Last week, gold and silver analyst Dan Popescu interviewed Egon von Greyerz, Founder and Managing Partner of Matterhorn Asset Management. They spoke at length about the upcoming Swiss Gold Referendum, which we’ve previously reported on here and here. Von Greyerz provides great insight into the Swiss mindset and the importance of gold for central banks around the world. At the end of the interview, he even weighed in on the massive flow of physical gold from the West to China.

Here is a partial transcript of Egon von Greyerz’s responses:

The Swiss have an affinity with gold. It is a tradition to own gold in Switzerland, although in later years this has been less so, because there has been more printed money like in other countries. The campaign is significant for Switzerland and it could be significant for the world as a whole…

If the initiative passes, it becomes part of the Swiss constitution. So the central bank or the government cannot change it. The only way to change it is for another national referendum…

In accordance with the initiative, they have five years to purchase this gold. So they don’t have to do it tomorrow. But they must do it within five years… I think it’s not just the fact that they’re buying 1,700 tons, but I think it’s the fact that this will be a trend setter for central banks worldwide… They’ll want to bring their gold back to their home country. Most central banks today hold gold outside their home country, primarily in London, New York, some of it in Paris, some of it in Canada. In the case of Switzerland, they hold roughly one-third of their gold in the UK and in Canada…

The Swiss National Bank [SNB] has said, “We need to hold it there if we need to sell it quickly.” Central banks should not treat gold as a toy that they can just buy and sell whenever they want to. They should actually use that gold to protect the finances of their country and the currency. Of course, we know that it’s not a valid argument that you have to have it in a different country to sell it. You can sell it from home also…

The SNB and the government are against the initiative for the simple reason that they want to do what every single government and central bank in the Western world is doing today, which is print money [and] buy votes… Because that’s really what they’re doing. When times are bad in the country, when finances are bad, they print money to please the people and buy votes. That’s what’s happened in Switzerland also…

[The SNB's] balance sheet is bigger, in relative terms, than any Western European countries. In order to keep the value of the Swiss franc low, they have printed 400 billion Swiss francs since 2008. In order to buy primarily euro assets, but also some other currencies…

For decades, the Swiss franc has been a strong currency and Switzerland has been a strong economy. I remember when I started working in Switzerland in 1969, one dollar [was worth] 30 Swiss francs. Today, one dollar [is worth] 95 Swiss cents. So you can see that there has been an enormous appreciation of the Swiss franc during that period. More importantly, during the whole of that period, Switzerland has prospered, had a strong currency, low inflation, and a strong economy.

Sadly now, central bankers [have] investment bank backgrounds [and] they are now using the same Goldman Sachs-type principles [of] manipulating the economy, manipulating the currency. They think that is necessary to keep the Swiss franc weak. Have they not read their history books? … Switzerland has prospered with a strong currency. I know of no example where a country has prospered that has a weak currency [and] prints a lot of money. The short-term exception of that is the US, [because] they’re still the reserve currency of the world. I wouldn’t say they’re prospering, but they’re still managing to run an economy with massive debts…

In the US, the balance sheet of the Fed is only 25% of GDP, and in Switzerland it’s 80%. Switzerland is out-of-sync. It’s printing too much money… It is really unfortunate to see your own country having gone from being the most prudent and conservative in the world when it comes to financial and economic policy to now doing what everybody else is doing. But the banking sector is too big for the country. The Swiss banks are seven times the GDP, [about] in line with Cyprus… The Swiss banking system is very exposed in relation to the size of the Swiss economy.

The Finance Minister said, “Gold is a risky asset, and therefore we shouldn’t hold gold.” The funny this is that if you look at gold in Swiss francs, [it] has appreciated by 200% in the last 15 years… So the Finance Minister has got it wrong. It’s the Swiss franc that is a risky asset, it’s not gold…

But the Swiss are a very independent people. They don’t like being told by the government what to do. So consequently, you’ll see [the latest poll] is slightly in favor of the “yes” vote. So people have not listened to what the government has said…

I think it’s such a fascinating game going on, with the West basically losing all its gold [to the East]…The central banks are not telling you [how much of their gold is leased to the market]… No central bank in the world, basically, will allow a proper physical audit of their gold. The estimates are that a lot of gold has gone out of bullion and central banks. When that happened before, it was all sold [mostly] between central banks and it all stayed in London… Therefore, it didn’t really matter… But what has happened now is that China has been the big buyer and they have taken physical delivery, often via Switzerland… That trade is continuing and China is clearly building up a massive stock of gold. We don’t know how much they have…

China is consistently shipping and buying gold to the East. I think at some point in the next year or two years or longer, the market will absolutely panic when they realize there is very little physical gold left in the West.