Eric Sprott: The One Event That Will Completely Take the Lid off of Gold!

I had the opportunity this week to connect with Eric Sprott, Chief Executive Officer and Senior Portfolio Manager of Sprott Asset Management.
It was a powerful conversation as Eric spoke to the “gargantuan rise”  he sees coming for precious metals and their corresponding equities, one which he expects will take gold to new highs within the next twelve months. Eric also spoke to the incredibly fragile Western financial system, and pointed out the one event which when it occurs—will completely take the lid off of gold!

War Bird

 

From Tekoa Da Silva, Bull Market Thinking:

Speaking to the gut-wrenching decline in metals and miners over the last two years, Eric said, “We’ve had many downturns in the gold market and as a portfolio manager…You just have to put up with these things. We had a horrendous decline in ’08…but sure enough, a year later [it was] right back where it should have been and anyone who sold at that time was severely misguided.”

The depth of this bear-market has set the stage for an epic rebound Eric explained, in that, “This event that we’ve gone through…which I think is now officially over on June 28th, is setting us up for a gargantuan rise in precious metals equities. It’s my own view that gold will go to a new high within the next twelve months and…I think when it goes to new highs, we’ll see a lot of people come into the space…such that I can imagine a very, very significant increase in precious metal equity prices. I have in my mind 300% to 500%.” 

Such gains should be expected Eric added, for the reason that, “We’ve seen gains like that before in the precious metals equities. As you know the HUI index at its low was 35, and I think at its high was something over 600…[So] after this monstrous shakeout…the rebound [should] be incredibly exciting.”

When asked his thoughts on the catalyst which will send gold much higher, Eric noted that, “The one event in my mind would be when it becomes apparent to everyone that having a deposit in a bank is a very risky situation. We saw that in Cyprus where the depositors got nailed on the bail-in. We’ve seen all these proposals to have bail-ins as the solution to the problem in the US, in Canada, in Britain, in New Zealand and in Europe. All the paperwork has been laid out.” 

Commenting on the absolute insanity of the Western financial system, Eric said, “We’re in a very, very fragile financial system right now. We have most Western governments buying their bonds, which is total financial insanity. We have zero interest rates which is total financial insanity and even with this, we can hardly get the economies to recover. What’s going to happen to those governments is the same thing that happened to Detroit…It’s so cast in stone. It’s amazing that we all ignore it.”

As a final comment to investors looking at precious metals, Eric said, I think the bottom is in, in gold and silver. I think the returns are going to be fantastic. It’s probably a better time to buy…than it was in 2000 when the price [really] started to move.

Once again, this was a powerful interview with one of the world’s top portfolio managers. It is required listening for serious investors and market students.

To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to to your desktop:

>>Interview with Eric Sprott (MP3)

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Comments

  1. >>>Speaking to the gut-wrenching decline in metals and miners over the last two years, Eric said, “We’ve had many downturns in the gold market and as a portfolio manager…You just have to put up with these things. We had a horrendous decline in ’08…but sure enough, a year later [it was] right back where it should have been and anyone who sold at that time was severely misguided.”
     
    Which was probably the reason TPTB smacked down the price so much? Was it a shake out to mop up some miners so that their outputs could be directed towards the LMBA to counter the lack of supply? I thought the smack down was way too far from what I ever predicted they would do, so I’m almost convinced that TPTB did it to gobble up some production capacity and to ensure they can feed it towards their LBMA ponzi to buy a few more years life support…
     
    If you had small/medium independent miners why would you supply the LBMA when you could smuggle it straight into India for a premium? :P :P :P   Prohibition never works, it creates craftier foxes!

    • Maybe those of us who think so are wrong, but the more convincing object of this mega-smack really looks mostly designed to crush the resolve of the ETFers … which has been the result!

      I continue to say the miners ought to be directly auctioning their metals to the public through fabricator-distributors like APMEx and others. setting minimum bid at their production cost. As I’ve been saying THEY MINE MONEY … so, why not TREAT it as such to derive it’s best and most accurate valuation.

