Credit Suisse & USD Policy: Signposts of Systemic Implosion to Gold Explosion

By Egon von Greyerz

Founder and Chairman

October 7, 2022

In this latest MAMChat, Matterhorn Asset Management principals, Egon von Greyerz and Matthew Piepenburg, discuss a range of current yet undeniably important as well as converging themes. This, of course, includes the significance of the most recent “Lehman moment” at Credit Suisse in the backdrop of falling markets, imploding currencies, steady inflation, heightened geopolitical risk and an increasingly beleaguered global population limping into a winter energy crisis.

Toward this end, Piepenburg addresses the implications, causes and consequences of the current strong-dollar policy behind Powell’s hawkish rate increases. The undeniably bearish ripple effects of this policy are evident in every asset class and every currency but for the USD. Of course, a temporarily strong USD has also hampered the gold price, when measured in USD. However, and as Piepenburg and von Greyerz remind, gold priced in other (i.e., non-world-reserve) currencies, has remained strong as other asset classes and currencies around the world weaken at a rapid pace. As for the USD and USD-priced gold, Piepenburg and von Greyerz address the reasons why even these current Dollar headwinds will be short-lived as the Dollar weakens and this current Greenback headwind becomes an historical and explosive tailwind for gold.

As for timing these seismic and systemic shifts in a global economy drowning in over $300T in debt within a rising rate (i.e., rising debt cost) environment, both confess that such precision/timing is a mug’s game. Nevertheless, von Greyerz and Piepenburg address near-term tipping points and risks. Foremost among such risks is the ongoing insanity of an escalating war in the Ukraine, for which the US-led West is offering zero legitimate solutions/doorways for peace as nuclear and financial brinksmanship over Ukrainian politics threatens the entire globe.

In such a disturbing backdrop, physical gold as real money will benefit those farsighted investors whose eyes are open to current realities. Nevertheless, and as always, even an historically confirmed asset like gold won’t solve all the world’s problems. Both von Greyerz and Piepenburg remind that our most valuable assets are the human connections, memories and support we build with families and friends.