Eric Sprott: QE3 Won’t Work, But Will Be ‘Huge Tail Wind for Precious Metals to Go Higher’

Sprott Asset Management’s Eric Sprott was back on CNBC this morning discussing the search for returns in a ZIRP environment.

When asked by CNBC why Sprott wasn’t lightening his gold and silver positions after the big gains his fund has realized over the past decade, Sprott replied:

Gold is up 600% since I got in around 2000, and in a way, I call it the great wealth redistribution because those who have invested in gold and silver have prospered quite nicely. To your question whether or not i want to stay with the trade. the reason I would stay with the trade and you mentioned qe-3. I never would’ve imagined when I got involved in gold I would have the benefit of kind of irresponsible money printing, bank runs that are ongoing as we witnessed in the various countries in europe, and those two ingredients along with the QE3 which has been announced I think will be a huge tail wind for gold and other precious metals to go higher.

As always, Sprott is a MUST WATCH!!!

Sprott continued regarding his reasoning for staying with gold and silver:

I go back to one of the fundamental problems was the over-leveraging of the banks, which culminated in the failure of Lehman Brothers and essentially the failure of many of companies, but they weren’t allowed — weren’t forced to liquidate. Lehman was the one time someone piece been forced to liquidate and we saw what nearly happened as a result of it. We’ve had many other companies that one way or another were either taken over, bailed out, fannie, freddie, aig, various banks, the Spanish banks, Greek banks, now we do it with governments, and i think all of those things suggest that the financial system is quite destabilized. I agree with the fed that qe-3 is not likely to work,  just as qe-1 and qe-2 didn’t work. when we look back at where we were and where we are, we’ve had all this printing and deficit creation, and we really have accomplished nothing. In fact, we’ve gone into reverse in terms of job losses and numbers of homes sold in a year. So i don’t see the qe-3 as being substantive in terms of helping the economy.

Regarding future inflation expectations Sprott stated:

I read bill gross’ articles and i can see going back to may that looked like bill was shifting his stance somewhat in that may article suggested that maybe real assets are a better investment and said he wasn’t sure about stocks and bonds and tweeted maybe gold is a buy. I think that inflation is likely to heat up. i mean, i think it’s continually underreported for the average person in the 99%. I don’t think they believe for one second that underinflation is 2%, and i think that incomes aren’t going up by that much, the whole 99% is under extreme pressure here. I think it creates more stress on governments in the banking system ultimately. You want to have your assets in something that’s real, that can benefit by the debasement of currencies as basically going on and all the developed world’s central banks.
Larry Kudlow asked Eric his outlook on timing for essentially when TSHTF:

Well, it’s a great question. and when you ask the question, when is it going to fall apart? I would have thought it would fallen apart years ago. it seems rather extreme to me that as investors we accept it as a palliative to the situation, which it certainly is not. we can keep the markets, i think chairman Bernanke basically measures himself by how he deals with the stock market and how he deals with the housing market. they have been kept up here by the hope that something’s going to happen. but i think when you review the results of qe-1 and qe-2, post qe-1 and 2, you realize the market gets in a bit of a funk. we’ve come to grips with the fact that maybe it won’t do anything. most of what’s being done is to help the financial system and not necessarily the man on the street. we’ve talked about some dire stuff earlier. i guess there’s a certain probability to some really frightening things happening within the next 10, 15 years, i guess.

I think you have to be prepared for reality.

Transcript Source:

Full interview below: