James Turk continues:

“The bad news is that this huge amount of funding does not provide the banks with sufficient liquidity, and the ECB has already announced another three year financing will take place in February.  Clearly the ECB thinks the liquidity strains are not going to disappear in the foreseeable future.  It is extraordinarily unusual for a central bank to lend money for more than a few weeks.  This illustrates how desperate the situation is.

All of the above is in addition to the 215 billion euros of sovereign debt the ECB has already purchased.  One really has to question to what extent the ECB is going to continue destroying its balance sheet, in order to keep over-leveraged sovereign governments and zombie banks afloat. 

The ECB is trying to keep these banks liquid, but it is not doing anything to solve the real problem which is many of these banks are insolvent.  The banks are sitting on mountains of bad debt that is related to the bursting of the real estate bubble, as well as government bonds, the repayment of which is questionable....

Continue reading the James Turk interview below...  


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“What’s more, many of these banks have not marked down the government bonds to a true market price.  Bank accounting is so loose that it allows all kinds of fictions, and this is a good example.  By holding these bonds in their investment portfolios, rather than their trading portfolios, banks can pretend that the bonds are worth what they paid for them, rather than what the market is saying they are worth.”

When asked about gold and silver, Turk responded, “You know, Eric, I can’t count how many times over the past decade we’ve seen gold and silver take a drubbing, like the one we just witnessed over the last couple of weeks, only for the metals to climb back off the canvas and fight their way to higher prices. 

The sentiment numbers show that we’ve not been this negative on gold and silver since the days of the Lehman collapse.  I find that quite ironic, given that nothing fundamental has changed to suggest the bull market in precious metals has ended.  If anything, the case for owning gold and silver is getting stronger as the Western world’s banking system continues to disintegrate. 

I keep coming back to the theme that we’ve stressed together so many times over the years, to not let emotion impact your investment decisions, but instead to use logic.  In this regard, gold, silver and the mining shares are all exceptionally undervalued.  In light of all of this, it is reasonable to expect much higher prices for them in 2012.

Gold is set to close higher for the eleventh straight year.  The fact that there is such extreme pessimism, not withstanding the fact that gold is 17% higher year to date and up for eleven years in a row, is absolutely stunning.”

© 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

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© 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.

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