The decline of the Western economic model will bring about hyperinflation and decades of painful readjustment, Egon von Greyerz, founder of gold investment intermediary Goldswitzerland.com told CNBC Thursday.
Fear of inflation causes investors to take refuge in gold. However, another analyst told CNBC that buying gold now is as pointless as the rush to buy tulips was in the 1630s.
From 1971, when President Richard Nixon's administration decided to take the dollar off the gold standard, economic growth in the Western world has been spurred by a massive increase in credit, according to von Greyerz.
The US debt increased from $9 trillion in 1971 to $59 trillion currently, while nominal gross domestic produce rose only from $1.1 trillion to $14.5 trillion in the same period, according to aresearch paper written by von Greyerz.
"The wealth that has been created in the last 40 years is not due to good times. The good times were created by credit creation," he said.
In 2008 and 2009, after the beginning of the world financial crisis, governments worldwide issued or guaranteed a total of about $20 trillion, von Greyerz estimated.
This gave a temporary boost to stock markets but "none of the problems in the banking systems have been solved, the toxic assets are still there, derivatives are still there," he said.
This burst determined by cash injections "had no effect on ordinary people," as 8 million became unemployed in the US and government deficits went up all over the world, von Greyerz added.
But central banks are going to keep resorting to printing money, causing hyperinflation, because the alternative will be a deflationary collapse in which debts owed to banks will not be paid, he said.
"It's simple. Just take this current year. Sovereign states worldwide need to issue around $5 trillion debt to finance deficits… where's that money going to come from?" he said.
"Clearly, as I see it, the long trends are now a structural decline of the West which will last a long time, and the East will be the coming economy," von Greyerz said.
- Watch the full interview with Egon von Greyerz above.
However, in the short term countries like China and India will suffer because their economies are linked to the Western ones, he added.
The price of gold has risen as a consequence of money printing, not because of the metal's intrinsic value, von Greyerz said.
"Clearly, paper money has now lost its function as a store of value and medium of exchange. Gold is just a stable medium of exchange that is reflecting the printing of money… when this trouble is over, we will have a reserve currency that will have gold as part of it," he said.
"Gold in itself has no value… gold reflects a stable value."