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 "WHY QE
WILL ACCELERATE AND GOLD WILL FOLLOW" :
Some investors are disappointed as gold only went up 7% in USD in 2012.
After having compounded at over 19% p.a. over 11 years, gold certainly should
be allowed to just gain 7% without some people calling an end to the bull
market. Those who believe the bull market is over are mainly the investors
who have missed gold going up almost 7 times in since 1999.
Let me be very clear, the real move in gold hasn�t started yet, it
is still to come.
I will summarise some of the reasons why:
1 � Gold is not an investment, it is money. And gold is the only honest
money which reveals governments� deceitful actions in destroying the value of
paper money by printing unlimited amounts of it.
2 � In addition to massive increases in government borrowing
worldwide, world central banks� balance sheets have exploded since 2007 and
now stand at $15 trillion.
3 � Most of the money borrowed or printed has been used to save the
banking system and very little has gone into the real economy. In spite of
this, the banking system is no sounder than in 2007 and nor is the world
economy.
4 � The US government is paying $1 billion per day in
interest. If interest increased from 2% to 3% on this debt, the US debt in
2022 would be $35 trillion. If rates went up to the historical average level
of 5%, the debt, in 10 years� time, would be $45 trillion. And this is with
extrapolating current deficits. But deficits are likely to accelerate and so
is Federal debt.
5 � Fed is indicating that they might stop QE in 2013. That is absolute
nonsense. The Fed cannot and will not stop QE. If they did,
who would buy the perpetual issuance of virtually worthless government debt
that can never be repaid in today�s money?
6 � In many European economies, government makes up 50-60% of the
economy. In the US it is now 40%. As Governments worldwide, take an ever
greater part of their domestic economies, it makes it practically impossible
to grow the economy and repay debt for the shrinking private sector.
Governments are non-productive and only consume resources. The only
thing they produce extremely well is printed money.
7 � Printed money is like heroin, the patient needs bigger and bigger
doses until it finally kills him or makes him totally dysfunctional. And this
is what is happening to the world economy. Government benefits are increasing
and the people are in need of even greater stimulus as unemployment
escalates.
8 � The banking system has not been repaired in spite of receiving $
trillions from governments. BoA and other US banks just had to pay out $20
billion linked to their MBS (Mortgage Backed Securities) activities. MBS are
a part of a $1.2 quadrillion derivative disaster waiting to happen. That will
lead to exponential money printing.
9 � The Basel III regulations for banks have been weakened and
postponed again. Banks around the world cannot cope with any serious
tightening of the rules. Even stocks and Mortgage Backed Securities
(MBS)! are going to count against their capital requirements. And
final implementation is delayed until 2019. Hopefully the banking system will
still be there then.
10 � When this crisis is over most people will not have a pension
that they can live on. 46% of Americans have less than $10,000 in retirement
savings and 29% have less than $1,000. Also there will be fewer and fewer
workers to pay for each retired person. The Japanese demographics are
horrific with their aging population.
11 � Real unemployment is now 20-25% in many countries including the
US. Youth unemployment is almost 60% in Greece and Spain and up to 50% in
many countries. This is a major disaster waiting to happen not just
financially but also in respect of social unrest, riots etc.
12 � For all of the above problems, unlimited money printing will
take place. The problem in the case of the USA is that as markets start to
anticipate this, they will dump the dollar which in turn will accelerate the
printing presses and lead to hyperinflation. That outcome is virtually
guaranteed.
13 � Gold (and silver) will continue to reflect this destruction of
paper money but at an accelerated pace. As gold dipped at the end of December
and early January, Swiss refiners received major orders and now have
unexpected delays in production.
14 � As I have stressed time and time again, the selling is in the
100 times bigger paper market in gold and silver. The physical market is
seeing major and strong demand. As more investors ask for delivery the paper
market will panic and gold and silver will surge. This is likely to happen
within the next 12 months.
15 � For wealth preservation purposes investors must hold physical
gold and silver and store their precious metals outside the banking system.