    • WNBAS…I think TPTB were only after the gold price.  Mining stocks were collateral damage. 

    • Pat, dont you think this is happening already?  Apmex gets their gold from someone, a nd if the mine doesnt like the price they dont have to sell it, but they then may pass on the business to a competitor.
       
      Same thing happens with corn, producers may have set their minimum sell price to the ethanol plant at $7 for this coming harvest.  The price is now under $5.  They dont have to sell, they can choose to wait and hope for $7, or can choose to sell for $5.  Nobody is forcing the sale. Their neighbor might have a lower cost base and be happy with $5 so they make the sale.

    • mikeyj80 … “dont you think this is happening already?”

      NO! You completely missed (or ignored) the defining element of my post … AUCTION … AUCTION … AUCTION!

      By offering their metals at AUCTION, both the miners AND the fabricators circumvent the humiliating financial GANG-RAPE they suffer by the bullion bankers and their phony sycophant ‘exchanges’. EVERYONE is spared that abuse, the whole way from ‘ore to store’. The miners offer at cost of production for OPEN BID and the final user gets his coin at minimal TRUE RATIONAL value … ACCORDING TO A FREE-MARKET.

    • you are right, not an auction today. However, you assume that their will always be a buyer at the cost of production. Also, who decides the cost of production as it varies, should it be the highest or the lowest?  Today miners and refiners can sell today to the higest bidder they can find, or they dont have to sell. It doesnt have to trade via comex, though often referenced to spot plus or minus a basis, that basis varies by buyer.  Someone is obviously selling at these prices indicating that they can turn a profit or at least cash flow.  Others are not selling and closing the mine.  If one had reserves and a way to store they could produce and move to a warehouse and bet that conditions improve.
       
      Producers will sell to the highest bidder or elect not to produce.

    • @PatFields
      I agree about the Auction. Set up an alternative market to the gang-rape indeed.
      If I were a PM producer I would probably actually completely circumvent the Western market and find some operation that would sell it direct to the Chinese Govt for Yuan and then be a player in the FOREX … but then of course you would have to pay export duties and all the other hoops, and then Tax on USD repatriation, and there is probably some law against it somewhere … oh brother!. The gang rape is in some ways unavoidable all the whilst the ‘price’ is perceived by the so called big boys who are all paper pushers fooling everyone into thinking they are anything but.

    • WillNotBeASlave … “If I were a PM producer I … would sell it direct to the Chinese Gov
       
      It’s cool you appreciate the basic notion, but you apparently didn’t intellectually drill down into the wider ramifications. The POINT is to NOT … SELL … but to AUCTION. To ‘sell’ is to succumb to the illusory ‘market’, abusively manipulated by infinite banknote credit. To AUCTION, on the other hand, is to deal in the realm of physical reality and its unique properties … CIRCUMVENTING credit illusions. Why should the Chinese government benefit from the banknote scheme, rather than be forced to COMPETE … OUTSIDE it, in the domain of physical realities. Screw their stupid yuan-renminbi! That’s phony paper TOO.

      Until ‘buying’ and ‘selling’ ultimately transpire in the private physical environment, we’re proportionally captured by the banknote/credit scheme, but the faster and closer we can get toward that goal, the nearer we ALL get back to Liberty and Independence, both as individuals AND as a country.

    • @PatFields
      I understand what you meant by Auction, I just think there are too many people in the US who would still be looking at the ‘market price’ set by TPTB as a baseline even if they went to an Auction, because they would set a mental barrier for what they were prepared to pay even before they walked in as there would be some chump somewhere dealing through COMEX or London who would supply at ‘the market price’. The only way the ridiculous perceived price will die is when London/COMEX run out of physical for delivery and then they will lose all credibility (it will definitely be interesting WHEN it happens .. and then you can have your Auction :P ). When the race for the USD door truly kicks in however, even auctioning domestically will not net as much as simply exporting to the East as no one will want USDs if they can help it, would it not be more like a Barter Market with Barter Auctioning? … which brings me to a good question…What do you know about the way the Chinese manage Gold on the Shanghai Exchange? I have no idea whether they just copied the same leveraged rubbish model that is used in London or whether they have some kind of leverage controls. Perhaps they have simply adopted the same model as London in order to look ‘competitive’.

