Grant Williams interviews Egon von Greyerz about the importance of wealth preservation in today’s economy, emphasizing that global debt has tripled in the last 20 years, increasing risk exponentially. Von Greyerz believes that gold is the best way to protect oneself against this risk, as it has helped people survive hyperinflation in the past. He warns against inflated property assets during times of rising interest rates and suggests that Central Banks may not be able to save investors this time. Von Greyerz also emphasizes that the value of money has decreased since 1970 and currencies will collapse due to increasing inflation and the printing of more money. He argues that anyone can preserve their wealth with gold and that it doesn’t need to move in price to be an effective tool. The interview covers topics such as asset protection, gold investment, central banks, and inflation investment.
Video Transcript Below:
Egon, great to get a chance to chat it’s been a while it’s nice to be here in Zurich. And, thanks for having me. So much to talk about. The world is a very different place to the one we were in the middle of last time we had a chance to have one of these conversations. So what I want to talk to you about today Is wealth preservation this is something that this idea of wealth preservation seems to be kind of bubbling up now people realize that over the last number of years if you’ve been invested you’ve done very very well. But with the return of inflation rising interest rates, people are starting to get the idea that they need to actually now play defense in the American terms and preserve their wealth. So, let’s talk about wealth preservation what it means and how gold fits into that.
Egon von Greyerz:
Well as you know that that’s why I started this business really because I saw the risks in the world already 20-25 years ago, and I saw that the rising problems or deaths and derivatives was going to affect all our asset investments or especially stocks and bonds and property. So, therefore I decided that you know the consequence of this money printing that we’ve seen in the world and this building up of debt the consequence is that the risk is going to increase.
Since debt has gone up three times in the last in the world global debt has gone up three times in the last 20 years because when debt goes up three times the risk increases exponentially. So, I was early and I always try to understand risk and protect against risk so I understood earlier that that you know this we had to protect against that and the consequence of that was gold because I found that gold was the best way to protect it. Therefore, we started with investing in physical gold. Of course, most investors don’t understand that. Because most investors don’t own gold and most investors don’t think for example that property is wealth preservation. They haven’t seen that property has gone up dramatically or they don’t understand that it probably is going to dramatically because of the money printed. And they think that property is always a good wealth preservation investment because people will always need properties. Yes, they will do but people don’t need properties at five or ten times the prices of 20 years ago.
Of course, and therefore people actually will not discover that they needed to be protected against this until they followed the market down. And that’s what’s so sad because every time now, every stage where a stock market has gone down dramatically and you know you certainly remember ‘87 well, which I do. We were, you know I was around 70, 74 or 73, 4 and, you know I got my first options at Dixon’s where I worked at the time and they went down 90, over 90 percent. I didn’t have much to lose in those days so it didn’t matter. But it did tell me that it was a good lesson. Early on, experience an event that destroys wealth quickly which it did, and of course the property market totally collapsed. This is in the UK also if you remember.
I mean the world is looking worse than it’s done for a long time because now you know not only do we have a debt we have higher interest rates we have inflation. Most people, if you know, you’ve been in the UK recently and you see ordinary people. They’re not coping. They’re suffering. People are turning off their heat, not eating properly. Yes, and don’t have enough money to last for the end of the month.
So, at that level, then you have people who have investments whether there are institutions or whether there are just people with the financial investments. They think you’ll be the same this time again. Well, so, tell me why are Central Banks not going to save you this time? They have every time so far in in the last 50 years. And you could even say in the last hundred years because markets have only gone one way in the last hundred years.
Well, it’s a great point you bring up I’m going to come back to that in a moment they’re talking about why the Central Banks can’t save you this time. But, let’s go back to housing you know you mentioned housing there and housing is an asset that people consider to be a real asset and people think that if I own property it will protect me. But let’s talk about the difference between owning property at those inflated levels you talk about at a time when interest rates are going up. Because you know most property is owned with leverage. And, obviously if you look at the charts of these housing markets look at the — and we’ll park Canada, New Zealand, Australia which are in a world all their own —but just look at the US and even in Germany now which historically has had a very different relationship with property. Germans weren’t big property owners in the past. But everywhere we’ve seen property prices go up over the last two years through the pandemic they’ve doubled in many places, many cities. But now we have mortgage rates doubling so in terms of wealth protection let’s talk about the dangers now of owning inflated property assets in these particular times with rates doing what they’re doing.
