by Egon Von Greyerz, Gold Switzerland:
The autumn of 2016 has for some time looked like a period when dark clouds will move in over the world economy. Therefore, it was not surprising to see the first sign of things to come in the next few months. In one day the Dow erased all the gains since early July with an almost 400 point fall. Since the beginning of the year the Dow is now up a pitiful 4%. Almost 8 years of ZERO interest rates have not managed to revive the US economy, nor the world economy. On a longer timeframe the Dow, together with many other markets, looks extremely vulnerable.
Central banks are leading ordinary people to the slaughter
In this century the Dow is up 57% which on the surface appears to be an excellent return over 16 years. But it must be remembered that we have seen an unprecedented period of money printing and credit creation in the last 16 years. In my article last week, I talked about the massive credit creation in the USA. We have seen the same pattern worldwide. China’s debt for example has gone from $1 trillion to $32 trillion in the last 16 years. And Japanese government debt is exploding and has reached 250% of GDP. Japan is now printing half of the government expenditure every month and buying all the bonds that they are issuing. Japan is clearly bankrupt and a default is inevitable. In Europe, the ECB is printing €80 billion every month. But that will of course not suffice to save a bankrupt European financial system. Whether we talk about Greek, Spanish, French, Italian or German banks, their balance sheets are all lumbered with billions of toxic assets with the only buyer being the ECB. This is why the current ECB printing programme will not end in March 2017 but instead accelerate. But as we all know, printed money can never save the financial system. All it will achieve is to increase the debt burden and create hyperinflation.
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