Greyerz: “Eric, I’m looking at the disconnect in the world and it’s becoming more exacerbated. Let’s look at some examples: Stock markets worldwide are booming, but these booming markets have nothing to do with economic prospects. Prospects in the world are worse than ever, and this includes the US, Europe, Japan and China. None of these countries have a booming economy. What they have is massive debt and accelerating deficits.
The Baltic Dry Index is around 900, and is another indicator of the disconnect. The peak of the Baltic Dry Index was around 11,000 about 5 years ago. This shows you what is really happening with global trade and economic activity....
Continue reading the Egon von Greyerz interview below...
“The shipping index hasn’t shown any signs of an upturn in the last year. It trades about 90% lower than it was five years ago. If we look at Japan, the yen is down 30% in the last year, and the Nikkei is up 70% since November.
As we know, government debt in Japan is 200% of GDP which is the highest in the world. Total debt in Japan is around 500% of GDP and it’s accelerating. The Japanese bond market is also a disaster and will only get worse. Eventually Japanese bonds will become worthless.
Eric, what we are seeing here with the booming stock markets and weak currencies is a clear sign of the hyperinflation that is guaranteed to come. The booming stock market is the first sign of hyperinflation. That is always the case.
As a the currency continues to fall, inflation in the economy will only increase. So starts the vicious circle of falling bond prices and currencies, leading to a hyperinflationary depression. It looks like Japan will be the first to encounter this, but many will follow.
The US stock market is also booming due to printed money. It has nothing to do with the economic prospects in the US whatsoever. The US deficit is continuing to increase and the debt is looking like it will increase by $1.5 trillion. The dollar is temporarily stronger, only because other currencies are weaker. Investors are chasing yield in this environment. Junk bonds are now yielding 5%. In 2008 junk bond yields were 20%. This is another sign of the hyperinflation that is coming.
Another disconnect is the gap between the rich and the poor. As the masses continue to receive food stamps, social security, etc, worldwide the rich are benefitting from all of the money printing. This massive gap that is continuing to widen is very dangerous for the world going forward. But we will see an acceleration of the money printing in both Europe and the US because of the stress in the financial system.
Finally, we have not yet seen the precious metals react to all of this global turmoil. Gold is continuing to recover, and silver is also continuing to recover from the massive manipulation in the paper market. We could very well continue to see more pressure in the short-term, and it wouldn’t surprise me to see silver test the recent lows and possibly break those lows, but I expect gold to hold its recent lows.
Despite the recent weakness in the metals, I wouldn’t be surprised to see new highs in 2013. What investors need to focus on is the fact that hyperinflation is coming. This is becoming clearer and clearer by the day. So they must own physical gold and silver and store it outside of the banking system.”