Egon Von Greyers has become legendary for his predictions on quantitative easing, historic moves in currencies, and major global events. He recently spoke about the coming worldwide financial destruction and the devastating effects it will have. According to Greyers, there will be an enormous wealth transfer within the next 5 years. Most will lose 75-90 percent of their wealth, while some will lose all.
There are a few measures that can be taken to protect your fortune. While some successful businesses and investors believe that there was skill involved in building their fortunes, the magnitude of wealth today isn’t due to investment skills at all. The enormous creation of credit and money printing experienced since the creation of the Fed in 1913 has created a global growth in asset values of unparalleled proportions.
Egon Von Greyers predicted that Swiss National bank would experience staggering losses, and that the Fed would also experience massive losses that will destabilize the global financial system. A massive beneficiary of the biggest monetary expansion in human history are stocks. In the early 80’s the Dow was at 850, and today the Dow is currently around 18,870. Since the Dow has risen over 18,000 points in 36 years, we can calculate it at a rise of 9 percent annually since 1981. With a 9 percent annual increase, the index doubles every 8 years. If you invested $10 thousand in 1980, that would have grown to $220,000 in 2016. There’s a reason the stocks have grown so much and it’s because they are fueled by debt.
The recipe for success as a President of the United States is simply to print and borrow money. There is a direct correlation between the increase in US debt and the growth of the stock market. Ronald Reagan was familiar with the secret, he tripled the debt from $900 billion to $2.6 trillion during his tenure as President. Bill Clinton didn’t have to print as much as Reagan for the market to rise, but Bush Jr almost doubled the debt with no success because the market ended lower then where it was 8 years after his inauguration. Obama has doubled the debt and the Dow in line with the longer trend.
Now, we are at the point of diminishing returns which started with George W Bush. The Dow was 10,800 when Bush Jr. took office and has seen a 74 percent increase since, but that 74 percent increase came at the expense of a 250 percent increase in debt. This spells trouble for Donald Trump, who will have to print an absurd amount of money to keep up with the increases in the stock market. The Dow is at record levels with a price to earnings ratio over 20, and corporate profits are falling. It will be virtually impossible for Trump to achieve a higher Dow, and just as hard for him to be re-elected due to the present high level of the stock market combined with record debt. It is much easier to become president in a weak economy with a weak market.
Since 1981, the Dow has seen a 22 times increase. The world is experiencing a historical asset and credit bubble of unprecedented proportions. An implosion of debt could see the Dow falling 90 percent, like it did from 1929-1932. It’s not unlikely that we will see the biggest money printing experiment in history by the central banks worldwide, in a futile attempt to save the financial system and world economy. This could lead to the Dow reaching much higher levels in nominal or hyper-inflationary terms.
If we measure the Dow against gold, the Dow, gold ratio peaked in 1999 and is now in a downtrend. They were last equally proportionate in 1980 when the Dow was 850 and gold was $850. When they meet again at a 1:1 ratio, it will involve a catastrophic loss of real capital for a stock market investor.