Serpo
28th June 2013, 03:03 AM
Today Egon von Greyerz warned King World News that the global derivatives market has already suffered a staggering $300 trillion of losses. These massive derivatives losses, which are being hidden from the public, will help lead the rebound in gold as it begins the next of its bull market. Below is what Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this powerful interview. Greyerz: “A few years ago when the problems in Greece started, it was found that the Goldman Sachs had helped them to hide the real truth of their economy by a major derivatives positions.
Now we’ve found out that Italy has done exactly the same thing. They took out derivatives in order to meet euro criteria back in the late 1990s. They had a total of $31 billion of derivatives and now they are finding that at least $8 billion of that is worthless. That’s about 30% of the entire position. “This just illustrates what I’ve been saying time and time again, that a major part of the over one quadrillion dollars of derivatives currently held in the financial world is worthless. Here you have a typical position that a government is taking, $31 billion of derivatives, and 30% is worthless.
If you then overlay that loss into the total amount of global derivatives, the loss would be a staggering $300 trillion. It would not surprise me if $300 trillion is in fact very close to the total losses on global derivatives. If that is the case it means that no counterparty can cover those type of losses, so in reality the entire financial system is bankrupt.
This is why the world will witness money printing on an unprecedented scale going forward, despite misinformation and propaganda about “tapering of QE.” So central planners are just hiding the truth and lying to the public.
If we continue to look at Italy, 160 corporations are in “special crisis administration.” That’s 160 major companies in Italy alone are in serious financial trouble. But Italy has a stunning debt to GDP ratio of 238%. In reality it’s probably a lot higher than 238% because of the derivatives losses which have been used to conceal the truth about what is really taking place.
But what this means is we can’t trust any government figures. This is why Draghi recently said, “There is still downside risk.” Of course there is downside risk, and that risk is massive. If we look at the European banking system, it’s terminal. People can never repay their debts to those banks, and of course the banks have continued to borrow money from the ECB since 2008. Of all of the bad debts these banks have, remember that nothing has been written off or even written down so far.
And of course the central banks have bought worthless debts directly from the banks in Europe. The ECB over the last 11 years has grown its balance sheet over 200%. The Fed’s balance sheet has grown 400%. The Chinese central bank has grown its balance sheet 660%, and the Bank of England 800%. England’s balance sheet has gone from $2 trillion to $9 trillion, and of course that debt can never be repaid.
Not only are the central banks highly leveraged, but so are the commercial banks. France is also in a mess. French bank Credit Agricole has a remarkable 46 times leverage! So if there is 2% bad debt, the capital of that bank is wiped out. Another French bank is using 40 times leverage. Credit Suisse, if you use Basel III rules, also has 40 times leverage. Deutsche Bank has 30 times leverage.
All of these banks are wiped out if 2% to 5% of their debts are bad. Well, we know that the banks value their assets at full value, but these are assets which would be written down dramatically under proper accounting accounting guidelines. So the entire global banking system is in trouble or already bankrupt, and this will simply turbo-charge ‘QE to infinity.’
Right now we also know there is a liquidity squeeze going on in China. This will have a tremendous impact on the Chinese economy because the banks have stopped lending. So there are problems everywhere right now and all of this will lead to massive money printing in the years ahead, not tapering.”
Greyerz also added this: “If we look at gold, Eric, the price is now below the marginal rate of production which is around $1,300. So it is already costing money for major gold mining companies to mine gold and give it to the bullion banks, which then use it to crash the market even further. This can’t be sustained and so we will see a significant decline in global gold production.
But if we look at gold here and compare it to the 1970s, when we had the bull move from $35 to $850, in 1976 gold had fallen at one point to $100. Gold then rose 850% from $100 to $850 in just a few short years. If we had a similar 850% move in the price of gold that would take gold over $10,000, which has been my minimum longer-term target for the last 10 years.
If we look at places like India, spreads have already risen to $20 an ounce for physical gold, which is enormous. So there is a lot of buying of gold in India as well as major shortages. In the meantime, many investors are worried and wondering if this is the end of the bull market. Well, of course it’s not the end of the bull market because gold will continue to reflect the destruction of money going forward.
For those investors with the capacity to do so, they have been adding to their physical gold positions because that is what you are supposed to do in bull markets, to buy the major declines. That is how the outsized gains will be made in the massive transfer of wealth that is still in front of us.
I expect for the price of gold to turn higher no later than mid-July, so we are very close to the bottom at this point. But gold investors should not despair because we have bankrupt governments worldwide as well as a bankrupt financial system. So the only real way to protect yourself is to own physical gold and physical silver.
