Greyerz added: “But coming back to the Fed, Eric, they will never be able to permanently stop QE. It’s not that QE is a solution, it’s just that if they stop it rates will go up and there will be no chance to refinance the massive U.S. debt load or the Fed’s own balance sheet. The system cannot survive with higher rates.
So I believe there will continue to be some type of ongoing secret QE done through foreign central banks or some type of Plunge Protection Team. But eventually the system will require massive worldwide money printing. This is because the problems from the 2008 collapse are still present in the system.
But regardless, the public will continue to suffer with high unemployment, high personal debt loads, and falling real wages. 90 percent of Americans are poorer today than they were in 1987. 58 percent of the population is now earning below $28,000. We also just saw a 19-year low in mortgage applications, which shows that the problem in the real economy is massive.
But we will also see more QE in Japan, where there are huge problems. And China’s property market is now in a real bubble. This will affect China’s banking and shadow banking system. French unemployment is also at a record high now, and Germany’s Business Confidence is at a 6-month low.
If you look at the stress tests in Europe, 25 banks failed. But the stress test was devised in such a way that most banks passed. Virtually all of them would have failed a normal stress test. But even the banks which did not pass the test won’t have to take measures to pass at a later stage. The bad debt in Europe is now over $1 trillion euros. This will eventually mean even more massive money printing in Europe.
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