The End of a Historical Debt Cycle: Prepare or Suffer

By Egon von Greyerz

Founder and Chairman

August 22, 2023

In this extensive discussion with the Jay Martin Show, Matterhorn Asset Management’s founding partner, Egon von Greyerz, addresses the catastrophic consequences of the current (and historical) debt cycle. History confirms that such debt bubbles inevitably collapse under their own weight, leading to potential hyperinflation and an implosion of assets. While von Greyerz cannot predict the exact timing of these events (no one can), it is essential that investors inform and prepare themselves for the obvious. 

• 00:00:00 The Fall of Empires? Jay opens by asking von Greyerz his thoughts on the potential fall of the US Empire and the overlooked risks within Europe. Egon addresses the conditions typical to the end of an economic cycle and warns that the ramifications of such an unprecedented debt cycle could be catastrophic for the world.
• 00:05:00 Debt & Currency Risk. Egon ties currency risks to the debt cycle discussion. He emphasizes that debt is the overwhelming and undeniable danger to the global economy. Despite efforts by governments and central banks to manipulate credit markets and postpone pain, Egon sees no avoiding a global currency crisis. He describes an exponential phase where inflation gradually increases before suddenly skyrocketing, leading to potential hyperinflation. Ultimately, he foresees an implosion of assets in which bond values will be detrimental to the global economy. Rather than predicting exact dates, von Greyerz focuses on protecting himself and others from these risks.
• 00:10:00 Warning Signs. The conversation turns to the warning signs of the looming debt crisis, including the recent banking failures, rising credit defaults and bankruptcies. Egon also points out that inflation may be higher than officially reported, causing increased costs for everyday items. While the signs are not yet causing panic in the market, Egon argues that the continuous stream of money creation has artificially propped up the markets beyond their natural expiration dates. As a result, debt levels have skyrocketed to higher levels, which means the consequences will be greater when they implode.
• 00:15:00 Debt is Global. Von Greyerz reminds that previous debt bubbles were limited to individual countries or continents, but now every country around the world is facing a debt crisis. Global debt, officially reported at $325 trillion, is in fact much larger when factoring in the grotesque expansion of the derivatives and the shadow banking system. 
• 00:20:00 What Matters Most. The conversation turns to “safe haven” locales whereby some have the luxury and ability to live in different countries. Most people, of course, don’t have such options. For Egon, the truest safety rests with a strong support system of family and friends rather than material possessions. He suggests that changing our values and focusing on things like nature, books, and music can bring fulfillment and happiness. He also mentions the need for a shift in societal values, as the world is currently focused on materialism.
• 00:25:00 Ignored Realities. The conversation turns to more cracks in the global economy, including nations losing sight of their founding ideals and freedoms at the same time that migration problems and realities are not being realistically addressed. China, in particular, will suffer from its debt situation and speculative bubble; but it is a closed economy and perhaps easier to control, despite immense suffering within its borders. The conversation then pivots to the Ukrainian War, where Egon believes it is not a war between Ukraine and Russia, but rather a classic proxy conflict between the United States and Russia. He points out that the Ukrainian people and the Russian people do not want war; it is the leaders who are pushing for it. Peacekeeping efforts are not being prioritized, worsening the situation. Both speakers conclude that the war is detrimental to the world and Ukraine, and that a resolution is urgently needed.
• 00:40:00 War & Energy. In this section, von Greyerz addresses the relationship between the US and Europe, particularly in terms of sanctions against Russia. Von Greyerz argues that Europe is weak and simply follows the instructions of the US, while the rest of the world does not participate in these sanctions. The US has successfully separated Germany from Russia in terms of energy dependence, but this has caused unnecessary suffering for Germany. Toward this end, von Greyerz addresses the global energy crisis, marked by rising energy costs. As a result, the world will have less and more expensive energy in the foreseeable future, as renewable energy cannot fully compensate for the decline in fossil fuels. Von Greyerz reminds that there is currently no viable alternative to fossil fuels in the short term, as renewable energy sources like wind and solar are still decades away from replacing them. 
• 00:50:00  Gold Stacking Banks. Egon then explains the trend of central banks stockpiling physical gold. He argues that there is no gold rush yet, but the inflows are gradual and steady. He predicts that the real gold rush is still to come, as the world faces the biggest financial and currency collapse in history. The shift from the West to the East, particularly with the rise of the BRICS countries and the Shanghai Cooperation Organization, will have a major effect on the gold price.
• 00:55:00 The Dying Dollar. Egon closes by highlighting the devaluation of the Dollar and other Western currencies due to excessive printing, prompting a mass move away from the world reserve currency. Von Greyerz suggests that gold will be the most natural replacement for central bank reserves, emphasizing the need for a significant revaluation of gold to accommodate future demand. He believes that those who fail to recognize this shift will be left behind and face costly consequences. Von Greyerz emphasizes the need for individuals to start considering and understanding risk rather than focusing on monetary gains, as he anticipates a major perception shift in the world.