Gold Bug Sees 20-Year Global Depression

Friday, 20 Aug 2010 10:54 AM

By Dan Weil

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Many economists now see heightened risk of a double-dip recession, but Egon von Greyerz, managing partner of Matterhorn Asset Management, is a lot more pessimistic than that.

“The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park,” he writes on the Swiss firm’s web site.

Massive monetary easing by central banks around the world has temporarily kept the financial system afloat, von Greyerz says.

“But the effect of this massive money printing is ephemeral since it is not possible to save a world economy built on worthless paper by creating more of the same.”

Still, money printing is all we know, he says.

“Therefore, we are soon likely to enter a phase of money printing of a magnitude that the world has never experienced.”

As a result, the western world is likely to suffer a downturn of at least 20 years and probably more, von Greyerz maintains.

Indeed, we will end up worse than Japan in the 1990s, because Japan then had the advantage of being both an export machine and an international creditor, he says.

Economists are lowering their growth estimates in the wake of recent data, but hardly anyone is as bearish as von Greyerz.

For example, a recent survey of economists by MarketWatch produced a consensus forecast for U.S. growth of 2 percent in the second half of the year.

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