Egon von Greyerz:
And of course, people think that property is the best thing there ever was. And, you know in many countries people leverage the first property, buy a second property they can afford and rent it out. But you know you take even here in Switzerland the property market has gone absolutely mad here also. Why? Because you could borrow 10 years or 15 you could until a year ago. 10 to 15 years at under 1%. That’s free money! You’re actually, you don’t even think about the cost of that or why you know 0.9% or whatever for 10-15-year money. It’s just somebody giving you a gift so you don’t think about it, the actual cost of the property.
And, at that level of course, people think that you know there’s no risk at all because clever people have taken obviously a fixed rate mortgage. But, most people don’t whether it’s in Switzerland whether it’s in the UK other countries, Sweden. And now with interest rates going up to it’s to 2%, 3% 4%, 5%, 6%. The mortgage rates going up well in many countries 6-7%.
7% in the US. [Unintelligible]But you can fix for 30 years which is a big advantage but even so yes fixing at 30 years at 7% versus fixing for 30 at 3 and ½%, which is what it’s done, that you can get half the house for the same money now. So, you know the house prices have to halve for the monthly payments to stay the same. And, this is what people I think are perhaps missing.
Egon von Greyerz:
And that’s what’s so, I think terrible with governments. They’re saying they’re helping people, about giving them subsidies printing money etc. in any way to help you. If markets weren’t manipulated, if interest rates weren’t down, hadn’t been down at zero, 1%. If people pay the real going rate based on supply and demand for borrowing money, without interference of Central Banks we wouldn’t have seen these booms and bust you know.
I’m a great believer in that the Central Bank should be abandoned totally. Because they destroy markets, and they make the tops and the bottoms much much bigger than they are. And then therefore – then they should be and therefore they create these incredible bubbles and then these horrible bottoms in the economy that I think we’re facing now. And, people have gotten no margin, no margin whatsoever. They have no savings, so nobody can afford these high mortgages and we will see defaults of a magnitude that no one can believe. The number of people that are going to suffer now because they got the mortgage rate they’re going up that they can’t afford. They got the cost of food is not going up by 7.7% the latest inflation figure in the US – they’re going up by 15% to 20% for food costs for example. For normal people.
And you’ve got energy obviously energy costs going through the roof.
Egon von Greyerz:
Exactly. So, all the costs that are relevant for a normal person that hasn’t got access or discretionary money are going up by 15% to 20%. Not by official inflation of or 7-8% or 10% in Europe. The official reflection. And everybody I see, people suffering already ordinary people. And you know, the government is not going to be able to help them. You know as Maggie Thatcher said you know, debt is all right until you run around…
…the problem with socialism is that you sooner or later you run out of other people’s money.
Egon von Greyerz:
That exactly right. And you know there was this French politician Bastia who said the problem is that everybody wants to live off the state. The problem is that the state wants to live off of everybody. Also, you know I’m not so worried about — well obviously for the world as a whole — and an asset and debt implosion. I think is inevitable but I’m worried about normal people the people are going to suffer and there’s no solution.
Well let’s explore that the idea there’s no solution because, obviously there is a solution. But it’s a very painful solution you know. The solution is to reset the monetary system clear the debt and start again right? That’s been the solution whenever this has happened throughout time. We’ve never had it happen to this degree before but the solution is always the same. And that’s the solution that’s been applied throughout history until this time around where Central Bankers have decided that they can subvert the laws of finance. And maybe if we just keep printing money we can print our way through the down half of the cycle and then stop printing when we get to the up after cycle. As if the two were independent of each other. So, when we talk about solutions, there’s a solution to the problem that’s unpalatable and won’t be tried. So, what do you think Central Banks will try and do from here because they’re not going to just step back and say the only solution is to let this thing burn to the ground and then build it up again.
Egon von Greyerz:
Well, you know, I often look back at history because everything is happening today has happened throughout history, if you look back. And as we both know not one single currency has ever survived in its present state if you want as they’ve always gone to [unintelligible] without exception. So, that means that you can’t have an ordinary reset it’s impossible. All the resets that we’ve seen in the world and have been a smaller or greater magnitude but all that in the world has meant that money has become worthless, debt has collapsed. But what people don’t understand is you can’t just write off the debt and clear the debt and it’s gone and you create another you know another form of money, digital money and then it’s all everything’s happy again. You can’t do that. Because if you get rid of the debt, the assets that this debt finance will also have to implode simultaneously. Of course, they will try orderly resets.
