Claudio Grass: Debt Is The Biggest Issue

This article represents an interview of Claudio Grass (managing director at Global Gold Switzerland) conducted by Stefan Kremeth Incrementum Advisors AG.

Please explain why you decided to switchfrom a management position at Logitech to start a new career in the precious metals storage business.

claudio_grass_global_goldThe process started long before I actually entered this business. To be precise it started back in 2004 when I read the book “Gold Wars” by Ferdinand Lips. Even before that I was very much interested in history but I had no clue about monetary history. After reading Ferdinand’s book I got in touch with him and you can say that he became my mentor in the world of Austrian Economics. He pointed me to the direction of Wilhelm Röpke, Friedrich August von Hayek, Ludwig von Mises and many more. I started reading everything related to the Austrian School I could get my hands on. The more I read the more I realized that our world is in a period of transition. I am convinced especially the financial system is facing major changes. That’s why I started purchasing physical gold and silver and also invested my money in mining stocks back in 2004. Since then my goal was to work in the physical precious metals business with the aim to offer a solution which focuses on all aspects that I consider key when it comes to purchasing and storing gold and silver safely.

How do you see the current global economic environment?

We are living in an environment of increasingly radical government and central bank intervention. This leads to distorted market signals and makes short-term predictions extremely unpredictable. However, what can be said is that governments can’t create trillions of new currency units without consequences. Therefore I believe it is important to focus on the big picture and not get lost in the details. Debt is the biggest issue! The leading nations of the world such as the US, UK, European Union and Japan are facing the highest level of public debt in times of peace. In addition to these high levels of debt there are unfunded liabilities which are also exploding, the aging population and increasing unemployment. Our financial system is simply not sustainable. In such an insecure economic situation I am convinced that the preservation of ones wealth is key or as Mark Twain said “I am more concerned with the return of my money than the return on my money”. To sum it up, governments will likely further increase their interventions and might increase their measures of financial repression as described in our recent Global Gold Outlook Report.

What makes Investors use your services? 

In short it is the safety, which Global Gold offers it clients. Global Gold was founded to offer its clients a rock solid solution, which is completely independent of the current monetary and financial system. We offer a solution that works and exceeds client‘s expectations even – and particularly – during a severe financial crisis. Our trading and services are facilitated “outside” the banking system. There is no dependence on functioning stock markets or banks. A financial crisis will not stop the program from operating. Furthermore wedo not have any cash settlement clauses or other provisions that would restrict the prompt delivery or sale of the precious metals.Since we store the coins and bars one-to-one according tothe customer’swishthere is no form of counterparty risk. Another important aspect is the jurisdiction we operatein. Switzerland is known for its stability, safety, solid rule of law and high service quality. In view ofcurrent global economic and political realities, we are convinced that Switzerland is the jurisdiction that most properly guards the interest of our clients and respects their property rights.

What do you see as the single most important risk investors face over the years to come and what is your recommendation to investors and/orinvestment managers when it comes to protection against any such risk?

I see several risk factors we are going to face in the future. In my view, the next few years will be dominated especially in the western world by a declining real economy, higher unemployment rates and as already mentioned by financial repression such as higher taxation and government restrictions when it comes to investment possibilities. Interest rates, which are kept artificially low, in combination with a moderate inflation rate, are leading to low or even negative real return on investments. That’s really destroying the existing wealth through the back door, reducing the purchasing power of paper money. The biggest part of all the new currency units has been used to bail out the bankrupt banking system and governments have redistributed their part to finance certain pressure groups favored by the governments. “The driving forces of economic health, are savings and investment, not consumption and debt. According to the Austrian School of Economics, every act of consumption has to be preceded by production”- Debt is nothing but consumption brought forward, which will consequently not take place in the future. There does not seem to be any painless therapy for these problems. That’s why I believe that physical gold is an effective antidote, because it can’t be printed or destroyed by any central bank policies.

Precious metals had a somewhat disappointing year in 2012. Do you think the time of precious metals investments is over?

I would not really call last year disappointing. Cash and nominal assets are currently yielding close to 0% on the other hand gold closed the year around 7%. I don’t think that precious metals are over as an investment, because in my view we are far from a bubble. In our report we have an interesting slide comparing the current bull market to the previous far. It speaks for itself!

The bull market is intact and the fundamentals are very strong. This in combination with our outlook on the economy makes us bullish for gold. We would use the dips in the gold price to accumulate physical long term gold positions.

How would you structure a portfolio in 2013?

The needs of each client are unique and hence there isn’t a one-size fits all recipe. I personally believe that it can make sense to put a minimum of 25% to 35% of ones investable wealth into precious metals.

Read more about Global Gold Switzerland or Incrementum Advisors AG.

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