Quote of the day—Egon von Greyerz

It is quite ominous that 100 years after Weimar, the world is standing on the cusp of a  similar debt and currency collapse with hyperinflation as a consequence.

100 years ago it was primarily the problem of one country whose debt the world could afford to write off. Well they had no choice since it was worthless anyway.

But this time it is a global problem with every country in the same situation. There will be no one to save individual countries or the global financial system. Yes, all major central banks will print endless amounts of money. But that will only exacerbate the situation.

A debt problem can never be solved with more debt. And a dying currency cannot be resurrected.

So the world is in for a major shock in the next few years. The problems will be at all levels – financial, social, political and geopolitical.

Egon von Greyerz
December 2020
Gold Vs Bitcoin & The Death Of Money
[Chet and I used to discuss this sort of thing for hours back in the 2009 to 2010 timeframe. It was impossible for us to put a due date on the implosion we imagined we saw coming. One could claim that since it hasn’t happened yet that we were wrong about it happening at all.

Perhaps.

Still, it seems to be impossible that the national debt can ever be paid off. And from a political standpoint I doubt it can even be reduced. And that has to have consequences, doesn’t it? I keep seeing a reset of some sort in the future. And no matter how the reset goes down I see rough times for a lot of people.

We live in interesting times.—Joe]

22 thoughts on “Quote of the day—Egon von Greyerz

  1. Paraphrased from Hemingway:
    “How did you go bankrupt?
    Slowly at first, then suddenly.”

    Whatever happens, it’s a safe bet that government will respond with mad, frantic scrambling that will make it infinitely worse.

  2. I don’t like what I am about to say. Ten months ago I expected the economy by now to be in a deep depression or to have collapsed, but it’s still rocking along.

    What is now clear is that most people are not part of the essential economy and that if they don’t work but still get paid the economy still goes on. How long? I suspect a long time. In other words, MMT does work.

    So what about those essential jobs – food, transport, infrastructure, and consumer goods? My guess is that is less than a quarter of the workforce. So the question becomes are they still motivated and content to continue performing those jobs? I think that answer is yes – the people doing those jobs don’t know how to do otherwise.

    To think about it another way what percentage of our workforce is lazy good for nothing? Is it more than three quarters of the population?

    It’s also clear that our entire economy and governments have bought into the BLM/ANTIFA movement and that diversity is the dominant decision factor. However, will that matter to the economy and society at large? I’m no longer sure that it will especially for the make work jobs. Or to put it another way, can an employer like Microsoft or Amazon afford to hire and function based on diversity? The answer is yes if they still have the motivated self starters that just get things done in spite of the system.

    Right now it seems that our economy and society will only collapse if the core essential works can’t do their jobs even if the SWJs are in charge, or, we fail to provide some form of basic income to the rest of the population.

    So if we want a society more to our liking we’re going to have to do it the hard way.

    • I suspect, however, that at some point the people performing the essential jobs will also have had enough.

      Whether it’s because their taxes keep going up, or they are sick of being villified, or because it’s a simple economic decision that life is easier on the dole, or something else entirely, I don’t know.

      But every person has an “enough of this” level.

      If it happens all at once to everyone, the system would stop abruptly; but that is unlikely. Instead I think it will be a gradual process, and I wonder (and worry) what the govt might do to try to stem the tide.

  3. We can’t go bankrupt. As the real currency of any nation is it’s resources and it’s people. Banks and bean-counters, criminal politicians, local to international know that. They all HAVE to live by our good graces.(I think that’s why they hate us so much.)
    They intertwine themselves as parasites. Always. In the coming great reset we should be asking, Quo bono?
    As this new inflationary cycle is just another short squeeze on humanity.
    For us whisky-tango pensioners, or anyone still trying to grow their money.
    The future will always be BOHICA.

    • That should be obvious, but when you listen to the talking heads motivated to sell you something it is easy to ignore it. As for the parasites: we’re just going to have to live with them and somehow keep them off our backs.

