fredag 17 februari 2012

Money printing or Austerity - Really today the only options awailable before the current financial system collapses

Today Egon von Greyerz told King World News that the consolidation in gold is ending and gold will begin a major upside advance starting next week. Von Greyerz also discussed the very serious conditions facing Europe and the United States. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Here is what von Greyerz had to say about what is happening: “I’m looking at the world getting more problematic every day. Let us just take Greece as an example. People say Greece is small and it is small, but it’s very significant. You are seeing riots in Greece. Those riots are due to austerity.”

If there is a formal default, there is no option for the banks. Jim Sinclair has been talking about this, US banks are carrying the biggest part of these CDS’s....

“The US banks, in total, have $250 trillion in derivatives. Of the total derivatives, maybe $30 trillion is in the form of credit default swaps. So that would be an absolute disaster for the US banks and for the US economy.
We have pressures coming out of Europe, but in the US we see no austerity whatsoever. What is the US doing? The US is basically increasing their borrowings by $2 trillion per year. $2 trillion is the same as the tax revenue of the US. They are borrowing as much as their tax revenue and they will never be able to repay the debt.

So the US is going in the other direction. No austerity, instead spending themselves into bankruptcy. This will soon have an effect on the US economy, bond market and the US dollar. The fact that the US is not downgraded to junk is just ridiculous. They should be. But of course the rating agencies don’t dare to do that.

We are in a situation that cannot be fixed. It may lead, as I’ve been saying, to a total collapse of the financial system. Before that happens, governments will try to print unlimited amounts of money. This will result in currencies worldwide losing their value and this will be reflected in the price of gold.”

Von Greyerz also added:

“The ECB and the eurozone governments are working on ring-fencing, but you can’t ring-fence these markets. These markets are international and totally interconnected. If Greece defaults, everybody will start attacking the other weak countries.

We are looking here at a situation where it is the last snowflake creating the avalanche. You only need a little bit happening in Greece and it will spread everywhere. If Greece defaults, they can’t ring-fence any other country for more than a short period of time. So they don’t dare let this to happen because it would be catastrophic for the world.

My view remains they will print money because if they fail at that we will have no financial system whatsoever. Printing money will not solve anything, but short-term it will again defer the problem and kick the can down the road.”

Inga kommentarer: