By Egon von Greyerz
It appears that evidently 2022 would be the yr when the US Empire disintegrates sooner than anybody may have imagined. Empires want robust management however electing a weak octogenarian president definitely matches the image of a collapsing empire.
With the world on the verge of a significant geopolitical battle that has a excessive chance of growing right into a conflict, the US definitely doesn’t have the statesman who may take them by means of such a battle victoriously.
Putin has bought the US over a barrel with Ukraine and Biden is unlikely to get any assist from Scholz, the German Chancellor, or from President Macron as the image on the left beautifully illustrates.
The US has a continuing Russia worry and is determined to make defence agreements with lots of the nations bordering on Russia. Europe’s and the EU’s relationship with Russia is extra complicated, particularly because of the European robust dependence on Russian power and particularly fuel. Germany for instance relies on Russia for 60% of its pure fuel. As Germany is now closing its final nuclear energy plant, they’re completely reliant on Russian fuel and subsequently impossible to alienate Putin.
So Germany is not going to facet with the US towards Ukraine and Macron is posturing as normal with out understanding what to do.
Putin has had a bee in his bonnet ever for the reason that Maidan revolution in 2014 when there was a coup, allegedly US backed, to throw out Ukraine’s then president Yanukovych and set up a US pleasant regime.
SWEDEN HAS FEARED THE RUSSIANS FOR OVER 300 YEARS
While the world worries if Putin will invade Ukraine, Sweden can be involved that “the Russians are coming” simply as they’ve feared since 1709 once they misplaced the battle of Poltava towards Peter the Nice.
So Sweden believes it’s going through an actual menace from Russia within the Baltic and is now preparing for conflict. Sweden is taking Russia’s actions on the Ukrainian border so severely that 120 Swedish troops have moved from the Swedish mainland to the island of Gotland in the midst of the Baltic. It needs to be identified that Sweden has not taken half in a conflict for the reason that Napoleon wars within the early 1800s and their military and weapons is likely to be considerably rusty. Possibly one other 100 or so fierce troopers (see picture) might be moved to frighten off the Russian navy, air drive and military.
Sure, the Swedes are proper to fret about Russia’s intentions in Ukraine. However based mostly on historical past, Sweden nonetheless seems very protected and even when they don’t seem to be, a few hundred troops are unlikely to avoid wasting them.
Here’s a image of the Russian troops close to the Ukrainian border. They appear a bit extra fearful than the Swedes within the picture above!
THREE FAILED INVASIONS TO CONQUER RUSSIA
There have been three main invasions of Russia/Soviet Union in historical past. Sweden within the early 1700s, Napoleon within the early 1800s and Germany within the Forties. Every time Russia was assisted by very chilly winters and in addition a tactic of retreating the troops and burning the cities behind them. Thus the attacker had no provisions and plenty of troopers starved or froze to dying. Within the ultimate battles, the Russians had been going through weak and drastically diminished enemies and subsequently had been victorious in every certainly one of these main invasions.
For the reason that Swedish king Karl XII misplaced the battle of Poltava in 1709 towards Tsar Peter I, the Swedish Empire, which then dominated Northern Europe, steadily declined. From that point, Sweden has all the time feared the Russians. The map of Europe and Russia may have appeared very totally different if the younger king Karl had been victorious.
RUSSIA – UKRAINE or CHINA – TAIWAN TO TRIGGER ECONOMIC COLLAPSE?
Whether or not Russia will invade Ukraine or not, time will inform however the indicators look ominous. Russia has by no means severely invaded Western Europe (aside from WWII to cease the Germans) however has turned its consideration east and south-east primarily. It’s fairly clear that Putin’s ambitions are to steadily recreate the outdated Russian Empire.
The potential invasion of Ukraine, even when with out violence, is prone to have a significant affect on the world. What makes such an invasion extra doubtless is that Russia traditionally considers Ukraine to be a part of their empire.
The state of affairs between China and Taiwan could be very comparable. China considers that Taiwan is theirs and a Chinese language invasion wouldn’t be a significant shock.
How the US and the remainder of the world would react to both of those potential invasions is what is going to decide if we face a possible world conflict. However Putin’s judgement of the US might be right particularly that the US is a rustic with weak management, a weakening navy and economically bankrupt. Sure, the US has an enormous nuclear arsenal however even that’s in the present day unlikely to be efficient towards a vastly superior Russian missile system.
A conflict in itself is all the time harmful for the world financial system and geopolitical state of affairs. In a world which is financially and morally bankrupt, even an invasion by Russia or China with out main violence, can be sufficient as a catalyst for the worldwide debt and asset bubbles to implode.
A FRAGILE WORLD ECONOMY ABOUT TO BURST
The fragility of the world financial system have to be apparent to any observer who cares to look.
If we simply take US shares for instance, the overvaluation is blatant however sadly one eyed buyers can solely see a market which always rises. Their greatest good friend is the wealthy Uncle Fed whose pockets are limitless. Thus, he’ll all the time assist the market nonetheless deep it falls. Not solely that, he may also hand out any sum of money to his fellow bankers that they request to finance their loss making extravaganzas.
The issue for Uncle Fed shouldn’t be the depth of his pockets however the high quality of their contents. The extra wizardry that emerges from his pockets, the decrease its worth.