Of course gold and silver have to be held outside of the banking system because the banking system will continue to implode as more banks collapse and governments will simply react by stealing their citizens’ financial assets directly out of the banks.”
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/28_$300_Trillion_In_Derivatives_Losses_To_Lead_Gol ds_Rebound.html
Now we’ve found out that Italy has done exactly the same thing. They took out derivatives in order to meet euro criteria back in the late 1990s. They had a total of $31 billion of derivatives and now they are finding that at least $8 billion of that is worthless. That’s about 30% of the entire position. “This just illustrates what I’ve been saying time and time again, that a major part of the over one quadrillion dollars of derivatives currently held in the financial world is worthless. Here you have a typical position that a government is taking, $31 billion of derivatives, and 30% is worthless.
If you then overlay that loss into the total amount of global derivatives, the loss would be a staggering $300 trillion. It would not surprise me if $300 trillion is in fact very close to the total losses on global derivatives. If that is the case it means that no counterparty can cover those type of losses, so in reality the entire financial system is bankrupt.
This is why the world will witness money printing on an unprecedented scale going forward, despite misinformation and propaganda about “tapering of QE.” So central planners are just hiding the truth and lying to the public.
If we continue to look at Italy, 160 corporations are in “special crisis administration.” That’s 160 major companies in Italy alone are in serious financial trouble. But Italy has a stunning debt to GDP ratio of 238%. In reality it’s probably a lot higher than 238% because of the derivatives losses which have been used to conceal the truth about what is really taking place.
But what this means is we can’t trust any government figures. This is why Draghi recently said, “There is still downside risk.” Of course there is downside risk, and that risk is massive. If we look at the European banking system, it’s terminal. People can never repay their debts to those banks, and of course the banks have continued to borrow money from the ECB since 2008. Of all of the bad debts these banks have, remember that nothing has been written off or even written down so far.
And of course the central banks have bought worthless debts directly from the banks in Europe. The ECB over the last 11 years has grown its balance sheet over 200%. The Fed’s balance sheet has grown 400%. The Chinese central bank has grown its balance sheet 660%, and the Bank of England 800%. England’s balance sheet has gone from $2 trillion to $9 trillion, and of course that debt can never be repaid.
Not only are the central banks highly leveraged, but so are the commercial banks. France is also in a mess. French bank Credit Agricole has a remarkable 46 times leverage! So if there is 2% bad debt, the capital of that bank is wiped out. Another French bank is using 40 times leverage. Credit Suisse, if you use Basel III rules, also has 40 times leverage. Deutsche Bank has 30 times leverage.
All of these banks are wiped out if 2% to 5% of their debts are bad. Well, we know that the banks value their assets at full value, but these are assets which would be written down dramatically under proper accounting accounting guidelines. So the entire global banking system is in trouble or already bankrupt, and this will simply turbo-charge ‘QE to infinity.’
Right now we also know there is a liquidity squeeze going on in China. This will have a tremendous impact on the Chinese economy because the banks have stopped lending. So there are problems everywhere right now and all of this will lead to massive money printing in the years ahead, not tapering.”
Greyerz also added this: “If we look at gold, Eric, the price is now below the marginal rate of production which is around $1,300. So it is already costing money for major gold mining companies to mine gold and give it to the bullion banks, which then use it to crash the market even further. This can’t be sustained and so we will see a significant decline in global gold production.
But if we look at gold here and compare it to the 1970s, when we had the bull move from $35 to $850, in 1976 gold had fallen at one point to $100. Gold then rose 850% from $100 to $850 in just a few short years. If we had a similar 850% move in the price of gold that would take gold over $10,000, which has been my minimum longer-term target for the last 10 years.
If we look at places like India, spreads have already risen to $20 an ounce for physical gold, which is enormous. So there is a lot of buying of gold in India as well as major shortages. In the meantime, many investors are worried and wondering if this is the end of the bull market. Well, of course it’s not the end of the bull market because gold will continue to reflect the destruction of money going forward.
For those investors with the capacity to do so, they have been adding to their physical gold positions because that is what you are supposed to do in bull markets, to buy the major declines. That is how the outsized gains will be made in the massive transfer of wealth that is still in front of us.
I expect for the price of gold to turn higher no later than mid-July, so we are very close to the bottom at this point. But gold investors should not despair because we have bankrupt governments worldwide as well as a bankrupt financial system. So the only real way to protect yourself is to own physical gold and physical silver.
Of course gold and silver have to be held outside of the banking system because the banking system will continue to implode as more banks collapse and governments will simply react by stealing their citizens’ financial assets directly out of the banks.”
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/28_$300_Trillion_In_Derivatives_Losses_To_Lead_Gol ds_Rebound.html