Coming Market Madness Could Take 70 Years to Recover
The comments below are an edited and abridged synopsis of an article by Egon von Greyerz
Cervantes’ classic novel Don Quixote can be described as a fight for liberty and freedom against oppression and against the state. This book is from 1605 and is considered to be one of the best ever written.
In the midst of market madness, risk doesn’t exist because lunatics neither see nor worry about risk. And still, 2022 will be more about risk and survival than anything else. Von Greyerz talks about “The Triumph of Survival,” which he discussed in another article.
This year will most likely be the culmination of risk. An epic risk moment in history that few investors will see until it is too late, as they expect to be saved yet another time by the Fed and other central banks.
Why will 2022 be different from any year since 2009, when this bull market started? Many investors won’t see that 13 spectacular years in stocks and other asset markets could signify the end of the epic super bubble.
The Great Financial Crisis (GFC) in 2006-9 was never repaired. Central bankers and governments patched things up with glue and tape in the form of trillions of printed US dollars, euros, yen etc. But the market was fatally injured and the intensive care administered only offered a temporary reprieve.
When the GFC started in 2006, global debt was $120 trillion. Today we are at $300 trillion, rising to potentially $3 quadrillion when the debt and derivative bubble finally explodes and then implodes.
Up for discussion: Investors have found Shangri-La; the epic bubble might not recover until 2090; Don Quixote would have fought wokeness; easy money madness; and “I come in a world of iron to make a world of gold.”
Meanwhile, gold is cheap in relation to the growth in US money supply. It is as cheap as it was in 1970 at $35, and as cheap as it was in 2000 at $290. Thus the upside potential for gold is multiples of the current price, especially since the currency debasement will accelerate due to money printing.