Below is an abridged version of an article by Egon von Greyerz of GoldSwitzerland.com about the greatest financial crisis, potential for hyperinflation and the role of gold as an investment.
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A hyper-inflationary depression has always been the inevitable end to the biggest financial bubble in history and, this time, it will be global. Hyper-inflation will spread from country to country just as the coronavirus has, starting most likely in the U.S. and within the EU, quickly followed by Japan and most other developing countries.
COVID-19 Is Just the Catalyst
The crisis that the world is now encountering has not been caused by the COVID-19, it is just the catalyst. The real cause of this crisis is the action of the Central Banks. They have been pouring fuel on the fire for 50 years by continuously reducing the cost of money until it became free in 2008 when rates were reduced to zero and, since then, we have seen negative rates around the world, which are not just a total paradox but also absolute lunacy.
Governments around the world have issued virtually unlimited debt (which will never be repaid) increasing the risk of lending to them exponentially. Instead of much higher rates to reflect the massive increase in debt, plus severely elevated risk, central banks have got away with defying the laws of nature by falsely manipulating rates and, as such, the cost of money today neither reflects the risk nor the demand. All it represents is malicious manipulation to serve governments and their masters the central bankers. Unfortunately, like all fake markets, this one will also end, not just badly, but catastrophically.
Now We Have the Perfect Storm
We now have the perfect storm. Virtually every government in the world is now committing billions and trillions of dollars, euros, etc., in fruitless attempts to save a collapsing world economy. Businesses are hemorrhaging cash and so are individuals. Estimates predict a 40-50% fall in Q2 2020 GDP in the U.S. and this erosion we are experiencing is the start of a secular downturn which soon will become a hyper-inflationary depression.
Very soon, we will see debt around the world come under enormous pressure:
- Borrowers will start defaulting, which will lead to bonds crashing and rates surging.
- Central banks will then lose control of interest rates as long rates first go up and soon pulling the shorter rates up. Rates can easily go to 15-20%.
- Many bonds will go to zero and rates to infinity, since the majority of the $1.5 quadrillion derivatives market is interest related, this market will also blow up.
All this will lead to unlimited money printing and currencies crashing fast to their intrinsic value of zero. At that point, the entire financial system will be unrecognizable and parts of it non-existent. All of this could happen very quickly, possibly within the next 6 -18 months…
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…to continue reading the full post of this abridged article, visit munKNEE.com.
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Chart 1: Gold Price – 1-Year
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