    • MTHead, sure, but the problem is that everyone uses the paper money issued by the banks, and that can certainly become worthless. It has before in our history, and more obviously in the history of other countries like Germany or Zimbabwe or Venezuela.
      The real currency you mention can be used in barter transactions but those are limited in practice. The purpose of money is to make transactions easier. The requirement for something to be useful money is that it can’t easily be forged by governments or other criminal organizations. In the past century, that requirement has been canceled worldwide, since banks for obvious reasons don’t like to be constrained like that. Gold would still serve, did for many centuries and quite possibly may again.

      • We’ve been brainwashed into thinking the wrong way about currency, was my point.
        A medium of exchange is the middleman of trade in goods and services. And with the internet, banks are almost not necessary.
        And government to a limited extent. To provide a common defense, and promote the general welfare of commerce. Roads, dams, bridges, etc.. And courts for the settlement of disputes.
        I think the point should be this. A banker under the fractional reserve banking system. Provides no labor for the purchase of his goods. Why then should Joe’s brother sale him wheat for his bread? Because the banker/government made themselves the only game in town?
        Before the civil war it was not so. And if we were an educated people, we would know that.
        Getting back up to speed with this society might prove to be impossible.
        But they might surprise us also. People will do what it takes to survive. And thrive. It’s what makes us American.
        This could be our greatest opportunity to launch us into the 21 century in a good way!

        • There’s more than labor involved in creating goods. Banks (credit) play a role, as von Mises explained in great detail.
          Fractional reserve banking is a Ponzi scheme of sorts, enabled by the government declaring it to be ok rather than a fraud. But full reserve banking isn’t. A bank that stores your wealth more securely than you could is a useful service. A bank that lends your money to others to enable them to do something they couldn’t do from their own savings, in exchange for interest part of which goes back to you, is also a useful service.

          • As Denninger wrote in his book about having one dollar of capital for every dollar lent.
            Your right in all aspects of banks being a useful service in an economy.
            But allowing them to write credit with nothing behind it is just inflation. Just as the government printing money.
            Government printed inflation is just somewhat of an under the table tax.
            As it steals the value of capital over time, Right?
            So the government has given that same ability to steal to their friends. Is that not what’s going on in a fractional reserve system?
            As a bank if I only have to hold in reserve 1 dollar for every 100 dollars I lend, to collect 10 dollars in interest?
            Then count the 100 dollar loan as an asset in my reserve? Knowing all along that the borrower is going to have to provide real labor and resources to pay me the 110 dollars?
            Like Lucky Luciano said; I joined the wrong mob!
            Banks are necessary to the modern world. But the thieves that inhabit them are not

  4. “A debt problem can never be solved with more debt. And a dying currency cannot be resurrected.”

    Wait; we’re assuming that “solving” and “resurrecting” are the goals here? I see no evidence of that. Quite the opposite. The goal is chaos and destruction, with a good deal of looting along the way, so the above discussion is all within the wrong paradigm.

    And anyway; as a people we’ve forgotten the recipe for the rise of liberty in the West, which was the Protestant Reformation. Having abandoned the cause, and indeed it is avoided quite vehemently, any attempt to repeat or restore the effect can only fail– We’re practicing something akin to “cargo cult science” therefore, and no matter how cleverly planned and executed it can never succeed.

  5. I’d offer there are people whose DNA drives them to achieve, and produce, because they cannot not see opportunity and advantage and seek to pursue it, even if only for themselves and their closests (family and friends).

    This goes back to Chet’s supposition ” the people doing those jobs don’t know how to do otherwise.” I think that’s largely correct, although exactly what job(s) they will perform in a severely altered economy may be unknown.

    The real issue will be what becomes of the mass of people who are dead weight. Aesop at Raconteur Report has hypothesized that the US doesn’t need 330 million people, 200 million or so would work just as well if those 200 million were actual performers rather than consumers. Chet assumes we’ll just have to suffer with a certain percentage of parasites, but I’d think the concept of “no work, no eat” – especially if that was driven not by “policy” but by raw necessity – would resolve the issue; if one looks around today one sees multitudes of “work” positions that garner income but produce nothing of value; much of that is driven by government regulatory compliance, some by misunderstood, and misapplied, benevolence, some by simple, basic inefficiencies. As was frequently said out on the production floor “do you want me to make widgets or report on making widgets?” The reporting part serves some degree of usefulness, as long as the data is employed productively, but as useful as the clerical activity may be when it begins interfering with the effectiveness of actual production something’s wrong (this was a small part of a much larger discussion on (actual) Employee Burden Rate, which is sufficiently misunderstood as to be worthy of a discipline all its own).