    • WillNotBeASlave  … “I just think there are too many people in the US who would still be looking at the ‘market price’ set by TPTB as a baseline even if they went to an Auction”

      Yeah? And, just how many of their ‘market bids’ would end up yielding metal in hand? Maby a few that closed on Christmas-eve, or the morning of January 1st, I’d wager. On the other hand, if the ‘exchanges’ DID actually allow freely bid contracts, the combination in tandem with the physical Auctions would drive each other to the most rational equilibrium compelled by real conditions at that time. In fact, since the more BELIEVABLE price discovery would be in the Auction environment, THAT could ironically SUPPRESS SPECULATION in the paper contract arena!

      Another aspect of the Auction alternative, would be that the miners and fabricators would set minimum offers to cover their production costs, unless they were in excess of their competitors, in which case REAL WORLD pressures would force them to ameliorate those excesses.

      As to the Shanghai Exchange, I don’t know.

  2. @ the Doc – Is there anyway we can get a “like” and or “dislike” button like youtube and facebook. Is it even possible or just too expensive?

    Also I forgot to thank you for returning the edit function! Thank you!

    • YEAH … when the site began there was a function to ‘Coin’ a comment! I miss that SO MUCH because, though I might REALLY LIKE someone’s comment and want to express it, I often don’t have anything I could say to expand on it or discuss for refinement.

      C’mon, Doc, at LEAST slip that project on the back burner, so as occasion permits, it can be re-activated.

  3. Here is what I want to know:
    And these are ACTUAL numbers from my Employer sponsored 401k program where the only options made available are in employer selected Funds.
     
    While the S & P and Dow have been getting headlines for making a new RECORD HIGH every few days……over the last –10 weeks– I’m DOWN (-4.43%)??
     
    From my perspective, not only have FED policies been robbing me of IRA Certificate of Deposits earnings for almost five years now—now while trumpeting record highs and an economic recovery, under it all I’m being robbed directly in my 401k!
     
    Goes w/o saying contributions were stopped sometime ago, yet seriously, if things are turning around in the USA as the MSM would have sheeple believe why is this happening to me…and if it’s happening to me, isn’t it happening to a ton of others as well???

    • Just because a company offers a 401k plan does not mean that it is a GOOD plan.  It is possible to have a MUCH better plan, perhaps even one with a discount brokerage window so those who want to choose their own investments can do so.  The employee ends up paying the extra costs of a brokerage account but can often do MUCH better than the standard run of the mill funds that all too many plans have in them.  Most plans do offer an S&P 500 index fund and that should be a core holding for anyone who is interested in participating in the growth of the US stock market.  It’s not a clone of the US market but it does a decent job of simulating it.  At the very least, all 401k plans should offer a few very low cost index funds or ETFs from which their employees can choose.
       

    • http://www.nytimes.com/2013/08/05/opinion/a-plan-to-avert-the-pension-crisis.html?_r=0
       
      <nyt_headline version=”1.0″ type=” “>A Plan to Avert the Pension Crisis

    • NetRanger808 … “A Plan to Avert the Pension Crisis”

      HAAAAhahahaha … THAT’S a PLAN? To float UST ‘backed’ State Bonds to fund HUGELY over-generous pensions, continuously EXTORTED over a half-century from pandering politicians by criminally avaricious, Mafia run ‘unions’?

      Who’s supposed to ‘invest’ in the Bonds? Retired government employees? NO WONDER they’re arming IRS with tanks and AR-15s.
       