You know somebody, let’s say the U.S tries an orderly reset you know that China doesn’t give a damn about what the U.S does nor does Russia, nor probably and Japan can’t afford to do anything because they’re bust anyway. So, you know an orderly reset and maybe using gold as some kind of backing the currency —which I mean not a believer in I don’t believe in actually having gold backing currency—we can come back to that. But then you know that will only last for a very short period of time because they’ll create new money but that will be fake money too, that’ll be fake money also, the new money.
And I also see that Central Banks are going to lose control of the system because when this disorderly reset if you want to call it that, a reset starts or implosion, you know there will be the bond of the debt markets are going to implode at a speed that no one can stop it, and an interest rate manipulation or QE will have no effect whatsoever and this is what you see at the end of a hyperinflationary era. Works on, we see that you know they print more and more and more and they add zeros to the money, has no effect whatsoever.
Well, look there are people who know your work, your written work and who are customers of metal and understand these things you’re talking about. But there are also going to be people watching this that don’t understand this. So, let’s talk a little bit about how people can start to take those first steps on that journey to understanding how this all pieces together how history offers us clues as to what happens next and the place that gold has in the middle of all that. How can people take those first steps?
Egon von Greyerz:
I’ve told the story before not to you but that was a couple of years ago in a restaurant in the Italian part of Switzerland, Ticino and the owner of the restaurant came up to me said I know you! So, he was following my articles etc. reading and then he said to my friends “listen to this guy, own gold” he said. I didn’t have to turn, he said he came from Yugoslavia he had experienced the hyperinflation in Yugoslavia in recent years of course. Most of his friends and everybody around him lost everything in that recession he had a bit of gold saved and he could come to Switzerland and live here and start a sort of a small restaurant. The people who have experienced hyperinflation they know what it is, they know the risk.
You know everybody needs to put a little bit away of course saving is now something that nobody knows what it is. You know, you don’t save you spend because Central Bank governments have actually taught us to spend because the money is always worth less tomorrow so that we have to spend. And, also on credit today. But you don’t need to be wealthy to preserve wealth. You could just, you know because if the people in Venezuela 10 years ago or 15 years ago, had just put you know the gold in Venezuelan Bolívar what it was 20 years ago was the same as in dollars. The currency was the same. And now they’ve had hyperinflation it’s worth zero the currency. Anyone who bought you know an ounce of gold 20 years ago and said it was 200 Venezuelan Bolívar and today it’s I don’t know 200 trillion whatever it is. Yes, it’s enormous. In any way but if they had just bought you know a little grain of gold or a silver coin and done that once a month of course, very few are interested in listening to our message when you talk about the general public because people don’t understand the need for this in a world where everybody just spends and borrows. And governments of course have zero interest in telling people that you should save money and buy some gold because we just we’re destroying your currency on a daily basis it’s going down daily in value and therefore protect against our foolish management of the economy.
No government will tell you that so therefore nobody thinks about wealth preservation. But, I you know, what will happen now in of course the next few years is that, I think the money’s gone down in value in real terms 97 to 99% [unintelligible] money since 1970 or 70 when Nixon closed the window. But, and the final 1 to 3% are coming now in my view and but they will be fine 1 to 3% is 100% from here. Which means and that will happen. I think we will see now currencies collapsing because it’s inevitable that governments are going to print more money. Because now with inflation higher interest rates, higher energy everything that we talked about you know there’s just —they’ll be a requirement for money from everywhere.
So how do you talk to people about these two different mindsets: the idea that the price of gold has to go up — “I’m not going to buy gold unless I think it’s going to go to two thousand dollars”. Because the other message is gold could stay right where it is at 1,600, 1,700 dollars and not do anything and you’re still better off. So how do you explain that message to people so they understand that the price of gold doesn’t need to move for it to do what it does.
Egon von Greyerz:
The sad thing is that whatever you tell ordinary people they don’t understand it. Unfortunately, you’ve got you know there was a time not for long ago 10 or 20 years ago or less when every Swiss bank in the world had gold coins. You could just go in and buy gold and when I was young I got gifts from aunts and uncles etc. also in gold coins. It’s a very common gift here in Switzerland for people who got married until the last let’s say 10-20 years to give them gold. But that’s all gone. So, what we both know that we are not going then it’s not going to reach the front pages until a surprise movement. That’s the only thing that’s going to make a difference.