    • What I am assuming is that we are already in a world (as least in the developed countries) where most people do not need to work to provide basic needs. That’s not the same as earning income as you pointed out.

      As a part of this shift, the morality of work, is also changing. Our traditional model is based on “no work, no eat”, but we’ve been shifting away from that and will likely continue to do so especially as basic needs are met with more and more automation. We do live in the richest period of history when it comes to material goods and that’s going to continue – we know how to do it and have the means to do so – baring some civilization killer. I would not have made that statement even 10 years ago, because of resource limitations.

      Personally I expect and think in “no work, no eat”, but circumstances have changed and continue to change so we need to adjust. The question is to what?

      And if we don’t provide an answer then we deserve what ever we get.

    • Most all of the problems stem from an active conspiracy to destroy our system.
      China doesn’t seem to have the same problems we do, despite the population?
      Once were destroyed. All those parasites left will be going to work. Trust me.

  6. Ok. Let’s agree that this will happen in the near future.
    How do you secure your assets against this stupidity?
    Rental units were touted as a good way to go but what we are seeing is laws against removing tenants for lack of payment.
    Stocks? Ha.
    Gold? Maybe too late, plus it’s probably being tracked and will get confiscated.
    So what is left?

    • As you point out stupidity is in charge today. In an imaginary world we could eliminate it, but in reality we have to live with it.

      One possible mitigation is to reorganize ourselves into smaller units that can do less damage to others due to stupidity and mistakes. I don’t know exactly what it would look like or how it would work, but I like the decentralized foundation that the internet was built around. We even have multiple models for a decentralized value exchange again with no one in charge.

    • Lead and beans? If you were ahead of the curve ammo would make you rich right now. The beans might later.
      And government will always be out to confiscate whatever is valued at the time. Even your beans.

    • It depends upon the model you use for the collapse.

      If certain states create a different union and can make it work then just being in one of those states is a decent action.

      If the communists take over everything then having gold and a sailboat could be your best plan.

      If gold is contraband but land ownership is tolerated even if evil landlord are not allowed to kick Tiny Tim onto the streets then farmland rental might work.

      Gold isn’t really tracked. Certainly, they can go through the receipts at the stores that sell gold and silver and find those people that purchased it with anything other than cash. But they don’t know who you sold it to. I’ve performed this service for people. They gave me cash, I bought them gold, and I forgot their names and the quantities of cash and metal involved. The problem will be where do you sell it if it’s contraband? You need to get it out of the country. Hence, the sailboat.

  7. “If the communists take over everything then having gold and a sailboat could be your best plan.”

    See: Kilmer, Dan; RE: “The Rebel Yell” (Castigo Cay; The Red Cliffs of Zerhoun).

    Unfortunately, there are neither enough sailboats nor sufficient destinations for them; we have no choice but stand and fight for what’s rightfully ours – there’s no place left to run to. It will depend on the formation, and structure, of “different union”; amount of political mass adequately backed up by strength, operating intelligence (aka “economic power, logistics and strategy”) and committment will be critical.

    • You and Joe are both right. To me, collapse brings black market….everything.
      Supply and demand is human nature. The trick will be to always have something useful.

    • Alien, yes, and also the “Enemies” trilogy by that same author (Matt Bracken). Those are seriously scary, by the way.

      • I assume anyone reading Castigo Cay and The Red Cliffs of Zerhoun most likely arrived there by way of the Enemies trilogy. (Which reminds me – Zerhoun was published in 2017; Matt, aren’t we about due for another Dan Kilmer adventure?)

        • True in my case. And I agree on “more please”.
          I also found a while back a collection of essays of his, “The Bracken Anthology”. Highly recommended. It includes some short story fiction (like “What I saw at the coup” and “Professor Raoul X”) which really set you thinking. But also some “what if” essays like “When the music stops”.

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