  4. Morning smackdown, right on schedule. Its hard to fight the cabal when they have unlimited resources(read, ink and paper).

  5. @4_oz , you are not the only person feeling bummed after looking at the second quarter’s 401K statement.
    When I signed up for mine – at my then-new employer back in 2010, I picked the funds who took the smallest hit back in 2008.  These are not necessarily the most conservative funds, yet they are not reflecting the gains which the stock market has been showing.
     
    Call me an idiot, but I am still participating, putting in 2% of my pay in order to receive the maximum 3% that my employer kicks in.  The rationale is that I am just spreading around my investments – land, skills, prepping, stacking, and yes, a 401K.
     
    BTW from your icon, it looks as though you are in the Seattle area.  PM me if you would like to meet for a beer sometime.  One of us can hop the ferry and we’ll solve the world’s pressing issues over a cold one.

    • Yeah Mammoth understand your rationale; Wasn’t too long ago I viewed the whole 401k matching funds thing as “Buying Money”  and was part of a plan of investments that would move me through my later years, along with Social Security quite well.
       
      ‘Corse now some of us understand that the game has been completely changed. The Rules have been twisted; Some Baankerdude named Burn-a-key has stolen like five years interest, something close to 90 cents on every dollar, every month from just about everybody in the USA!
       
      Don’t need to say much about the Ma & Pa that did all the right things,  saving and skimping for 40 years so they could have some 6% retun and not be a burden to their children….who now get zip return… have had to resort to a reverse mortgage on their house so they can live, but now when they pass the bank will own it….same house  that one of their daughters lives in the basement of with her 8 yr old son…..and one of their surviving parents lives in too cuz  grandma can’t afford the assisted living place…..
      Can someone even tell me if school is going to start in Detroit after Labor Day??? Yep, the USA is on the way back……Riiiight!.

       
      But gotta say that it really chaps my pooper to hear all this– “The Economy is Turning Around”  bs and all the– “Dow Sets Another New Record High” bs, while 50 million Americans are on food stamps and ETB cards… and at the same time my 401k that’s connected to the BS Equity markets is already silently getting “Bailed In.” 
       
      All I can figure is these Dip Skeets in the MSM must not have 401k’s…..
      Am from the Seattle area and I’m sure you and I would have a great time solving some of the issues that face the world….

  6. Kind of ‘fluffy’. I really would like to hear Mr. Sprott expand a lot more on the research that had gone into his determination of metals stores remaining. What he’s already discussed is surely convincing enough, but still, a little more ‘dirt’ would ‘juice up’ people’s comprehension of the severity and resulting urgency he projects.

    • Pat  Your comment about the Feds taking funds from the Federal employees 401K is a reality. From what I read recently this plan started last year with about 25% taken to fund the government deficits.  Now it’s nearly complete. The result is a disguise for the amount of the deficit and a means to delay dealing with the debt ceiling coming up in a few months.  This transfer of these pension plans is apparently differnt than most, since these are accounts held for federal employees and veterans.  The 401k is much different than the Social Security trust fund which is just a load of post it notes.  The irony is that the same people charged with the task of firing on the American people will see their pension plans strip mined into the terrible returns of the UST bonds paying bupkis. 
      Those folks will probably be better off than the student loan recipients, 12% of whom are in total default and 35% are delinquent in their payments. That debt load is about $1.2 trillion, the biggest consumer debt of all.
      But then, this entire story is wrapped around Plantation Scrip so it will all end in tears

    • @ AGXIIK Federal Employees 401k Plans are called Thrift Savings Plans. 

    • AGXIIK … “The irony is that the same people charged with the task of firing on the American people will see their pension plans strip mined into the terrible returns of the UST bonds paying bupkis.”
       