It’s, I find it so interesting that you know when you when you think about gold when you understand gold it doesn’t change right? It’s inert and by the very definition of inert it just doesn’t change. And so, people talk about so-called gold bugs all the time just beating the same drum, beating the same drum but the reality is the message around gold doesn’t change either because gold doesn’t change. There’s no new story on gold there’s no new way to couch it. It’s money. It’s no liability of any bodies. It has no credit risk. It has no duration risk. It has none of the characteristics that have kind of come to define this last era that we’ve been in. It’s just you know inert and it stays there and so you know when I when I talk to people like to try and get them to understand that the price doesn’t need to move for gold to do what it needs to do for you. You know? If the gold price is $1600 an ounce but the price of everything has fallen even in a terrible deflationary environment it’s still protecting your purchasing programs increasing your purchasing power.
And I find it I find it fascinating that that there’s this there’s really one message about gold. We can all tell a story in various different ways and try and get as creative as we can in terms of making that message more accessible and easier to understand for people, but the message is the same: gold is money.
Egon von Greyerz:
Yes, you know that’s absolutely right. And you know I’ve been I’ve been writing for 20 years now so, and you get a lot of people, because people obviously who follow us who follow you are people who believe in what we say and do so that way’s easy. We are preaching to the converted and as you rightly say I could basically write this same message every week, or variations on a theme and that’s of course what we all do because our beliefs and our values are not changing. I mean I haven’t, my view on the world has not changed since I started worrying about wealth preservation and what I saw happening in the world.
I mean it was very clear to me and whatever has happened in between has not changed my mind at all. And then of course we started buying gold for ourselves and then for investors who would have listened to us or we had advised in 2002 at $300. Today you know we’re getting more near $1800 whatever it is and the message is the same. But now since then, since 2008-09 the risk in my view has gone up exponentially. And you know what we actually were telling people then is more relevant than ever today and so, we are still doing what we’ve done. We’re and I, you know a lot more people are listening. I must say that anyway. We’re still and you’re seeing a lot of gold buying on at the retail level. The people are worried there’s a shortage of coins.
There’s no shortage at all at the wholesale level of, at the investment level. That’s why the gold price hasn’t gone up a lot either. I think we actually now you know looking at the shorter I think we’re now getting into the – now a cycle where actually gold is going to take off again. We’ve had the consolidation for a few years now and the pause, and I think we’re going to see the next move. And of course, it’s going to continue because of course, paper money is going to continue to decline in value. So therefore you know yes, gold is eternal money and the – almost eternal wealth. And the best thing with gold is that you should never worry about the price. Because you’re measuring gold in money that has no relevance in paper money. And therefore, just think, here people should just think about I have 10 grams of gold or I have one ounce of gold or an ounce of silver also. And that’s the only real money I have and especially that will be my nest egg if things really go bad in the world. Which I think there’s a higher risk that they will. And there will be more people listening and people will realize it with time.
But the time people are suffering already and they’re going to suffer a lot more in coming years. And of course, you can’t only —very few will buy gold. Instead sadly, a lot of people will have very difficult times in the next few years and governments cannot help them. And you know as I always say that the most important thing in life is friends and family. Because we —if you have a tight group of friends and family and that you see that it’s in countries especially where they live close together etc. —they can be very poor, but they still have a good life because they’re supporting each other and when times are bad that’s what we need to do.
Family is now disappeared in the current society in the West, hardly exists in America. But that no people should not think about actually caring about friends and family and of course we’re also in the coming years we’ve got to help people also because with the with the situation that the world will be in. And I think that that’s the most important thing. And I —you know I, the real values in life is not money. The real value is that first of all family and friends. And then there’s so many things you need. Enough food of course, the roof over your head. But thereafter you don’t need iPhones and cars, and all of that. Best things in life are free, best things are — except for family as I said, books, music, nature, and just taking a walk, and you know, in the forests, or in the mountains. I think that. So real values will come back and that’s what I think, what the reset, we’re going to have the transition will be horrible for people. A lot of people will suffer tremendously. But out of that, will come a much better world in my view. We need the suffering to get to that. And in the meantime, people will need to help each other which will create much better values than we have today.
Well you’ve been, you’ve been very consistent with your message over the years. You’ve written an awful lot about the subject. You’ve written some phenomenal pieces about it and, so it’s always a great opportunity to get a chance to sit and actually talk to you about the stuff. So, thanks for taking this time and sharing it with me.
Egon von Greyerz:
Thank you, Grant. I appreciate your wisdom also. Thank you very much.
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