End of the paper market

Eric, it’s hard to understand how the world economy can function at all. We have near zero interest rates in many countries, massive debts, and we print to borrow more money than ever. Despite all of this, GDP is not growing…

First quarter GDP in the U.S. was 0.1 percent annualized, and that will probably be revised lower. And we have record unemployment in Europe and in the U.S., and most countries are running major deficits. But stock markets are somehow still at the highs.

The problem is there is no morality or integrity because society has become so corrupt. On top of that, most markets are manipulated. Today we have more proof of false reporting, which has little to do with reality. The U.S. reported 288,000 jobs were created. That sounds great because it implies that the U.S. is booming, but how come the labor force in April dropped by one million people?

There are now 92 million Americans not in the labor force, up from 60 million in the late 1980s. And the Job Participation Rate dropped down to 62.8 percent. This is the lowest figure since 1978. If you add to that the record low wages and the number of people on food stamps and social security, you’ve got a very different picture of the U.S. economy than what the mainstream media propaganda is telling us.

Another major misperception is the corporate situation. We read everywhere that U.S. corporations have higher level of cash than ever. That might be true, but what nobody tells us is that corporate borrowings are at the highest levels ever. So corporate cash is at a 15-year low compared to debt. All that’s happening is corporations are issuing a massive amount of bonds in order to take advantage of low rates. Well, some of that results in cash on their balance sheets, which is artificially skewing that figure.

Eric, I often talk about Japan in these interviews because that is the economy which is likely to collapse first. The combination of debt demographics and deficits, both budget and current account, guarantee that Japan will not survive in its present state. Japan’s economy has not responded to Abenomics. This was to be expected because you can’t push on a string and create wealth by just printing money.

Eventually the yen will collapse and so will the stock and bond markets in Japan. Japan’s Debt/GDP is now at 230 percent. Imagine what happens when Japan’s bonds collapse and rates go from zero to probably 20 percent or more. That will be the end of Japan, Eric.

But while ordinary people in most countries are suffering badly, the rich are still getting richer. In London, for example, an apartment was just sold for $235 million, which was a staggering $17,000/square foot. It was probably a Russian or Ukrainian buyer. Eric, this gap between the rich and the poor will lead to major social unrest in many countries. The rich will, of course, lose a major part of their wealth as stocks, property and bonds collapse in real terms, but ordinary people will suffer even more because governments will not be able to assist them.”

Greyerz added: “Looking at the metals, today could be a very important day. Gold and silver are turning up on cue, and this is in spite of the phony employment figures. It is likely that we’ve now seen the end of the more than 2-year correction, and the start of the move to new highs, before 2014 is over, is starting now.

We have always known that the manipulation in the paper gold market, as well as consistent Western central bank government selling of physical gold would eventually fail. It has actually failed already because gold has gone from $250 to $1,300 since 2001.

Now that Western central banks have very little, if any, physical gold left, this means that they have no ammunition to manipulate the market. When countries like India, China, and Russia are buying much more than the annual global production of gold, of course it was just a matter of time before the Western scheme collapsed. This also means the price of gold can only go one way from here and that is much higher.

It’s not possible in the long run to manipulate a physical market with just paper. As I said, Western governments have no more ammunition left in the physical market and so they will no longer be able to push gold prices lower. This also means we are coming to the end of the paper market in gold and silver, as most investors around the world will either take delivery or buy the physical. This also means the end of the difficult years for gold and silver investors, and in the next few years we will see prices that few people believe are possible today.”