      These spoiled government goofballs haven’t a clue. Their ‘plan’, I’m certain, is to keep running off their ‘Plantation Scrip’ to retain loyalty of their ‘Brown-Shirts’, while the ‘Serfs Beyond the Gates’ scrounge in garbage pails. The merest notion that the entire banknote scheme can and will thoroughly disintegrate into a senseless joke, is unimaginable to them. In thinking of all these robo-cop toys being handed out to LEO departments, I had thought to myself, to what avail? When they can’t afford to crank that stuff up to use it, it’ll all just sit in garages and those departments will be hard pressed to even retain staff, with nothing worthwhile to PAY them to hang around!

      To be sure, I’ll probably be scared crapless, but at the same time I’ll be laughing my butt off at all the absurd irony.

  7. “Bail-ins” are the big event to get PM’s moving higher?        Not gonna happen. The idea that Western governments would use bail-ins is just absurd, and why would they even need to use them?
    Even if bail-ins did happen, why would it be PM bullish?   It’s a deflationary event.   Instead of printing money to bailout banks, they would be using existing money, that is not PM bullish.
     

    • @zman >>> that is not PM bullish
      But you of course would take what remains in the bank out if you are losing value leaving it in would you not? and you would buy the only other product where your value could be retained … PM’s and an assortment of other commodities maybe.
      BANK RUN!!! deflation/inflation would not be the issue, it would be safety.

    • >>>“Bail-ins” are the big event to get PM’s moving higher?        Not gonna happen. The idea that Western governments would use bail-ins is just absurd, and why would they even need to use them?
      So why are they all rushing to get legislation passed (already there in most cases) if they were not going to copy Cyprus?
      Cyprus was a beta test for sure. I know it is different as Cyprus relinquished their rights to print, but they are still passing the legislation. The Aussie Prime Minister Kevin Rudd announced the other day that the Aussies should raise a Levy on bank deposits to build a bailout fund to ‘help out the banks’ in the event of another insolvency crisis, and Australia apparently was a currency flight option of choice just 6 months ago. All around the globe the signs are not rosy at all. The Chimerica trade link has been severed/damaged severely and the economic connections that WERE are now NOT and in stasis.

  8. If a bail-ins did happen, 99.9% would just hoard physical cash, or find a safer bank, few would buy metal.  The key question remains, why would we even need a bailout?
    Bail-ins would cause 10 times more pain to the banking system than a bailout, it’s not gonna happen.

    • >>>99.9% would just hoard physical cash,
      Physical cash cover for the total amount of digital 1′s and 0′s out there is under 10%. When Cyprus was bailed in they put cash limits on at the same time. A bank run that drained enough physical notes from circulation would just be a catalyst for the scumbags to eliminate notes and have 100% electronic funds transfers, which would be a wet-dream for the IRS and Govt Revenue. BUT, the top 1% parasite class have gotten so many of the 1′s and 0′s that there may in fact be enough physical notes to fulfill the desires of the bottom 80% of Americans. Trust me they will bail in you can count on it, but printing money is technically a bail-in anyway, as it IS affecting the value of any savings that aren’t in PM’s or solid wealth regardless of what the Wizard of Oz at the Fed says.

  9. 4oz  It’s still amazing to me how employer sponsored 401Ks can lose value in a market going sky high.  What little I know about that, being out of employer-sponsored plan for 25 years, there is a good chance that da boss selected a plan manager with high fees and low returns, with da boss being sold a pixie dust story of how good this plan was.  My question would be?  Does da boss use the same 401K plan or a hedge fund operation earning 15% a year.  There’s been a good bit of news over the years of these plans receiving some of the worst management in town while racking up some of the highest fees.  Sheep being sheared.  It is damned unfair.

  10. There are a number of choices within my 401K plan, and many have done well.  However, I am hesitant to change my allocations now, what with fall just around the corner and those two notorious months – Sept. & Oct. coming shortly.
     
