Below the transcription of an interview of Egon von Greyerz, founder of Matterhorn Asset Management and board member of Goldbroker.com, published on Kingworldnews.com.
Eric King : Egon, what are you focused on, right now, in the aftermath of this Cyprus disaster?
Egon von Greyerz : Eric, anyone keeping assets within the banking system now is at risk of losing it all, you know… investors have a much better chance, and much better odds, by putting their money on black. Therefore it’s absolutely critical that they get their assets out of the banks now. What’s happening in Cyprus is not important, economically, for the world, but the consequences are extremely serious. For King World News’ listeners, Cyprus is not a surprise. I and many of the contributors to King World News have been warning investors for years that the banking system is bankrupt. The Cyprus disaster proves that, and governments and international organisations will not be able to cope with these collapses, as they will happen one after the other.
The Troika, Eric, that’s the ECB, the EU and the IMF, were totally dysfunctional in dealing with the Cyprus crisis. They had no plan and no agreement, and of course neither of the three organisations offers any money, but only borrows from bankrupt nations. So Cyprus wasn’t a bailout, there was no debt relief, just a ten billion euro loan. This loan would burn the country until it goes bankrupt. So depositors over 100,000 euros have to take the hit and lose around 40% of their money, probably more, and apparently the Russian depositors and others have managed to get their funds out through all the foreign branches of the cypriot banks. That means that the loss for the remaining depositors will be even bigger than 40%, most likely.
So the consequence is that Cyprus will need much more money and that the ECB and, especially, Germany, must fund it. Cyprus has now implemented capital restrictions and controls on withdrawals, on transfers, on credit cards and on foreign exchange transactions. This is said to be temporary but, in my view, these restrictions are unlikely to be lifted for a long time because, if they were, that would create another run on the cypriot banks. So what’s important here is to understand that Dijsselbloem, who is the head of the Eurogroup, has said that Cyprus will be an example for future bailouts… which means, of course, that depositors, and not taxpayers, will suffer. There is already a capital flight currently now out of the Southern European banks into Switzerland, into Singapore, into Dubai and Panama and a few other countries.
But, Eric, investors are deluding themselves… the banking system is totally inter-connected and, therefore, no bank is safe. This is why investors must get their assets out of the banks. I do realise, though, if everyone followed this advice, of course, that the banking system would collapse. But only a 5-10% withdrawal wouldn’t make any bank totally insolvent. But we’re only talking about a fractional, but wise minority that would heed this advice and get their assets out. I doubt that Dijsselbloem, what he said about Cyprus being a model, will work. As the next country comes under pressure, be it Slovenia, or Italy, their problem will be so big that the ECB and the Fed and other central banks will have to step in with massive money printing. And the politicians will continue to make fatal mistakes by trying to hold together something that eventually will break up anyway. Greece, Cyprus, Italy, Spain etc…
Eric King : What needs to happen for those countries to get back on their feet, now?
Egon von Greyerz : Well, they can only get back on their feet by leaving the European union, and leaving the euro and devalue (sic) their currency. And, in my view, this is guaranteed to happen, eventually. Whatever the politicians try to do in the short term, no country can survive by adding debt to debt, and misery to misery.
So, while Europe is suffering, the dollar is strenghtening, but it’s part of the kind of optimism in the air. The situation is not better than… in most other countries. Now, the U.S. is the most indebted country in the world. Though we had short term some weak news for the U.S. economy, with consumer confidence dropping from 69 to 59, and the Richmond Fed Index dropping from 6 to 3… and, of course, new homes sales, which is… you know, we’ve had a dead cat bounce, I mean you can hardly see it on the chart… they are at extremely low levels, and they were also bad last month. And, finally, the Chicago BMA also dropped. So you have this, that the signs are there that there are (sic) weakness and it’s just that the focus is on Europe now, and, eventually, it will turn to the U.S., I’m absolutely convinced.
Looking at gold, you know, the ABN AMRO decision not to reimburse gold investors with gold, but instead in cash, it’s just another sign that the banks don’t have the gold. Now we’re getting so many signs that investors, you know, must realise that they have to hold the physical…Germany was another example, you know, Germany getting their gold back, they want it back, but they can’t get it back from New York or from London or from Paris until 2020… why? Well, because the gold, obviously, isn’t there. So the 23,000 tons held by Western central banks is probably massively lessened there, you know… We’ve seen James Turk and Eric Sprott doing a lot of work on this to prove the point that they don’t have the gold they say they have. And if you take the gold held by bullion banks for investors, it’s probably encumbered (all?) by the central banks… the central banks will take their gold back from the bullion banks, and central banks will give the bullion banks an I.O.U. That means that all they’ll be left with is an I.O.U. from central banks that, you know, they have a claim on gold. And, of course, that gold in the bullion banks is held by investors, so the investors will, instead of having physical gold, they will just have a piece of paper saying that they’re owned gold. So this is why it’s so critical for investors to have all their gold stored outside the banking system.
Now, physical demand continues to be very strong, you know. Central banks in the Far-East, Middle-East and Russia continue to add, and in 2012, they added about $25B worth of gold. So, with strong physical demand, the paper holders and the paper shorts… of gold, are likely to suffer badly as gold is to resume their (sic) uptrend, and a very strong uptrend in 2013.
Eric King : Egon, what is your number-one takeaway from the theft that we just witnessed in Cyprus?
Egon von Greyerz : Eric, as I’ve been saying many times, it was so clear to me that it had to stop somewhere with a run on the banks, and it will always start in a small nation. So Cyprus was a very good and typical example. But I think it proves the point that I’ve been saying so many times that the system is bust. It cannot be saved and the politicians will try everything they can to artificially hold together that (which) should not be held together. So, therefore, it is, again and again, the most important thing for investors to understand, that whatever they have within the system is not safe.
Eric King : Do you expect to see this kind of theft accelerate, going forward, around the world?
Egon von Greyerz : Definitely. Investors will suffer, taxpayers will suffer, which means that the world will suffer. And when you start with a small nation, okay, it’s relatively easy to find a solution for ten billion, but when you’re talking about trillions and eventually, in my view, when you’re talking about the bigger banks then it will have to be the bigger banks also, but then, you’re talking about hundreds of trillions and, if you then get a problem with the derivatives, which is also likely to avail, there are no resorts against these and we’re talking about one quadrillion, there, then you can talk about figures in the, as I said, in more than hundreds of trillions.
And, of course, this is what we have been talking about for quite some time, now that this is a war, it will lead to the currencies collapsing; unlimited money printing and hyperinflationary depression is almost certain to happen, ‘cause this banking system has no chance of surviving, and Cyprus is just an example of what the whole banking system looks like.
Eric King : So, the fear that people are feeling around the world, right now, is justified, in your opinion, Egon?
Egon von Greyerz : Definitely, but I don’t think there’s enough fear. If you look at the price of gold, or if you look at what’s happening in stock markets, the fear hasn’t started. I think people are much too complacent. I think that we will see a panic that is hard to fathom today, and I think we could very well see the start of that in 2013, and then building in the next two or three years.
Eric King : And Egon, as always, for people that are interested in GoldSwitzerland and your services that you provide there, can you tell them about that and how they can get in touch with you?
Egon von Greyerz : Yes, Eric. We facilitate for people to invest in physical gold and store it outside the banking system in their own name, and anyone who’s interested can contact us by our website GoldSwitzerland.com.
Eric King : Egon von Greyerz, thank you for joining us.
Egon von Greyerz : It’s always a pleasure to talk to you, and especially in these troubled times.