Gold and Silver • Eric Sprott – Governments Frightened of Panic Liquidation Ev
Eric Sprott – Governments Frightened of Panic Liquidation Event
billionaire Eric Sprott told King World News that governments are desperately trying to avoid a “Liquidation Event.” Sprott, who is Chairman of Sprott Asset Management, also warned the the market is liquidating, “irrespective of whether the powers that be want it or not.” Here is what Sprott had to say about the unfolding crisis: “Something has to be done because it’s totally out of control these days. I mean you can’t have bank runs (like we’re seeing). The one thing the powers that be, the central banks and the governments, have tried to do is to avoid what I call a ‘Liquidation Event.’”
“Ever since we saw what happened when Lehman was liquidated, they realized we can’t go there. Fannie was taken over as well as AIG and GM to prevent this liquidity event. But I think the market is just liquidating, irrespective of whether the powers that be want it or not.
I just think that process is picking up into a tsunami…
“…and the world is going to start focusing back on precious metals. We’ve had one Minsky moment in Greece and we’re going to have another one.
As these Spanish yields and Italian yields move up here, it will become a Minsky moment in those countries as well. I would suggest the same would be true for most major developed economies because the obligations of the state are way beyond the productive capacity of the remaining workers to fund those obligations.
I think on a worldwide basis, whether you’re talking Japan, England, the US, and all of Europe, people are going to realize that we have too much debt here. At a certain interest rate cost, we can’t pay the interest.
That’s exactly what I would imagine should unfold here. That’s what’s causing the bank runs. That’s what’s causing interest rates on sovereigns to rise, and I think that’s what will tip over into a mass desire to get involved in precious metals.
You know, the most stunning thing about the bank runs, and I’m going to focus on the one in Greece, I really couldn’t believe that people took 500 million euros out of Greek banks on Monday. This country has had a problem for two years.
had one bond restructuring already, and here we are two years later and people are finally figuring out they should take their money out of the bank. I don’t know why it takes so long for people to put two and two together, but I’m happy they are finally doing it.”
Here was a portion of what Sprott had to say about gold and the recent decline in the gold market: “I put it all down to the shenanigans that have gone on at the COMEX. As you know, some of the major dealers, who are embroiled in some of their own issues outside of the gold market, were short gold and silver.
I think the downtrend was engineered because when you look at the physical aspects of gold, they seem totally different than the paper aspects of gold. The major dealers, who have now massively covered their short positions, orchestrated the takedown in the face of fundamentals that were just screaming to buy gold and silver.
The key thing, Eric, that everyone should focus on is you always have to look at what’s going on in the physical markets. We’ve had some dramatic numbers recently. Of course, the most dramatic one is what’s going on in China.
Yesterday we had the World Gold Council saying that Chinese demand would be up 30%. I would always suggest to people that when somebody says they are going to increase their demand by 30%, in a market where the supply is flat, it’s almost impossible to do that without the price rising.
We’ve seen in the last nine months that exports of gold from Hong Kong into China have increased by a factor of almost ten times. The numbers are truly staggering. For example, in March the exports from Hong Kong (into China) were 64 tons.
I would remind everyone that the available supply to the world, ex-China, ex-Russia because China and Russia consume their own gold, the mining output is only 2,200 tons, which is less than 200 tons per month. When someone comes in and buys 64 tons in a month, that’s over 30% of the market.
How you can satisfy that change in physical demand when there is no increase in supply is mind boggling. I suspect that (Western) central banks have continued to surreptitiously sell gold by leasing gold to the bullion banks. When they go to call in those shorts, obviously the physical is not going to be available.”
Statistics: Posted by DIGGER DAN — Sat May 19, 2012 12:19 am
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