The Silver Bear Cafe

It reached $ 1 million on August 16, 2024 – 53 years and 1 day after the US (Nixon) permanently said farewell to the dollar as a store of value by closing the Gold Window.

Let’s just recap what has happened to the cost of a 400 oz gold bar since 1971:

That is a loss of purchasing power of 98.5% over the 53 years between 1971 and 2024.

Just think about it: If you put $14,000 in the bank in 1971 and earned, say 4% on average, that would be $116,000 today. A far cry from the $ 1 million that the same amount invested in gold – REAL MONEY – would be worth.

It simply means that after August 15, 1971, the dollar could no longer be converted to gold by any investor, private or sovereign.

Before we look at the fatal consequences, let’s just look at the Folly of the West.

First, we see the West’s prediction of the consequences as interpreted by Nixon on 15 August 1971:

And below follows the Wisdom of the East (Mao) as written by the official Government body, the People’s Daily:

And China said, “These measures mark the collapse of the capitalist monetary system with the US dollar as its prop”.

So the West is only interested in instant gratification, issuing debt and thus buying short-term prosperity and votes, leading to “decay and decline”.

So, let’s look at the “decay and decline” of the US and the West reflected perfectly in the fall of the US dollar.

Nixon said in 1971 that the “strength of the currency is based on the strength of the economy”.

A 98.5% fall in the value of the dollar (in real terms, against gold) since 1971 can hardly be called “worth the same”.

Measuring the dollar against gold is the only correct method to determine the real purchasing power of the dollar. To measure currencies against each other serves no purpose. All that tells us is which currency will win the race to the bottom.

What will destroy the dollar and all Western currencies, will be the exponential growth of debt led by the US.

The table below shows the inevitable road to perdition that the US dollar’s is now on:

With debt up 82x since Nixon closed the gold window in 1971 and GDP only up 26x, it is not difficult to see that the US engine is running on empty.

Just look at the super-exponential phase of debt since 2009, the year that the Great Financial Crisis was supposed to have ended. Since 2009, US debt has trebled, while GDP has only doubled.

More and more debt is required to create growth. Consequently, since 1971, US debt to GDP has gone from 39% to 122%.

Over 90% of Debt to GDP is considered junk, and 122% is Banana Republic territory.

A pure statistical extrapolation of the debt trend tells us that by 2036, the debt will be $100 trillion.

The US government, together with all Western governments, are destroying the fabric of society by constantly spending more than they earn. Even the word “earn” is deceitful.

Governments don’t earn anything. They will just wilfully levy taxes and other charges against the people without their consent. After decades of suffering from high taxes, people are entirely “socialised” and expect the government to pay for everything.

Do the people of the US and Europe want to send $100s of billions to Ukraine? Do they want to pay similar amounts for the immigrants, many of whom get preferential treatment when it comes to housing, social security, hospital treatments, etc?

Well, nobody knows what the people want since they are never asked. But I doubt they would approve this spending if they had a say.

Nor does anyone ask where all this money is coming from. It definitely hasn’t been earned by the government.

The government doesn’t even have the money it is paying out. It just creates money out of thin air and creates ever-increasing deficits that lead to exponentially growing debts.

The people are pacified since they believe that the government is paying. Nobody understands that all this debt is owed by the people.

But they can, of course, never afford to repay it in taxes and other levies. Nobody understands that the consequences will be the value of money dropping catastrophically, poverty, famine, shortages of many items, homelessness, social unrest and probably war.

And once a country reaches that stage, the government is powerless. They are bankrupt and have no funds to assist anyone. The risk of anarchy is high since the government will have few tools to maintain law and order.

So, how can we predict such a dark period? It requires no predictive powers but just a study of history. Please read “THE DARK YEARS ARE HERE II”, a 2018 update of my 2009 article. It was even more important today than it was in 2018.

Just take the US government’s mismanagement of the country’s finances as the inevitable journey to serfdom. With a handful of exceptional years, the US has increased the Federal debt since the early 1930s. Even during the so-called “Clinton surplus years”, the debt went up. So, the surpluses were fake.

