In this second installment, I bring you another veteran’s opinion of the financial condition of the world. I heartily recommend listening to the entire interview with Felix Zulauf at KingWorldNews:
Some highlights follow:
Felix Zulauf: I think we are living in a time when we are going through many crises but the common denominator of these crises is that the industrialized countries, virtually all of them, have too much debt outstanding relative to the size of the economy. In a way we have been living in a fiction for the past twenty years or so that we thought we could borrow ourselves into sustainable prosperity and going more and more into debt and living a life that we cannot really finance out of our own income. And all of a sudden it seems the world is realizing we that we do have a problem that is unmanageable and that we cannot continue the way we used to live.
And all of a sudden serious doubts about the validity and the soundness of our currencies have arisen…
Interviewer (Eric King): Will this be like the 1970’s in terms of stagflation or is the US in much worse shape than it was in the 70’s?
Zulauf: Oh I think this is completely different than the 1970s. In the 1970s we had an inflationary problem that was due to bottlenecks here and there and everywhere and a booming world economy. Today our problem is deflation. I think the deflationary problem is due to too much debt outstanding. When an entity has too much debt it means that it has to borrow more and more to pay its interest, and we are in that Ponzi type of scheme.
We won’t have much economic growth in coming years, certainly not enough to service the outstanding debt. Now I think the US as many other industrialized countries are going eventually to hit the wall because we are in the final, in the end game of this system… And it means we will enter a deflationary period … and the policy makers are trying to counteract by using inflationary policies.
I don’t think you will see conventional inflation into hyperinflation over some years, but I think you will see, once the central banks come in as I described, you will see it happening in a matter of a few weeks. And at that point you destroy the currency, and as you destroy the currency and come out with a reform as a new currency you basically eliminate part of the debt and part of the wealth.
I think it will be uncomparable to everything we have seen in the past 70 years.