How Long Before Global Financial System Fails?
By Egon von Greyerz
The global economy turned down in earnest already in 2006 but with a massive worldwide printing and lending programme, the world has had a temporary stay of execution. But the effect of this fabricated money has now come to an end. And what else would you expect. To print money that has no value or to lend money that doesn’t exist can never create wealth or save anybody.
The downturn will soon start to accelerate and eventually lead to a total failure of the financial system and sovereign defaults. But no one must believe that there will be a sudden implosion or a “reset” that solves or changes everything. Instead, what we will experience is a process with things deteriorating at a fast pace but without one single event that overnight changes everything.
The big foreign holders are of course aware that they will never be repaid with real money.
They also know that the dollar is massively overvalued and likely to decline substantially. So whether they sell their holdings today, thus depressing the price, or wait until both treasuries and the dollar are worthless is one of these choices that will always be LOSE – LOSE. There could be a first mover advantage, especially since the only buyer is the US government and they would clearly try to accommodate the first selling country by just printing more money. But thereafter all hell will break loose and it will be too late to run for cover.