“I’m seeing how massive amounts of money are within the system, and people think they are safe, but they are not.” Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also warned, “This is the illusion that people are living under, and it’s very sad. That’s not going to be the case. The banks are going to close if there is a problem, and people are not going to get access to their assets.”
“Right now the markets are in a waiting game. They are waiting for Bernanke’s Jackson Hole speech tomorrow. They are (also) waiting for the German court decision which is on the 12th of September. This is to decide if they are going to approve the ESM (European Stability Mechanism), which replaces the EFSF.”
Egon von Greyerz continues:
“Now, the EFSF is running out of money, they’ve only got about $200 billion left. Spain and Italy, only, will need about $700 billion. We know for a fact that the eurozone and Southern countries are in desperate need of additional funds.
The US is (also) running a deficit of almost $1.5 trillion a year, plus they are increasing the unfunded liabilities by more than $10 trillion a year….
So the US is running major deficits and money printing today. Will they announce official QE at Jackson Hole or not? It’s totally irrelevant. It’s going to make no difference whatsoever. The world economy will need massive amounts of money to survive. Whatever these guys say or decide in the next few weeks won’t make any difference. It (money printing) is going to come anyway.
These central banks are now leveraged to the hilt. The Bank of England is leveraged 100 times. So if they lose 1% (on their bets), they will lose everything. The Fed is leveraged 55 times. So a 2% loss, they’ve lost their capital. The ECB is leveraged 40 times.
So every central bank is massively exposed. On top of that, governments are borrowing massive amounts of money. So worldwide money is being created on a daily basis.”
Greyerz also added: “What is interesting here is in the last 100 years we have created so much debt. For the first approximately 50 years of the last century, every additional $1 of debt in the US created $4.60 of (additional) GDP. In the last 10 years, every new dollar of debt has created 6 cents of GDP.
And for the last few years we are getting negative returns. It will still end in the same way, sadly, which is a collapse of the system. All of the assets that were financed by the credit bubble will collapse, in real terms, in the next few years. In real terms, that is against gold, they will collapse.
But even if you have gold you’ve got to worry about the counterparty risk. I was recently speaking to an American investment bank. They buy gold for their very high net worth clients, and they store it with major bullion banks. I asked (them), ‘Well, what about the counterparty risk?’ They responded, ‘There is no problem whatsoever because the gold is segregated, and creditors are totally protected.’
This is the illusion that people are living under, and it’s very sad. That’s not going to be the case. The banks are going to close if there is a problem, and people are not going to get access to their assets. We have seen the cases of Lehman, MF Global and Sentinel.
Sentinel was a company that went bust. There, like in MF Global, segregated assets were used by the bank, or the financial institution, as security for trading with other major banks. So the segregated funds were not segregated at all. Recently there was a court decision saying that the banks have the right to use the assets, i.e. the stocks or the bonds or whatever other assets (customers) have, as security for their credit lines they are granting to these firms.
What I am saying to investors is protect your counterparty risk. You are not safe within the financial system, even if you are told you are. There is only one way to protect yourself, and that is to store your assets, what we are talking about is mainly gold and silver, outside of the banking system.
You have to have direct control of it. I’m seeing how massive amounts of money are within the system, and people think they are safe, but they are not.”