With investors around the world concerned about the tremendous turbulence in global markets, including gold and silver, today Egon von Greyerz warned King World News that “the world is now on the edge of total collapse.” Below is what Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this powerful interview.
Greyerz: “Eric, the whole world is panicking over Bernanke’s hint that the Fed might start tapering QE. Before we look at why that will be impossible for the Fed to do for any period of time in the U.S., let’s first look at other areas of the world where we have major problems.
Fitch just came out and said that China’s credit model is falling apart. The liquidity in China is under tremendous pressure. The shadow banking system is now at $2 trillion and 50% of debt is rolled over every 3 months, and 75% of China’s debt is rolled over every 3 to 6 months.
So short-term things are very dangerous….
“Credit has grown in China from $9 trillion to $23 trillion since the Lehman Brothers crisis. Now total credit is over 200% of GDP. Home prices are an absolutely massive 16 to 18 times income. But the massive credit creation the world has witnessed is leading to diminishing returns. Today, 1 new yuan of credit creates only .15 yuan of GDP. In 2008 that same credit created .85 yuan of GDP.
We are seeing the same thing in the US. Both China and the US are printing more and more money and not getting any return for it. So this is becoming a much more dangerous situation, and because of this liquidity squeeze in China, the entire global financial system could become unhinged. All of this will lead to more money printing and pressure on the currencies. But regardless, China is certainly dealing with a very high rate of inflation at this point.
Of course Japan is even worse, Eric. You have collapsing balance of payments and collapsing savings. You also have a population which is collapsing. Population will go from 125 million to 90 million over the next 35 years. There won’t be enough young people to pay for the old.
And you have falling bond markets, which will eventually collapse in Japan. You also have surging debt with all of the money printing. Japan can’t even afford rates now with their terrible financial position, but interest rates are headed higher anyway.