Printing Money – Price of Gold – Preservation of Wealth

By Egon von Greyerz

Founder and Chairman

October 9, 2012

1. Worldwide money printing continues unabated.
2. In just 10 years, $120 trillion has been printed, making global debt $200 trillion.
3. World GDP has gone from $32 trillion to $70 trillion between 2001 and 2011.
4. Thus, a $120 trillion debt is required to produce a $38 trillion annual increase in GDP.
5. The marginal return on printed money is negative in real terms.
6. Thus, the world is living on an illusion of paper that people believe is money.
7. This illusory paper wealth will implode in the next few years.
8. The initial trigger will be the collapse of the world’s reserve currency – the US dollar.
9. The dollar is backed by $120 trillion of US government debt and probably NO gold.
10. All currencies will continue their race to the bottom and lose 100% in real terms against gold.
11. This will create a worldwide hyperinflationary depression.
12. All assets financed by the credit bubble will go down in real terms.
13. This includes stocks, bonds, property and paper money, of course.
14. The financial system is unlikely to survive in its present form.
15. The banking system, including derivatives, has total liabilities of around $1.2 quadrillion.
16. With a world GDP of $70 trillion, the world is too small to save a financial system which is 17x greater.
17. This is why there will be unlimited money printing and hyperinflation.
18. The only asset that will maintain its purchasing power is gold. Click here for the chart.
19. Gold has been money for 5,000 years and will continue to be the only currency with integrity.
20. Western countries’ 23,000 tons of gold is probably gone. See the recent article by Eric Sprott.
21. The consequence is that most of the gold in the banking system is likely to be encumbered.
22. This means that Central Banks one day will claim it back against worthless paper gold IOUs.
23. Thus, gold and all other assets within the banking system involve an unacceptable counterparty risk.
24. Gold should be held in physical form and stored outside the banking system.