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Rick Rule - Fed Bailout of Europe Sends Gold Soaring
With news of the Fed bailing out the European banking system, today King World News interviewed one of the most street smart pros in the resource sector, Rick Rule, Founder of Global Resource Investments, which is now part of the $10 billion strong Sprott Asset Management. Rule had this to say about the situation, “Pretty amazing isn’t it? We’ve decided as American taxpayers that we don’t want to merely bail out brain dead American bankers, but we want to bail out brain dead European bankers too. Strange day, particularly from the point of view of a US dollar holder and a taxpayer.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
November 30, 2011
Rick Rule continues:
“It makes near-term sense that the dollar would trade lower. It means that the European banks that have to roll over their US funding requirements won’t have to sell euros to buy dollars. They will be able to borrow discounted dollars. And it probably takes pressure off the euro in the sense that it gives the European banks more rope with which to hang themselves.
I keep harkening back, but I think it’s important, to telling your listeners that to increase the encumbrances on an over leveraged institution doesn’t help the institution long-term. It kicks the can down the road.
To use the example of the sovereign debtor Greece, the idea that somehow you improve the Greek situation by taking a country that can’t service the debts at 150% of GDP, and increasing their debts to 170% of GDP, it doesn’t seem to help.
And similarly, at least from my point of view, to the extent that Deutsche Bank, as an example, has too many short-maturing obligations in US dollars, the idea that you increase that level of obligation doesn’t appear to me to be helpful in the long-term....
Continue reading the Rick Rule interview below...
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“Certainly it extends the day of reckoning and I guess the game that everybody is involved in is kicking the can down the road. The ultimate question, of course, is what happens when the lender of last resort goes broke? I think that was the question the Europeans found themselves confronted with last week when the Germans, who were regarded as Europe’s lender of last resort, had a failed bond auction.
As a consequence of superior American technology, that superior American technology is, of course, counterfeiting, we were able to counterfeit US dollars. The Bundesbank, being a sovereign German, can’t counterfeit euros. This meant that the Europeans had to search out that superior American fraud. Truly a strange day in the world economy today.”
When asked how this will impact gold, Rule stated, “In a credit cycle where you have over-encumbered balance sheets at the sovereign level worldwide and as a consequence over-encumbered banks, it would appear to me that there is one of two outcomes. Either you inflate your way out of the encumbrance or you default your way out of it, and it would appear to me that both of those outcomes would be good for gold.”
The KWN interview will Rick Rule will be available shortly and you can listen to it by CLICKING HERE.
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