    Just a dumb, thick-headed amatuer investor here, trying to spread my options.  Hopefully I will not feel as much of a dumbazz for having participated in my 401K plan, as I recently felt when I looked at those seven 5-oz ATB coins which I paid around $45/oz for when they were first released.  (Although I did double my investment when I sold that first set of 2010 ATB’s!)

  11. Hey gang.  I have read (many times) that the DJIA as a group can be quite fluid.  If a member of the DOW does poorly enough, for enough trading sessions, they are dropped from the ‘index’ and some better performing company plugged in.
    We are all living in a false reality of lies, phony reports, and cooked books while being propagandized daily that the status quo is perfectly fine and recovery is at hand.  This is why the pundits can say ‘recovery doing great’ while your 401K heads south.
    Baffled and confused we will cling to good news and ignore reality.  Until it all crashes.
    It’s happened before..
    “Though Nineveh was like a pool of water throughout her days, Now they are fleeing; “Stop, stop,” But no one turns back.  Plunder the silver! Plunder the gold! For there is no limit to the treasure– Wealth from every kind of desirable object. She is emptied! Yes, she is desolate and waste! Hearts are melting and knees knocking! Also anguish is in the whole body And all their faces are grown pale!…”
    Buwaahahahahaaa.
     
     

    • Yeah a big manipulation on the DOW is that when 2 large companies merge either another candidate bumps up to fill the loss of a number, or the number is inflated by a cannibalization of the economy that it doesn’t represent … so it simply creeps over a larger data set technically. Technically massive bankruptcies and corporate mergers of the failed ones can positively affect the number or at least prop it up or put it in stasis whilst the economic news is anything but good.It’s more of an index to explain how the implosion of healthy competition and multinational consolidation is going. When there is 30 or less companies left in existence then it will be a correct indication of industrial activity perhaps :]
      Smoke, Mirrors, and Crack … someone in the white house is smoking the crack … the crazy crack house … full of dreamers … “We’re having an awesome recovery” … Shutup Barry, just go smoke some more of Ben BerBanke’s Crack!

  12. Who said, “Gold is real money, everything else is credit.”

    When did he say this, and why did he say it?

  13. “THE ONE EVENT THAT WILL COMPLETELY TAKE THE LID OFF OF GOLD!”
     
    One of the things about black swans is that the more severe their impact, the less likely they are to happen.  This does not prevent them from happening, of course, but it should give us pause to think about whether or not the threat that they pose is worth going ballistic over.
     
    As to a rise in gold prices… yes, it will happen because must.  But a long slow steady rise in gold prices is far more likely than any sudden “moon shot”.  Central banks are printing like there is no tomorrow because it is always possible that there really may not be a tomorrow… at least in terms of economic prosperity.  Printing money hand over fist is one of those things that banksters are always willing to try yet not one of them can point to a single case wherein it worked successfully.  The most egregious cases do, in fact, become classic cases of what not to do when one is in financial difficulty.  Germany in the 1920s and Zimbabwe in 2008 are just such cases.  Perhaps El Bernanko should study these instead of the banker-caused 1930s Great Depression?  Like other pie-in-the-sky ideas, massive money printing is something that can solve a very short term liquidity problem but only by creating a massive long-term financial stability problem.  Those with IQs above room temp will be investigating WHY there is a liquidity problem and addressing that rather than simply shrugging and handing over truckloads of free tax-payer supplied money to incompetent / thieving banksters.

    • The most likely “Black Swan” is “None Of The Above!”  It is, by definition, undefined.

