A Climate Change in Candor: Von Greyerz & Stoeferle Address Cracks in Bond Markets. Part II.

Egon von Greyerz and Stoeferle conclude their two-part Zurich discussion by addressing gold’s role in the context of current rate, currency and bond market forces.

Both see a future of negative real rates and increased centralized controls as inevitable. But Egon asks if central banks can truly control rates forever? He feels eventually there will be a sell-off in the long end of the bond market, which will send bond yields and rates to unpayable levels. Ronni agrees, but in the interim foresees greater forms of yield curve controls to stem this inevitable rate tide. Each discuss the various reasons such policies will eventually fail.

Rate and currency forces, of course, are highly inter-related. As yields on the 10-Year Treasury surpass 2%, the Fed will be forced to buy these bonds via unlimited QE, which is expansion is extremely destructive too currencies seeking to prop otherwise unloved bonds.
As to bonds, both Stoeferle and von Greyerz see the bond market as the most important (yet most ignored) force in the financial world today. The irrational yet desperate efforts central banks are making to “support” (i.e., subsidize) that market with fake money always ends badly, but not without a fight.

Toward this end, Ronni and Egon foresee more financial repression in the form of increasing capital controls. Pension funds, for example, are allowed to purchase Treasuries, but not physical gold. Such insanity is increasingly becoming policy.

Meanwhile, and despite such obvious currency, debt and financial risk, the world appears to be deliberately distracted by climate change summits as the currency (and hence financial system) beneath their feet is rotting at warp speed.

Ronni and Egon close by discussing their unique and respective services (and asset focus) to inflation-protect investors, from fund management and wealth management to exceptional and transparent market/macro reporting. Ronni sees a particularly solid set-up in the gold mining space, and explains why. Ultimately, both concede that gold will rise for no other reason that sovereign currencies are already falling, and set to fall much further.

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