by Egon Von Greyerz, Gold Switzerland:

There are lies, damned lies, and economists. Whether these economists work for the government or a bank, they spend all their time on the computer extrapolating current trends with minor adjustments.

If you want to understand the future, don’t spend your life preparing and constantly revising an Excel sheet with masses of economic data. Collective human behaviour is extremely predictable. But not by spreadsheet analysis but by studying history.

HISTORY IS A BETTER FORECASTER THAN ECONOMISTS

There just is nothing new under the sun. So why is there so much time and money wasted around the world to make economic forecasts that are no better than a random job by a few chimps?

Instead, give some lateral thinkers a few history books and let them study the rise and decline of the major empires in history. That will tell them more about long term economic forecasts than any spreadsheet.

After a 50 year decline of the US economy and the dollar, we still hear about the V-shaped recovery being imminent.

On what planet do these people live who believe that a world on the cusp of an economic and social collapse is going to see a miraculous recovery out of the blue.

This is the problem with a system that is totally fake and dependant on constant flow of stimulus even though it has zero value. Most people are fooled and believe it is for real.

ALL EMPIRES END WITH COLLAPSING CURRENCY AND SURGING DEBTS

We are now in the final stages of the end game. The end of the end could be extended affairs or they could be extremely quick. Most declines of major cycles are drawn out and this one has lasted half a century. During that time the dollar is down 50% against the DM/Euro and 78% vs the Swiss franc. And US debt has gone up 65x since 1971 from $400B to $26T. A collapsing currency and surging debts are how all empires end.

But the end of the end has also been drawn out and started in 2006 with the Great Financial Crisis. The financial system was on the verge of collapse in 2008 but was miraculously rescued with tens of trillions of dollars in printed money and guarantees.

Central banks have since then frenetically kept the party going by manufacturing worthless paper money. The music should have stopped in 2008 but the participants are still dancing on the grave of a system that is about to succumb.

The degree of the coming disintegration of the world economy will only be known with certainty by future historians. What is clear though is that we are seeing the end of a major cycle. What we will experience next is not just the fall of one nation but of most nations on earth, both advanced and developing countries. Debt is a global problem that virtually every country is seriously affected by. When the financial system crumbles so will world trade.

WHAT WILL HAPPEN NEXT?

Asset Bubbles can only end in one of two ways: Either they Implode or they Explode

The principal bubbles we are here talking about is the financial system, stock markets, bond markets, and property. So in principle, we are looking at two options for this era to end.

The net result is always the same although the Explosion finale will be the more violent and lead to a quicker massacre than the Implosion.

Explosion

The risk of an Explosive end is very high. That would most probably involve acute problems in the banking system leading to a major bank defaulting, say Deutsche Bank. This would spread throughout the whole banking system like wildfire and obviously also affect the derivatives bubble of $1.5+ quadrillion. It would happen so quickly that central banks wouldn’t be able to print money fast enough to stop it. In any case, the whole financial world would know at that point that any freshly printed money would have ZERO value and therefore ZERO effect.

An Explosive outcome of this 100-year bubble-era would clearly be cataclysmic for the world. It would lead to a global deflationary depression of a magnitude never seen before. It would also take life back to a level of devastation and deprivation that would be unimaginable today.

Implosion

The only difference with an Implosive outcome is that it would take longer and therefore involve both hope and pain as desperate central banks create trillions and quadrillions of worthless dollars, euros etc to temporarily keep the balloon inflated.

Even though this process would be more drawn out, it would also fail in the end. First, there would be a brief period, maybe a couple of years, of hyperinflation before it would end in a deflationary collapse.

So these are the two options. There is absolutely nothing that can stop it. Well, we always have Deus ex Machina of course. Yes, miracles can always happen and the world would certainly need one this time. But sadly the odds are not in favour of these kinds of wonders.

WHAT WE KNOW

• Coronavirus is a convenient excuse but not the cause of the current problems. CV was a catalyst but the real crisis this time started in Aug-Sep 2019 with the Fed and ECB panicking.

• The real problem is excessive debt at all levels of the economy, sovereign, corporate, financial, and personal. Governments and CBs have created the debt and are now desperately trying to remedy their mistake by doing more of the thing that created it all. As Einstein said, “We cannot solve our problems with the same thinking that we used when we created them”.

• But CBs have no other tools. Rates are already zero and making them negative means you would have to pay for lending money to a bankrupt borrower. There are clearly more attractive investments which I will discuss later.


• Unemployment is currently in the 100s of millions globally. Many people now earn more by not working and would be allergic to having to work for the money in the future. Also, a high percentage of the lost jobs will not come back in the world.

46 million Americans, almost 30% of the US workforce, have filed unemployment claims since CV started.

ILO (International Labour Organisation) estimates that almost 50% of the world’s labour force, in particular in developing countries could lose their jobs.

• Businesses, big and small, are failing. 1000s of companies are going under in all sectors. Total losses will easily be in the $trillions.

As an example, the whole travel industry is on the verge of a total collapse. Carnival the cruise business just announced a $4.4 billion loss and the sale of 6 major cruise ships. Airlines and hotels are either going under or losing fortunes. Global tourism is a $5T market and with indirect support businesses making a $9.2T contribution to global GDP. Just imagine, here is an industry that represents 11% of global GDP that is hemorrhaging and will not recover in this decade at least.

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