Beginning of Hyperinflation—Part II

Walter K. Eichelburg predicts Germany’s national insolvency by mid-2009. The question is why are governments repeating the same mistakes again?
Beginning of Hyperinflation—Part II
10/27/2008
Updated:
10/1/2015

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The road to success. (Gerd Altmann/www.pixelio.de)
Until recently, Walter K. Eichelburg was seen in many advanced industrial economies as an outsider, given all his predictions about a worldwide economic crisis and hyperinflation. But, beginning in 2007, The Epoch Times printed an interview wherein he predicted hard times ahead. Many of his predictions have alreay come true, including the collapse of both Fannie Mae and Freddie Mac.

Epoch Times (ET): Mr. Eichelburg, the G-7 nations announced the rallying cry “Save yourself.” What is your opinion on this?

W.K. Eichelburg (WKE): With this, the future of the Euro was sealed. Sarkozy asked for a bailout fund or rescue package for all of Europe. But, Germany rejected such a demand, saying that everyone should attend to their own affairs. Banque AIG [1] already predicted some months ago that the Euro zone could very well fall apart. But, there is a rescue plan in place that is similar to Germany’s payments under the Treaty of Versailles [2].  

ET: The rescue of the Euro zone could only be spearheaded by Germany?

WKE: Exactly! That meant that Germany should pay for the bailout of the other countries. But, they aren’t inclined to do that, given their own problems. This would have resulted in the total impoverishment of the German population. The politicians are very aware of this. The decision that everyone must save themselves was made several weeks ago. Eventually, one of them will suffer a collapse. We must wait and see. I can’t predict it. The decision was made that the European countries would shore up the interbank market. It is revealing, when the banks don’t even trust each other anymore.

There is one crucial element, and that is the gold price. It would be a problem if one could no longer suppress the gold price [3].

ET: What do you mean by suppressing the gold price?

WKE: Gold is the barometer of the health of the entire financial system. Whenever something is going on, gold prices will rise. We saw this during the Bear-Stearns and Fannie Mae crises. Gold prices jumped to over US$1,000 an ounce.
The Central Banks have printed money and sold gold and derivatives in the market for quite some time to suppress gold prices. This has been going on for the past 15 years. One wants to prevent the capital from flowing to gold.

ET: But, gold prices are at an all-time high.

WKE: Not on a U.S. dollar basis, but yes, on a Euro basis. The gold price is below US$800, and the all-time high was over US$1,000 per ounce. It is being massively suppressed with all available means. One can see a worldwide flight to gold. The ounce and small bar gold and silver markets are almost exhausted. Especially in Germany and the United States, gold is no longer available.

When there are shortages and the demand is high, market forces should kick in and the prices should increase significantly. This is not as simple as it looks. One needs to let go of one’s trust in the authorities and use common sense. I didn’t earn an MBA and I’m not an analyst. As an investor, one needs to be able to think outside the box.

ET: How did you figure all this out while others did not?

WKE: What is the small investor, among all those fund managers and bankers, up to? You must realize that investing has an inherent fear factor. It is risky. That’s just how it is! If the risk is too great, they will lose their money.

What I’m trying to say is that if everyone agrees that if a certain investment is without risk, everyone will jump for it. “Ah, it is without risk at this time. We can get involved now,” said Eichelburg. But, only up to the time it has all been purchased. Here, the skill to predict the movement of an investment is an art. One has to be able to predict most accurately when a stock will rise and when it will fall. One has to know when the mass of investors will enter and when they will exit.

ET: What should an investor do today?

WKE: Get rid of your stocks. Please look at the front cover of the summer 2005 Time Magazine (the picture shows a man hugging a house). This was the heyday of the U.S. real estate market. People camped for days outside a real estate office. Tell me what did the media report at the time? This made the headline story. The media will publish anything that is popular. That’s their job. What will be on the cover-page? You will find stories that the masses are interested in. What I’m saying is that the educated investor will know what to do as soon as reading such a story -- get out.

ET: Why don’t most investors react to such media reports?

WKE: The masses are just like a herd. They need a leader. Those who don’t think outside the box will not be the winners.

ET: What comes next?

WKE: Most banks will collapse during 2009, including those in the United States. Most Western banks will be affected by this trend. I have no idea which ones will survive.

ET: In your opinion, most banks and countries will collapse by mid-2009?

