Greyerz: Global Debt Over $200 Trillion, Gold Demand Surges

Today Egon von Greyerz spoke with King World News about the, “... most massive Ponzi scheme the world has ever seen.”  He also stated, “... this will clearly end in total disaster.” Greyerz, who is founder and managing partner at Matterhorn Asset Management, also warned about a developing situation which, when it becomes apparent, will create, “... panic in the gold market because nobody will hold paper gold anymore.”

Here is what Greyerz had to say:  “US deficits are set to continue to rise, no matter who wins the election.  This means a great deal more money printing.  Right now the US has $40 billion per month of QE in the form of buying mortgage-backed securities, and with ‘Twist’ another $45 billion.  But you have to also add the $145 billion monthly budget deficit.”

“Right now the US deficit is running at roughly $1.5 trillion per year.  So in total, the US is already printing $200 billion each month, and that will of course increase.  The US debt is up $10 trillion in ten years.  As revenues decline and expenditures increase, the pressures on the US economy will be enormous, and the deficit will increase substantially.

In a couple of years time, we will have $20 trillion, at least, of US debt....

“$20 trillion of US debt, think about that for a moment.  US tax revenue is now around $2.3 trillion.  If you examine $20 trillion of debt, and factor in a dramatic increase in interest rates in coming years, as money is printed and inflation enters the picture, an interest rate of 12% is very likely. 

Take 12% of  $20 trillion and you get $2.4 trillion per year just in interest.  That figure is more than the current tax revenue of $2.3 trillion.  So the US will reach a point, in the not too distant future, where the total debt servicing will be equal to the total tax revenue.  That is of course unsustainable.

If you look at global debt, in the last ten years it is up from $80 trillion, to $200 trillion.  These are figures which are hard to comprehend.  Global debt has increased $120 trillion in just ten years.  So when you look at the so-called prosperity of the world, it is all based on debt.  So it is all an illusion.

Central bank balance sheets are also exploding.  They have increased 16%, compounded, per annum.

What are the central banks doing?  Just like the Fed, they are buying toxic debt which has zero value.

What are they doing to buy that?  They are printing worthless pieces of paper, they call it ‘money,’ and with that ‘money’ they are buying another worthless piece of paper which they call an ‘asset.’ 

So it is the most massive Ponzi scheme the world has ever seen, and this will clearly end in total disaster.  It will end with the implosion of debt and the implosion of assets.  But before that, we will have hyperinflation.  As governments continue to print, we will have hyperinflation.

Hyperinflation comes from a collapsing currency.  Take Iran, that is a good example.  Iran’s currency is now down 70%, and inflation is now estimated to be running at 50% per month.  This is what we will see all over the Western world in coming years.  I’m absolutely certain about that.”

Greyerz had this to say regarding gold: “So we are holding gold to preserve wealth because gold is the ultimate way of protecting your assets from total destruction as a result of the money printing.

 Because the financial system is bankrupt and governments are bankrupt, any asset that you hold within that system is at risk.

This is why you have to have physical gold and you must store it outside of the banking system.  Eric Sprott came out with a superb report detailing the official figures we are seeing regarding production and purchases of gold.  His conclusion, quite correctly, was that they are not telling the truth in those official reports being published.

He (Sprott) is looking at an annual deficit of 2,500 to 2,600 tons of gold.  I have talked about this many times, and Eric puts it superbly in his report, that the 30,000 tons which central banks are holding in gold reserves, with the Western central banks holding about 23,000 tons of that gold, are probably not there.

When that becomes apparent, there will be panic in the gold market because nobody will hold paper gold anymore.  It means that Western governments do not have adequate amounts of gold to back their money.”

Greyerz also added: “I would also note, Eric, that some of the refiners we are talking to, they are seeing business strongly increasing now, and in this environment they are actually increasing their margins and prices.  So there is clearly an increase in short-term demand.  This is why, up to now, the paper shorts in the gold market have been struggling to bring the price down.”