    • >>>Germany in the 1920s and Zimbabwe in 2008 are just such cases.
      The only difference is that the USD is the World Reserve Currency and way many more countries have been absorbing US Debt. The big event in my opinion is the failure of either the Chinese or Western economies … which is not really a failure but more of a ‘spook event’ that sets liquidity racing to the other faster than any damage control measures the other can instigate to prevent it. But as Pat has said this may simply be a systemic failure, Ie, they both implode together, which I can understand, but it’s the flow of liquidity which in such an event is simply Gold and Silver as the Fiat fails and the FOREX takes a walk off of the flat-Earth.
      Technically that flow is underway, and it only shows in Physical Gold, as the race from Fiat IMO has been well underway for good and irreversible since 2008, there’s simply no incentive to invest and do business in the West …Free-Market small Govt Capitalism is DEAD! and it ain’t coming back until after a failure. The flight for Gold and PMs will be the event that buries Fiat, the only event, as it is the only alternative IMO … unless Bitcoin or Bitcoin alternatives are seen as an alternative which in my opinion it is definitely not, too many arbitrage problems with Bitcoin Clones emerging using the same source code, which in effect means it has a Fiat reproducible intrinsic value.

  14. A new study by University of California-San Diego economics professor James Hamilton finds that the United States has over $70 trillion in off-balance sheet liabilities–an amount nearly six times the on-balance-sheet debt figure.
    http://www.breitbart.com/Big-Government/2013/08/04/Study-U-S-Debt-Obligations-70-Trillion

    • Exactly, that’s the BIG elephant in the room. TPTB can not even control the Shadow Banking system they have created, it is an animal all unto itself. 70 Trill would just be starters.

  15. Assad Bans Use of Foreign Currencies in Attempt to Prop Up Syrian Pound
    http://reason.com/blog/2013/08/05/assad-bans-use-of-foreign-currencies-in
    I read this earlier this morning. All I could think about is how the United States and other countries may use this move by Assad to invade Syria. This is a direct attack on the United States Dollar. Why on earth would he not use his own currency. Assad my turn to Gold or already has used Gold to purchase imports and or except Gold of exports. Just had to write on this subject. 

    “SANA, the government-run news agency, said that people offering goods and services for foreign currencies without the government’s approval could be fined and sentenced to at least six months in jail. In cases involving deals valued at more than $5,000, the punishment could be up to 10 years of hard labor.”

  16. Another thought occured to me about China and its rapacious appetite for gold.  If we discount the notion that China wants to have a gold backed YUAN, at least for now, and its apparent that it in in the process of creating currency exchanges with countries that comprise 2/3 of the world’population and 50% of the world’s GDP (Including Japan, India, China, Brazil, Russia, Indonesian et al) then why is China buying and taking in so much gold
    The economy of China is slowing rapidly. Their GDP may grow only in the lowest single digits. It’s debt to GDP is a Greek-like 240%.  Rates are fairly high when one takes into account the funds needed to pay for this debt.  China engages in some seious QE to sustain their economic growth.
    The PBOC and BOC along with the central government and leaders are  buying gold in what we will probably see as 1,000 to 2,000 tons this year. They are converting their USD holdings with a Indirect trading system, ultimately shipping those back to the NY banks.  They are lightening their ship of the US dollar as a toxic enterprise.  Lightening the ship of its problem cargo allows them to buy the asset bases that will help them with a softer landing.  With gold and massive commodity stocks they are hunkering in for an economic hard time.  Gold, silver, base metals, commodities of various types, product companies owned overseas that can feed the appetite, they are working hard to buffer themselves from the inevitable reset that will take place once the USD loses it’s reserve status.  That is a mathematical certainty but the timing is not know. Maybe 1,5 or 10 years.  But China must prepare for this and some of the more inevitable craches that will occur in  the Eurozone, Argentina, Brazil, Australia and other countries that have relied on China trade to help sustain their economic engines. 
    As the greater part of the world’s top GDP counties have precious metals removed from their vaults by the 100 ton tranches, China maybe uniquely prepared for this calamity because they have seen it in their world and know the inevitability of the hard times that will hit them.  Their people are vulnerable to the shocks that a country which has not had the time to produce the centuries of wealth building we and the Euro zone have had   They have been racing to become rich and the question is whether they will become rich enough to give them breathing room when the crunch hits.
    As usual, this is jsut a guess but the dots to seem to point to stresses in the Chinese storybook and how a people with a 5,000 year history handle stresses when those outside their realm start to prove troublesome to the Middle Kingdom. human nature is part of this guessing process

