Today Egon von Greyerz spoke with King World News about the financial destruction that investors will witness in 2013 and in coming years, and how gold and silver will fare in this incredibly volatile environment. Here is what Greyerz, who is founder of Matterhorn Asset Management in Switzerland, had this to say: “Eric, 2012 was a tough year for some investors since gold has not really done much in dollar terms. Gold is also only up a bit in other currencies, and silver has done slightly better, being up around 7% in dollar terms, and a little better in euros.”
Egon von Greyerz continues:
“But this is a time not to focus on the short-term, but rather investors should instead be looking at 2013 and beyond. I’ve stressed time and time again that the link between money printing and the gold price is what people should be keeping an eye on.
I think that link will be even more pronounced in coming years, starting in 2013….
“If you look at the last 6,000 years, around $8 trillion of gold has been produced. If you then look at the credit creation just in the last few decades since Nixon decided to abolish the gold backing of the dollar, the US has gone from $430 billion in 1971 in debt, to $16.4 trillion today.
Since 1971, this financial system has become a paper money circus. Just since 2006, when Bernanke became Chairman of the Fed, the debt in the US has gone from $8 to $16 trillion. So what I am saying is it took 6,000 years to produce $8 trillion of real money (gold), and Bernanke, just in the last six years, has produced the same amount in terms of fiat money.
This is an indication of what’s happening in the world. There is no real money anymore except for gold. But most people don’t understand that gold is money. So what investors need to focus on today is the protection of their assets against this massive onslaught of money printing that I expect will start in earnest in 2013.
It (money printing) will happen in the US, it will happen in Europe, and it will certainly happen in Japan. So now let’s look at the major investment markets and what’s likely to happen. These are essentially the markets where investors have all of their money because, as we know, just 1% of financial assets that are in gold.
The global stock markets are down in real terms, which is against gold, around 80% over the last 12 years. The S&P is down 83% for example. But if we are looking at 2013, we could have a small rise in global markets at the very beginning of the year. But thereafter I expect global stock markets to collapse.
In my view we are going to see at least another 80% to 90% decline in stock markets over the next few years vs real money (gold). So in real terms, investors are going to suffer enormous damage by staying invested in global stock markets. It’s the same with the property markets. In real terms, against gold, real estate is down around 75% in the last 10 or 12 years. I see another 70% to 90% decline in real estate vs gold over the next few years.
Then you take the bond market, which is one of the biggest financial markets in the world, and also the biggest bubble, not only in the US but in every country in the world today, and looking at the 30-Year bond, it’s down 70% against gold in the last 12 years.
Interest rates are supposed to reflect risk, but with zero percent interest rates in many countries today, it looks like lending to governments is risk-free. But how can it be risk-free when no government will ever be able to repay this debt? So bonds are not a place to have exposure over the next few years. I expect the bond market to fall another 90% vs gold in coming years. Bonds may even fall 100% vs gold in several sovereign debt markets because governments are probably going to default in many countries.
So outside of gold and silver that leaves cash. Well, if you look at most currencies, they are down more than 80% against gold over the last 12 years. With the accelerated money printing we are going to see in the next few years, and the likely hyperinflation, I would expect cash to fall another 95% to 100% against gold. In many countries cash will be worthless. Cash will definitely be a very poor investment in coming years, and if you add the fragility of the banking system and the risk involved in holding cash in the banking system, it’s probably one of the worst investments ever.
The bottom line is investors need to sit down and think about the likely destruction of their paper financial assets, as well as assets financed by the credit bubble. That destruction will take place over the next few years. Physical gold and silver will by far be the best protection during this period of financial destruction. As always, investors have to remember to eliminate counterparty risk. The only way to do that is to hold physical metals outside of the banking system.
What percentage should investors hold? I recommend in 2002, when gold was $300, that investors should put 50% of their assets into gold. That would now be about 85% of their assets because of gold’s outperformance vs other assets. If you ask me, is 85% in gold responsible? Well, since I see most other assets being destroyed in real terms, I think 85% is a responsible amount and a correct percentage. But I would also add that at the current price of around $1,660, I think this is another good opportunity to acquire gold at a very advantageous price.”
Article Source: Kingworldnews