With continued gold and silver volatility, the Dow breaking below 12,000 and the US dollar on the move, today King World News interviewed billionaire Eric Sprott, Chairman of Sprott Asset Management. When asked about year over year explosions in the price of corn 118%, wheat 71%, cotton 83%, sugar 61% and coffee 96%, Sprott replied, “Well I always chuckle when people at the Fed and the Treasury suggest there are no signs of inflation. There are nothing but signs of inflation, not withstanding the Fed suggesting the CPI is up one or two percent.
We all know that the average guy on the street, his food costs are skyrocketing, his energy costs are skyrocketing, his tax bill is skyrocketing, his insurance, everything is going up and they are basically getting modest to zero wage increases. So that’s why some of these consumer confidence numbers are just falling right off the table here, and that’s why most of the data we’ve seen recently on the economic front has been incredibly weak.”
Sprott continues:
When asked about another financial crisis being around the corner Sprott stated, “Well I’ve always believed the fundamental problem with the capitalist system if you will, is the fact that the banks are over-levered. There is only one way to get rid of over-leverage and that is to shrink your balance sheet.
I always find it interesting that every time a bank fails we find out exactly what the losses were and typically not only did the bank lose their capital, but they lost their capital six times over. That’s the average cost, which really means that your dollar of assets was undervalued by about 30 cents on the dollar and I think that’s the case almost throughout the banking system. So if we ever marked things to market, we would be in big trouble.”
When asked the discontinuation of QE Sprott said, “I think it’s becoming obvious to any thinking person as to what has to happen...I’m almost tired of hearing the word bailout all the time. I mean it’s been on the radar screen for the last three years, it never goes away, it just goes from one country to another. Throughout this whole mess that we’ve been in governments and central banks have attempted to extend and pretend the problem.
Sooner or later there comes a point where the funding for these things is not going to be available unless it’s just printed. So far the ECB, the Fed, Bank of Japan have all chosen the printing route. It’s going to be very interesting to see what happens come June 30th when QE2 ends. I sort of think of us all as lemmings just heading over the cliff, and if we don’t know what’s going to happen on July 1st, if you don’t think there is going to be any printing going on then you better be very wary of being in any paper assets.”
When asked about Jim Sinclair’s comments regarding $12,500 gold Sprott had this to say, “Nothing surprises me as to where gold can go. I mean you just simply look at the printing of money and the way we’ve attempted to deal with things and the stresses in the banking system, and my ultimate end for gold is when people realize they are probably better off not having their money in a bank. They get paid nothing, they take all of the risk of the bank balance sheet which is incredible, and in my mind why wouldn’t you own gold and silver that are going to maintain their purchasing power in almost any circumstance? You are way better off owning physical metal than owning a piece of paper at a bank.”
Eric Sprott talked at length about gold, silver, the mining shares, the economy, the banking system and much more. Sprott has been deadly accurate in his writings for more than a decade. In fact I would say when it comes to forecasting markets in writing that Sprott has one of the best track records in the world. The KWN audio interview with Eric Sprott will be available shortly and you can listen to it by CLICKING HERE.
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Eric King
KingWorldNews.com
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