    • @AGXIIK >>>They are converting their USD holdings with a Indirect trading system, ultimately shipping those back to the NY banks.
      That’s the answer right there. Unload that Fiat back on the US. An even more worrying thing for the US is the discussions and agreement the BRICS had where they decided to start a BRICS Development Bank for 3rd world countries that provide all the raw materials for China and the US …. USING US TREASURIES as collateral. Basically switch up your IMF based loan for a brand spanking new Chinese restructured loan and of course switch the supply of raw materials to China, and the US gets all of its fiat back … Western multi-national parasite companies are sent packing and the 3rd world countries then use all of their income to buy the consumer goods shortfalls from China that the US previously was importing. Basically they are going to put the whole US/IMF in a catch 22 scenario. It is a rival to the World Bank/IMF system.
       
      Who ever said that third world countries could not restructure their loans with a better lender? Wall Street can, they send their losses to the Fed when they feel like it :]
      Of course they said they were GOING TO set it up, not that they WILL … they are being really shrewd about it because they know what happens to people who threaten USD Hegemony, look at Gaddafi and his Gold Backed Dinar. But behind the scenes they are doing direct currency swaps and moving away from the IMF managed system. Even Australia is doing direct currency swap with them. Otherwise the Forex markets would crap themselves because the whole world system is taking an ‘Asian Pivot’ … and the USA is pivoting militarily at the same time like it is some kind of Death Tango. China just has to do it without causing an economic shock that brings their own system down, but the US knows how to play dirty … lots of practice.
       
      Food supply is Chinas biggest weakness and the US will take advantage of this … and its oil supply which has to come past Singapore, thus the big Military Base in Darwin, Australia. The US Hegemony on the seas and also space (satellite) is quite the predicament to China, they should have bulit a navy earlier, but at least they can satisfy some domestic labor building it now to keep some Chineze civilians happy and not rioting. This WILL all get messy.

  17. Oh boy i think i have a new ailment i’m calling it, “Gold and Silver article fatique Syndrome”, shall we say GASAF Syndrome, Gotta admit i’ve been reading these articles for years from lots of sites and the truth is the only thing that really matters is the price(yeah yeah and it’s value). Somebody wake me up when were back up above $40, otherwise happy reading lads, i’m off for a game of Golf to reduce my GASAF problem….FOUR…..
     

  18. It a way it’s both funny and not that the federal employees who have positions of power and importance, charged with defending the ever-loving dollar who will find that they are defending the indefensible. 
     Our miilitary. paid in Plant Scr.,  defend it in a dozen countries. Some of these countries are trying to defend themselves against the dollar by going to gold and oil as means of exchange.  The military officers  are threatened by their superiors, all the way to the WH CNC, with loss of their pensions while another division of the government steals the thrift savings plans.   What a world. 
    Sometime in the near future those folks are going to wake up, like you said Pat, and the blowback from the people expecting their retirement funds to be safe and sound is going to be almost indescribable.  The pension holders in Detroit and another half dozen cities aer finding out how their pensions were spent into oblivious. 
    Hell hath no fury as a pensioneer scorned

    • AGXIIK … “Some of these countries are trying to defend themselves against the dollar by going to gold and oil as means of exchange.”

      It’s occurred to me that the global rejection of banking accounts to Americans may have a lot to do with this broadening attempt to purge American banknotes from local economies. The funny thing is that EVERYONE has this brainwashed viewpoint that it’s only ‘Western’ banks and their notes at risk. As I’ve said repeatedly, though, the very banknote scheme ITSELF is the root of the collapse and all the excesses are in fact PRODUCTS of its insanely designed machination. Even the criminality and corruption can be traced to increasingly frenetic efforts at ‘saving’ it, necessitating worse and worse forays beyond ‘normal’ methodologies.

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