Earth Circus... a few Golden notes-BANK World
Republishing excerpts that summarize the situation at hand.... from the recent Egon von Greyerz report--from goldswitzerland.com
This:
$2 QUADRILLION DEBT PRECARIOUSLY RESTING ON $2 TRILLION GOLD
October 28, 2022
“A Lehman squared moment is approaching with Swiss banks and UK pension funds under severe pressure.
But let’s first look at another circus –
The global travelling circus is now reaching ever more nations just as expected. This is right on cue at the end of the most extraordinary financial bubble era in history.
It is obviously debt creation, money printing and the resulting currency debasement which creates the inevitable fall of yet another monetary system. This has been the norm throughout history so “the more it changes, the more it stays the same”.
It started this time with the closing of the gold window in August 1971. That was the beginning of a financial and political circus which continuously added more risk and more lethal acts to keep the circus going.
An economic upheaval always causes political chaos with a revolving door of leaders and political parties going and coming. Remember, a government is never voted in but invariably voted out.
What was always clear to a few of us was that the circus would end with all of the acts crashing virtually simultaneously.
And this is what is starting to happen now.
We have just seen a political farce in the UK. Even the most talented playwright could not have created such a wonderful merry-go-round of characters who we have seen coming in and out of Downing Street.
Just look at the UK Prime Ministers. First there was David Cameron who had to resign in 2016 due to mishandling Brexit. Then the next PM Theresa May had to go in 2019 since she couldn’t get anything done, including Brexit. Then Boris Johnson won the biggest Conservative majority ever but was forced out in 2022 due to Partygate during Covid.
In came Liz Truss as PM in September this year but she only lasted 44 days due to her and her Chancellor’s (Finance Minister) mishandling of the mini budget. They managed to crash the pound and UK gilts (bonds) on the international markets leading to the Bank of England having to step in. Both gilts, derivatives and UK pension funds were at the point of implosion.
And now the carousel has gone full circle with Rishi Sunak the ex-Chancellor taking the helm as Boris bailed out. Boris clearly decided that speeches and other private engagements would be more fruitful than being part of the circus. But he will most certainly attempt to come back.
What a circus!
It just shows that at the end of an economic era, we get the worst leaders who always promise but never deliver.
In a bankrupt global system, you reach a point when the value of printed money dies and whatever a leader promises can no longer be bought with fake money which will always have ZERO intrinsic value….”
UNLIMITED PERSONAL LIABILITY
“No banker, no company management or business owner ever has to take the loss personally if he makes a mistake. Losses are socialised and profits are capitalised. Heads I win, Tails I don’t lose!
But there are honourable exceptions. A smaller number of Swiss banks still work with the principle of unlimited personal liability for the partners/owners. If the global financial system and governments applied that principle, imagine how different the world would look not just financially but also ethically…”
GLOBAL DEBT $300 TRILLION PLUS $2.2 TRILLION OF DERIVATIVES & LIAB.
“Just look at the last 50 years since 1971. Globally governments and central banks have contributed to the creation of almost $300 trillion of new money plus quasi money in the form of unfunded liabilities and derivatives of $2.2 quadrillion making £2.5 trillion in total.
As debt explodes, the world could easily face a debt burden of $3 quadrillion by 2025-2030 as the derivatives and unfunded liabilities become debt.”
DERIVATIVES – THE MOST DANGEROUS FINANCIAL WEAPON CREATED
“Derivatives is not a new instrument. For example during the Tulipomania bubble in Holland in the 17th century, it was possible to trade options on tulip bulbs.
Today the financial system has developed derivatives to become such a sophisticated instrument that virtually no financial transaction can take place without involving some form of derivatives.
But the biggest problem with derivatives is that the quants that create them don’t understand the consequences of their actions. And senior management, including boards of directors, haven’t got a clue of the massive risk derivatives represent.
The collapse in 1998 of LTCM (Long Term Capital Management), set up by Nobel Prize winners and the 2007-9 Sub-Prime crisis is a clear proof of the ignorance of the risk of derivatives.
As an aside, it seems that anyone can receive a Nobel Prize today. Just take Bernanke, he has been awarded the Nobel Prize in economics. Remember that Bernanke, when he was Head of the Fed, printed more money than anyone in history!
What we have to understand is that the committee which chooses the winner of the Nobel economy prize is the Swedish Riksbank (central bank), filled with Keynesian money printers!
Need I say more?
