but so are rates. I’ve included another very
interesting chart that shows bond yields for the US, Germany and Japan. This
is a 200 year chart and it shows that rates are now at an all-time low (see
chart below).
This breaks every single
economic law there is. You can’t have unlimited credit expansion and record
low rates. This is totally unreal and unsustainable. When borrowings
are high, the rates must be high as well. This the law of supply and demand.
But governments and
central banks have temporarily suspended economic laws by artificially
manipulating rates. This will not last, that much is absolutely guaranteed.
Since governments can’t repay their debts in today’s money, bond prices will
fall dramatically.
So yields will go higher
and they will go a lot higher than what we see on the above chart, even at
the peak where interest rates were in the mid teens.”
Greyerz had this to say
regarding gold: “Looking at
gold and silver we are seeing another small pullback as both of these metals
prepare to launch. So the manipulation short-term continues. But the
continued rise of both of these metals is inevitable.
Everyone who deals in the
physical market sees strong demand whether it’s in coins or bars. I have
mentioned previously that the next target for gold will be $4,500 for gold
and $150 for silver. Eventually there will be many zeros in the price
due to the hyperinflation we will see.
So investors are
buying gold and silver to protect themselves against the destruction of paper
money. By now investors should know they must buy physical gold and silver
and they must store it outside the banking system.”