WKE: Yes. One can already see from Iceland how this will happen. Hungary and the Ukraine are already in the process of going under. But, let’s continue to talk about Iceland. Their currency has already collapsed. It’s gone under. There are no imports and the supermarkets are emptying out. The prices for food are going out of the roof.

The majority of the populace who took out large loans continues to live in their ‘luxury.’ They still drive their SUVs around Reykjavik and refuse to accept reality. The reality is obvious.

ET: And this reality is?

WKE: What is next – massive hunger. A trade journal recently published on the front cover, “Iceland—Returning to Fish.” That is the truth. This is the only thing the country has and which they don’t need to import. The same thing will happen in all other “Bubble-Countries,” Spain, England and Hungary. The Baltic’s are also collapsing and the same is happening in the Ukraine.

I think that Austria and Switzerland will fare a bit better, because we still have an industry that was never part of the excessive bubbles. Spain’s food industry will also be hard hit. They will return to Third World status. The British Empire will see its final days and will do much worse than the United States, as the financial sector was of greater importance in Britain than in the United States.

ET: On what do you base these speculations?

WKE: The English Pound is already falling. This is always the beginning – currency devaluation. Then the country can no longer import. At that time it will begin to be very difficult. It naturally will take some time for all of this to materialize. The same will happen in Eastern Europe.

ET: Why will Eastern Europe be hit that hard?

WKE: Because of the trade deficits. Also, the banks, especially the Austrian banks, have lent a lot of money there. Many of the people don’t even know that they have to pay back the loans. The Hungarian Forint [1 Forint = $.004624] had to be bailed out recently. The Austrian banks will collapse, because no one in Eastern Europe will make good on their loans.

ET: What about the German banks?

WKE: They will also collapse. There are many reasons for this, which are all grounded in Spain, Eastern Europe and especially in the United States. The German banks will suffer the greatest losses.

World trade is already collapsing, because Letters of Credit [4] are no longer available. Well, a few may still be available.
ET: This scenario sounds worse than that of the thirties.

WKE: That is right.

ET: In your mind, does that mean that a rush to buy gold will ensue?

WKE: Small countries – where can they go? They can’t assume the Euro or the dollar, although they want to escape their local currency. The only way to go is gold or silver. That means a gold price at US$1,000 is still very cheap. Even up to US$3,000 is very cheap. When the financial-Titanic sinks, one will pay any price for a life-boat.

The Central banks and governments are doing all they can to stop this scenario. The problem is that with each bail-out, the country also collapses. Iceland experienced this and so did Hungary.

ET: But Hungary is not officially bankrupt yet.

WKE: Not yet. But, as I have said, it won’t be very long before that happens. Just take a look! All have fought hard until the last moment and then they admit failure. The currencies are no more than toilet paper, including the Swiss Franc. It has already reached the third level, just like in the thirties.

There is a big difference between myself, and the bankers and economists. They all are interested in it because it is their profession. One cannot trust bankers or politicians. They will lie until the last moment.

ET: Could it be the exact opposite? Why should it be this bad this time?

WKE: It is the same during any crisis. Always! Then the day of reckoning has arrived. That is the time when the people’s anger will overflow, because the people will lose everything they own.

ET: If this scenario truly happens, is there a route for escape anywhere?

WKE: You have to exit the system completely. There are only three types of things one can invest in. First in gold and silver – the new money; second in energy – most ideal would be an oil well and not any energy that depends on credit, such as energy that is promoted by the government, including wind energy and photovoltaics. Forest and coal mines would also be rather interesting. And the third factor is the single most important, real-estate – small or middle-sized farms. Everything else is not worth another thought, because they are worthless, just like loans. When the currency is worthless, one no longer can import. Then you must produce true agricultural production -- not speculation -- real production. Then small gardens will reappear.

Hyperinflation Part I:

Notes:
[1] Banque AIG is a subsidiary of the American International Group, Inc. (AIG), a publicly owned global insurance organization.

[2] Treaty of Versailles, an agreement negotiated during the Paris Peace Conference of 1919 that ended World War I, was meant to be a peace agreement between Germany and the Allies. Germany signed the Treaty under protest, given the demands put on Germany. The demands are seen as the main reason for the rise of Nazism and Germany.

[3] Central banks sell off gold when they want to depress gold prices.

[4] Letters of Credit are an agreement between an individual or company and a bank that guarantees payment, as long as the terms defined in the letter of credit are met. A letter of credit is payable when the required documents are presented to the bank.