Inventory markets are massively overvalued on any standards like margin debt, worth to gross sales, value earnings ratio and so on. It isn’t simply overvalued however at historic all time extremes no matter measure we apply.
However let’s take the very dependable Buffet Indicator to inform us how drunk buyers actually are.
Between 1975 and 1995 the Shares to GDP ratio was on common 50%. On the 2000 bubble it was 140% and now with the EPIC Inventory bubble, it’s over 200%. So a return again to the 1975-95 degree would contain a 75% fall. However an epic bubble could be very prone to end in an epic fall so I might count on a collapse of 90-95% in actual phrases which is in keeping with the 1929-32 fall of 90%.
A GLOBAL DEBT BUBBLE ABOUT TO FIRST EXPLODE AND THEN IMPLODE
With world debt up 3x on this century, from $100 trillion to $300 trillion, the rocket gas that has pushed this explosive development in asset markets is simply skinny air changed into faux cash.
Initially the debt will explode resulting from limitless printing to avoid wasting the monetary system together with the $2 quadrillion derivatives market. The $3 quadrillion forecast within the desk beneath features a collapse of the derivatives market.
Thereafter, because the world discovers that the central financial institution liquidity created out of skinny air is nugatory, the debt bubble will implode straight away, along with all of the belongings financed by the debt bubble.
COVID WAS NOT THE CAUSE BUT JUST AN EXCUSE
I’ve identified many occasions that Covid was not the reason for the present disaster however only a handy excuse. The true disaster began in September 2019 when the Fed was compelled to make emergency loans to various severely illiquid Wall Avenue buying and selling homes like Nomura, JP Morgan and Goldman Sachs. In complete the Fed made emergency repo loans to the extent of $19.9 trillion. Nomura, Goldman and Morgan obtained $8 trillion and simply six homes obtained 62% of the virtually $20t which along with the aforementioned banks had been Barclays, Citigroup and Deutsche Financial institution. See desk beneath.
What makes these repo loans much more controversial is that in response to the economist Michael Hudson, they had been made in contravention of Dodd-Frank.
When Covid began in early 2020, central banks may conveniently blame the pandemic for the large and continued growth of their steadiness sheets. However the actual downside was that the foremost funding banks had been once more on the verge of chapter.
SIX BANKS RECEIVED $12 TRILLION OUT OF $20T EMERGENCY LOANS
2022 THE BEGINNING OF THE BIGGEST GLOBAL ECONOMIC CRISIS IN HISTORY
What has all the time been crystal clear (at the least to me!) is that the 2006-9 disaster was by no means resolved however simply briefly patched up. It has been an absolute miracle that central banks have managed to idiot the world one more 10 years, till September 2019, when the issues reemerged.
Admittedly, all of the gamers within the monetary system have had a vested curiosity to participate on this faux Monopoly sport constructed on an illusory basis. They’ve had all to realize, since they’d reap all the advantages, however not be responsible for any of the losses.
However the issue that reemerged in September 2019 received’t go away. The explosion of central financial institution steadiness sheets and debt have now reached unmanageable and insoluble proportions.
2022 would be the first of a few years when the world will expertise the largest monetary and financial disaster in historical past.
As a result of by no means earlier than in historical past has the world seen a world financial disaster of those proportions brought on by massively extreme money owed in all corners of the world, exacerbated by epic bubbles in all asset markets.
So whether or not a possible invasion of Ukraine or Taiwan would be the catalyst, or if it comes from a much less vital snow flake that triggers the avalanche, is irrelevant.
The chance of an enormous avalanche that crushes credit score and asset markets is so excessive that anybody who doesn’t get out of its method will see his wealth completely crushed.
Gold has for five,000 years been the very best safety in any disaster and this time is unlikely to be totally different.
The desk beneath was a part of an article I wrote that confirmed tips on how to flip $10,000 to $1 billion by holding a inventory index or gold for 10 years and reinvest it simply as soon as on January 1 each ten years beginning January 1, 1970.
By January 1, 2020 the $10k had turn out to be $121 million and was then invested in gold at $1,550. Gold must go as much as $12,500 by January 2030 to get to realize $1 billion after 60 years.
I might count on gold to be a lot increased by that point however keep in mind that we’re holding for wealth preservation functions and never as a speculative funding, so value is much less vital than defending your wealth.
GOLD AS CHEAP TODAY AS IN 1970 AND 2000
Lastly, let me once more remind buyers that gold is as low-cost in the present day in relation to US cash provide, because it was in 1970 at $35, or in 2000 at $300, in different phrases an absolute discount!
STOCKS ABOUT TO CRASH & GOLD TO RISE STRONGLY
We usually by no means fear about brief time period strikes for the reason that key in the present day is to guard wealth.
However markets presently, main strikes are very prone to occur comparatively quickly.
For buyers who follow inventory market investments, they’re about to get a shock of a lifetime because the inventory market bubble bursts. The decline in asset values might be violent and sustained, main to an enormous destruction of wealth. The beginning of the actual crash could possibly be within the subsequent 2-3 months.
Gold has consolidated for a sustained interval and is about to interrupt out on the upside. As soon as gold breaks out decisively above $1,900, the transfer up might be very highly effective.
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