How Devastating The Coming Worldwide Financial Destruction Will Be
On the heels of another wild week, today the man who has become legendary for his predictions on QE, historic moves in currencies, and major global events, spoke with King World News about how devastating the coming worldwide financial destruction will be.
World Will See Devastating Global Financial Destruction
Egon von Greyerz: “Very few people realize the enormous wealth transfer that will take place in the next 5 years. Most will lose 75-90% of their wealth and some 100%. What is interesting is that investors needn’t lose most of their money if they took a few measures to protect their fortune. I often speak to Family Offices who built fortunes from the $100s of million to many billions. Without exception, they believe that it is there skill in building a business or investing that has created these fortunes. It clearly requires a lot of skill and a bit of luck to build a sizable fortune. But the magnitude of wealth today is not due to investment skills but the enormous creation of credit and money printing that the world has experienced since the creation of the Fed in 1913. This has created a global growth in asset values of unparalleled proportions…
“Stocks have been a massive beneficiary of the biggest monetary expansion that the world has ever experienced. If we look at the Dow since the last major economic cycle started in the early 1980s, we find the most remarkable rise. In early 1980, the Dow was at 850 and today we are 18,870. That is a rise of 18,000 Dow points in 36 years. This means that the Dow has gone up by 9% per year on average since 1981. A 9% annual increase means that the index doubles every 8 years. What a great investment. You buy stocks in 1980 for $10,000 and today in 2016 you have $220,000 without having to lift a finger. On top of that there has been a dividend yield of around 2% on average. But this growth in the stock market has not just happened on its own accord. Stocks don’t grow at 9% annually for 36 years without some rocket fuel. And the explanation is very simple. Debt has provided the fuel. Because US debt has also grown by 9% annually since 1981. So the recipe for becoming a successful and loved president is just to print and borrow money. There is an absolute correlation between the increase in US debt and the growth in the stock market.
Reagan knew the secret. During his reign, he tripled debt from $900 billion to $2.6 trillion, leading to a tripling of the Dow from 900 to 2,700. And so it continued. Clinton didn’t have to print as much money to get the market up but Bush Jr. had to almost double debt and still the market ended lower than when he took over eight years earlier. Obama doubled both debt and the Dow in line with the longer trend.