As current growth is derived from creating debt with ZERO intrinsic value, the growth is only illusory.

The world will soon understand that it is all a fantasy game, with trillions of unreal assets created by even more trillions and quadrillions of debt (including derivatives) made out of thin air.

In the next few years, the world will realise that debt has zero value since neither sovereigns, corporations, or individuals can repay their debt or even afford the interest.

Remember that the official global debt is around $350 trillion plus a big part of the derivative time bomb which could be into the quadrillions. Much of that will transition to debt.

The billionaires will lose all or most of their zeros (of their wealth), and so will the trillion-dollar companies.

The wealth transfer will be shocking. The wealthy have the most to lose. Some have been clever and are debt-free. But most are leveraged and will lose everything.

Everyone will suffer, rich or poor. However, the poor and ordinary people have the most to lose with no reserves, no safety net, and a bankrupt government that can’t help them.

The few who have understood that future prosperity comes from natural resources will obviously be in a better position. Technology will also be a growth area, but it is currently overvalued, as it was in the 1990s.

The asset-rich BRICS countries will be major beneficiaries, whilst the debt-infested West will experience the end of a major era. These are all major shifts that will evolve over decades and even centuries.

But the beginning could be very rapid and most probably violent for the whole world, West and East…

Economic decline, financial collapse, wars, political and social unrest, poverty, food shortages, as well as mass migration led to major cultural shifts.

Well, that is what history tells us with great certainty. History never lies, and it never fails us as lying politicians do, without exception, for their political survival.

But history doesn’t tell us when, of course. So, the exact timing is always unknown.

We also know that the world has never experienced a global debt bubble of such magnitude.

It’s important to understand that the risk is now higher globally than at any point in history.

As I have outlined in this article, a continued and steep dollar decline in the coming years is a virtual certainty.

As there has been no gold window to close since 1971, the US government is almost certain to implement foreign exchange controls as the dollar falls. I wouldn’t be surprised if it comes relatively soon, but the timing is irrelevant. The risk is here today and now is the time to prepare for it.

Thus, for Americans, it would be an advantage to have funds or assets outside of the US as soon as possible. Physical gold and silver are clearly the best assets to hold as they also protect against the dollar debasement.

Switzerland and Singapore are obvious places to hold gold. Switzerland has a strong currency and a very sound economy. Exchange controls would be unlikely here.

What is extremely important is not to hold your precious metals through a US company or other entity, which the US government can order to return the gold or silver from a foreign vault to the US.

Instead, hold your metals through a Swiss or Singaporean company that has no US links.

For anyone who has savings, big or small, putting them into physical precious metals can make the difference between survival and misery.

Most people can afford to buy a few silver coins every month, and many can afford one or more small gold bars or coins.

With the acceleration of the dollar’s (and other currencies) debasement and shift in Central Bank reserves out of dollars into gold, the revaluation of gold in coming years will be by multiples. As I keep on saying, the real move in the gold and silver hasn’t started yet.

But above all, a harmonious and close circle of family members and friends is crucial to survive the difficult times ahead.

Born with dual Swiss/Swedish citizenship, Egon's education was mainly in Sweden.

Egon von Greyerz began his professional life in Geneva as a banker and thereafter spent 17 years as the Finance Director and Executive Vice-Chairman of Dixons Group Plc. During that time, Dixons expanded from a small photographic retailer to a FTSE 100 company and the largest consumer electronics retailer in the UK.

During the 1990s, Egon von Greyerz became actively involved with financial investment activities including mergers and acquisitions and asset allocation consultancy for private family funds. This led to the creation of VON GREYERZ as an asset management company based on wealth preservation principles.

VON GREYERZ is now the world’s leading company for direct investor ownership of physical gold and silver outside the banking system. Our vaults include the biggest and safest gold vault in the world, located in the Swiss Alps. Clients include High Net Worth Individuals, Family Offices, Pension Funds, Investment Funds and Trusts in over 90 countries.

Egon von Greyerz makes regular media appearances and speaks at investment conferences around the world. He also publishes articles on precious metals, the world economy and wealth preservation.

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