As the world edges closer to the next crisis, today the man who has become legendary for his predictions on QE and historic moves in currencies just warned that what is going to unfold in markets will shock the world.

$2 Quadrillion Ponzi Scheme
(King World News) – Egon von Greyerz:  “Maecenas was a well known benefactor in Rome for Horace and others. His name has come to mean benefactor, in many languages called a mecenate.

The loss of a benefactor can be very serious for anyone on the receiving end of his alimonies. For a century, the world has had the most generous group of benefactors ever. These benefactors have created immense wealth in the world. Even better, they did it without any major effort. All that was required was a printing machine combined with some bookkeeping wizardry.

The problem now is that these wizards will very soon be revealed as the biggest swindlers in history. With money printing and debt expansion they have created a $2 quadrillion Ponzi scheme of debt, derivatives and unfunded liabilities.

It is not difficult to understand that I am talking about governments and central banks, which have created a world of illusory wealth. A system that grows primarily by expansion of debt rather than hard work and return on investments made from savings has no sound foundation. When the debt implodes, so will most of the assets financed by the debt. The reasons for this is because assets generated by printed money or debt can, by definition, not be worth anything since the money that created them was free money with ZERO intrinsic value. Money only has a real intrinsic value when it is the result of a service or produced goods. But it has zero value if it is printed or just generated by a book entry. Thus worthless IN and worthless OUT!

This Is What The World Will Soon Experience
And this is what the world will soon experience. The 2006-9 rescue package of around $25 trillion followed by the doubling of global debt from $125 trillion in 2006 to over $250 trillion today, will be the last time for decades or maybe longer that it will be possible to create worthless money out of thin air and con the world into believing that this is real wealth.

The next round of stimulus in the form of money printing, interest rate manipulation or free money, debt expansion and deficit spending will definitely not work. The world economy is now at the end of the road and any debt added today, even if free or with negative interest, will have zero effect. The $100s of trillions of debt likely to be printed in the next few years will trigger the collapse of the debt mountain by its sheer weight. And the current historic super bubble in bond prices will implode with bonds collapsing and interest rates going to the teens, initially, like in the 1970s to early 80s. Eventually a major part of the bond market will default and rates will reach infinity. But before that we might have a couple of years of zero or negative rates as central banks fight to keep the financial system afloat. When that happens, the money printing will already have created hyperinflation and the collapse of the currencies which I discussed in last week’s KWN article.

In the medium term, the current $15 trillion of debt with negative interest is likely to get much bigger. The implications are both crazy and mind boggling. In Switzerland, for example, insurance companies now offer 10 year mortgages at 0.64%.  And just look at the 100 year Austrian bond yielding 0.8%. It must prove to be one of the worst investments ever as bond prices and currencies collapse.