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Sinclair continues:

“I think the important thing is that the risk you undertake when you accomplish management of perspective economics is you build everything into the confidence you’ve created by media control and by timely acts such as the release of the oil reserves. If it doesn’t work, if it cracks, it cracks confidence across the board. Confidence is extremely fickle so there is no question that whatever is necessary to shore up the equity markets will be done, especially in this election year.

If people lose confidence, it isn’t the country that suffers, it’s the currency of the country that suffers. This whole thing is put together with mirrors, smoke and spit. You can’t afford to have any kind of financial crisis or all of the old wounds will open up and hemorrhage because of the investment that’s already been made, you’re stuck in a bad investment, the dollar. All currencies are going into oblivion and that’s why they (investors) are buying gold.

You’ve got to continue what you’ve been doing. The slightest indication that you wouldn’t continue has brought this crisis on. But you see QE is the kind of thing that puts some sort of balm on the sore of fear. Whether they call it QE or not, it’s coming back on in spades.”

John Hathaway

“Well frankly I thought the selloff in gold might have been a knee-jerk reaction to the release of oil from the strategic reserve, possibly signifying that the government was becoming more involved in suppressing markets. That was just my initial reaction.

So I suppose you had a lot of these commodity funds that are long gold along with other commodities and they probably just panicked out. I thought at least for today that the shares acted pretty well. They sold off in the beginning and they finished with much more moderate losses than their initial trading level. To me that’s a sign of accumulation.

We’re still just backing and filling and chopping around. Gold has had a very good first half of the year and now we’re waiting to see what kind of lipstick they put on the pig for the fiscal issues. The fiscal disorder that we have in this country with $1.6 trillion in deficits, unless fiscal order is restored, the Fed’s going to have to print money. Frankly I’d be surprised if they come up with anything tangible.

Unless the government, unless the two houses of Congress and the President, the administration, can come up with a credible plan, that’s when I think all hell could break loose. We’re not too far away from knowing that...

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“If for example it’s just lipstick on a pig then I think the markets get out of hand. That’s when I think the Fed, not withstanding anything Bernanke has said, is going to have to do more quantitive easing.

Clearly you have Germany, France and the ECB doing everything they can to prevent an event of default which would then trigger obligations under these credit default swaps that all of the banks have written. Some have said this could bury the big banking names in another liquidity crisis like we saw in 2008.

To me that’s a very volatile situation. People can say that Greece is only 2.5% of Europe’s GDP, but what percentage of financial assets did Lehman represent when it went under? It’s the tip of the iceberg for the banks who are also exposed in the other weaker European economies.

In my earlier comments I talked about whether we would see any resolution regarding the fiscal situation in the United States, that remains to be seen, but in the meantime we’ve got plenty of action in Europe which calls into question the viability of sovereign debt and whether or not that’s a safe asset, all of which is good for gold.”

Jim Sinclair

“We’re talking about the credit default swaps. There is a crisis in the derivatives again that nobody sees, but many people know. This crisis is the fact that the person who creates the derivatives, the manufacturer, what he’s creating is insurance policies. What’s being paid for it? Higher and higher prices as all of this default talk takes place, it’s nothing more than a promise to pay.

Modern derivatives have some degree of margin behind them, but not enough that could possibly survive a default on Greece tomorrow followed by all of the weaker nations of the EU. Nobody is really putting enough attention on the fact that these manufacturers sell these things and they take in huge amounts of cash flow. But their ability, taken as a whole, to guarantee the debt of sovereign nations is simply not there.

If you think that the banking system of the western world is strong enough to guarantee the debt of the western world, you’re totally out of your mind. That’s the reason they’ll do everything possible to paper over the Euro crisis to prevent the defaults in order to prevent another crisis in banking that definitively would occur, that absolutely would occur from a default. This fact is ravingly positive for gold. You would have a complete collapse of the western banking system if Greece goes down.”

Eric King

KingWorldNews.com

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Sinclair, Hathaway - Hell Could Break Loose, Confidence Cracks

With the price of gold and silver getting hit, stocks weakening and the US dollar strengthening, today King World News interviewed two of the greats, Jim Sinclair and John Hathaway, to get their take on the situation. Jim Sinclair stated, “Today was your first crack of confidence. When you’ve adopted an economic thesis, the management of perspective economics, the greatest risk you take is that perspective might turn. The announcement of the end of QE at the end of this month leaves open so many questions. So today was your first break in confidence that was across the board.”

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June 24, 2011

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