Today the man who 66 days ago remarkably predicted the collapse of the euro against the Swiss franc warned King World News that events are now in motion in Greece and elsewhere that will create worldwide chaos and massive problems for mankind.
Egon von Greyerz: “Eric, today we are standing on the cusp of life-changing events, which are unfolding worldwide. It’s ironic that the catalyst could be a Greek drama. With the way the negotiations are unfolding between the Greek Finance Minister, Yanis Varoufakis, and the troika, it’s hard to know if this is a Greek tragedy or a comedy.
The EU President just said that ‘Greece risks bankruptcy if they continue with the strategy.’ Well, Varoufakis responded, ‘We are already bankrupt.’….
“It’s actually refreshing to hear a finance minister admit that a country is bankrupt, especially since virtually every major Western economy, including Japan, is bankrupt. There are a lot of finance ministers who should own up to this. And isn’t it fascinating that a relatively small economy can now take a bankrupt world down?
DEUX EX MACHINA
I wrote an article 4 years ago titled DEUX EX MACHINA. This expression comes from the Greek tragedies. When everything looked hopeless on stage, a little figure, who represented God, was lowered down with a machine onto the stage to solve the problems. Are we going to see that today? I doubt it very much because the Greek and the world dramas can never have a happy ending.
What we are now seeing, Eric, is the domino effect of almost every single economy getting into problems. It’s a world under pressure, with debts that can never be repaid. There is also a lack of demand, which is creating deflation and deflation is the number one enemy of heavily indebted nations.
In the first 35 days of this year, 15 central banks have already lowered interest rates and many countries now have negative interest rates. That is disastrous. Pension funds and insurance companies cannot survive with negative interest rates. Right now Swiss insurance companies don’t know what to do with their cash because if they put it with a central bank they have to pay 0.5 percent. Of course they don’t yet understand that they should buy gold but they soon will, Eric.
Currencies Collapsing
And the consequences of interest rates being zero or negative is that currency after currency is falling dramatically. It’s not just the yen, euro and the ruble. Every day more currencies collapse. The Ukrainian currency went down 35 percent yesterday. The Turkish lira also fell to new lows.
And as the Chinese economy and financial system comes under continued pressure, they are also likely to let the yuan decline in value. That would accelerate the vicious worldwide deflationary cycle. So, Eric, what I have forecast about many currencies going to zero is now actually happening right in front of our eyes.
These competitive currency devaluations has recently created a surge in the price of gold in currency after currency. And as the dollar eventually turns down, gold will also surge in dollar terms.
Circling back to China, their economy is now under real pressure. Factory prices fell by over 3 percent in December and house prices by 4 percent. New construction fell by 30 percent over a 3-month period. We have to remember that property only represented 4 percent of GDP in 1998. Now property represents 15 percent of their GDP.
China’s $5 Trillion Investment
China spent $5 trillion on fixed investments and infrastructure in 2014. That’s more than Europe and the U.S. combined. As this investment activity comes to a halt, it will not only have serious repercussions for China but also for the whole world. Remember, it has been Chinese demand that has helped keep commodity prices elevated. That is now coming to an end. If you look at the Baltic Dry Index, that’s another sign of this. It is now down to 1986 levels and it’s down over 90 percent from the peak.
On A Path To Worldwide Chaos
So will we see DEUX EX MACHINA? No. That will not be how the world will be saved. But what we will see is a massive worldwide money printing program which will dwarf the 1.1 trillion euros that was just launched by the ECB. But this time the money printing will not have any effect on the world because you can’t push on a string forever. This will, however, send the price of gold soaring.
Eric, world markets are now on the cusp of a major turn. Global stock markets are topping and will soon start a secular bear market. The overvalued dollar will also soon head lower and gold will start its major rise. But the problems in the world will be much bigger than just economic because events are now in motion in Greece and elsewhere that will create major worldwide chaos and massive problems for mankind. Governments should focus on this tragic situation, which is the real crisis, rather than simply trying to prop up the banks.”
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