Derivatives have been a massive profit earner for all banks involved. They were initially created as defensive hedge instruments but today they are the most dangerous and aggressive financial instrument of destruction.
Just over 10 years ago, global derivatives were $1.2 quadrillion. Then the Bank of International Settlements (BIS) in Basel decided to halve the values to $600 trillion overnight by changing the basis of calculation. But the $1.2Q risk was still remained at the time…”
CENTRAL BANKS RESCUING UK AND SWISS BANKS
“Just a couple of weeks ago, the UK and thus the global financial system was under severe pressure due to pension funds’ interest derivatives collapsing in value after the UK Budget. Pension funds are globally on the verge of collapse due to rising interest rates and insolvency risk. In order to create cash flow, the pension funds have acquired interest rate swaps. But as bond rates surged these swaps collapsed in value, requiring either liquidation or margin injection.
And thus the Bank of England had to support the UK pension funds and financial system to the extent of £65 billion to avoid default.
In the last couple of weeks we have seen a dismal situation in Switzerland. Swiss banks, through the Swiss National Bank (SNB) have received $11 billion ongoing support through currency swaps (a form of dollar loans) from the Fed.
No details have been revealed of the Swiss situation except that 17 banks are involved. It could also be international banks. But most certainly the ailing Credit Suisse is involved. Credit Suisse just announced a 4 billion Swiss francs loss.
What is clear is that these UK and Swiss situations are just the tip of the iceberg.
The world is now on the verge of another Lehman moment which could erupt at any time…”
CENTRAL BANKS NEED TO VACUUM $2 QUADRILLION DERIVATIVES
“These derivatives which some of us now estimate to be over $2 quadrillion (not $600b reported by BIS) are what will bring the financial system down.
Every derivative includes an interest element. And the construction of all derivatives did not foresee the major and rapid rise in interest rates that the world has seen. Remember Powell and Lagarde calling inflation transitory just a year ago!”
WITH OVER $ 2 QUADRILLION DEBT, PROTECTION IS CRITICAL
“This article is not directly about gold. No, it is about the disastrous consequences of governments’ deceitful mismanagement of the economy and of your money. But based on history, gold has been the best protection or insurance against such mismanagement.
Why do 99.5 % of all investors in financial assets avoid the investment that is continuously backed and supported by every government and every central bank globally…”
Egon von Greyerz continues…
“What very few investors know, partly because governments are suppressing it, is that gold is the only money that has survived throughout history. Every other currency has without fail gone to ZERO and become extinct.
With this perfect 100% record for gold, it certainly is surprising that virtually nobody owns it!
Investors don’t understand gold or its relevance. There are many reasons for this.
Governments hate gold in spite of the fact that all their actions make gold appreciate considerably over time.
They are of course totally aware of the fact that their totally inept management of the economy and of the monetary system, destroys the value of fiat money.
This is why it is in their interest to conceal their mismanagement of the economy by suppressing the value of gold in the paper market.
But investors ignorance of gold and reluctance to buy it will very soon go through a tectonic change.”
OVER $2 QUADRILLION OF LIABILITIES RESTING ON $2 TRILLION OF GOLD
“Total gold ever produced in the world is $10.5 trillion. Most of this gold is in jewellery. Central banks around the world hold $2 trillion. That includes $425 billion that US allegedly hold. Many people doubt this figure.”
So with over $2 quadrillion (2 and15 ZEROS) of debt and liabilities resting on a foundation of $2 trillion of government-owned gold that makes a gold coverage of 0.1% or a leverage of 1000X!
So that is clearly an inverse pyramid with a very weak foundation. A sound financial system needs a very solid foundation of real money. Quadrillions of debt and liabilities can not survive resting on this feeble amount of gold. If gold went up 100X to say $160,000, the coverage would be 10% which is still hardly acceptable.
So the $2 quadrillion financial weapon of mass destruction is now on the way to totally destroy the system. This is a global house of cards that will collapse at some point in the not too distant future.
Obviously Central Banks will first print unlimited amounts of money, buying up to $2 quadrillion of outstanding derivatives, turning them to on balance sheet debt. This will create a vicious circle of more debt, higher interest rates and higher inflation, with probable hyperinflation as debt markets default.
No government and no central bank can solve the problem that they have created. More of the same just won’t work.
“So these are the gigantic risks that the world is now facing.
Gold stands as the sole protector of a sound currency system and the only money which has survived throughout the ages.”
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45
Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 80 countries.
Articles may be republished if full credits are given with a link to GoldSwitzerland.com.