The Swiss Fund Manager Felix Zulauf warns of a more unsettled economic environment in the coming months. The Chinese financial system is deeply in trouble, he says.
Zug based Felix Zulauf stated in an interview with the website «King World News» that the economy is currently completely over indebted. He points out that in the year 2000 total global debt was in the region of $86 trillion, currently total global debt is well above $200 trillion and the remaining borrowing-power solutions have become limited.
Zulauf said that China had perhaps the biggest boom we have ever witnessed but it has definitely ended. The world did not sincerely recognise that China was in a downward spiral because of the vague transparency of growth numbers.
Financial System in Trouble
The Chinese financial system is in trouble he says and they have been throwing money down a very deep black hole. He is adamant in his view that you cannot support your economy just by throwing infinite amounts of liquidity at it while at the same time supporting your currency. Either one or the other eventually has to give.
Historically, Zulauf noted, countries give up the fight and let their currencies run and this year he expects the Chinese to let the currency go until it finds its own equilibrium. This in turn might export more price deflation from China to the rest of the world.
Gold's Comeback
As a knock on effect banking systems could lose deposits with Zulauf foreseeing bad debts created by excessive lending into China hurting both Hong Kong and Singapore and in Europe, Italian and Spanish banks could also be hit hard
All of the current turmoil in the markets though is good news for Gold which Zulauf reckoned could run through to as high as $ 1,400.
