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Stephen Leeb continues:


“Recently the head of the San Francisco Federal Reserve was quoted as saying we’ve got to keep the throttle wide open.  This goes along with Bernanke’s testimony.  What Bernanke and other members of the Fed are looking at is the overall participation rate in this economy.


The participation rate fell off a cliff in 2007 and has not improved.  The percentage of people working in this economy is probably lower than it’s been in a generation.  Real median incomes are at generational lows.


There is no sign of economic improvement and I think the Fed is extremely worried about this, so they are going to continue to ease.  They have reaffirmed their pledge to keep interest rates near zero and you’ve seen very active discussions about QE3.  


This talk of QE3 is happening even though producer prices are above 20 year averages.  Aggressive easing with this kind of backdrop just spells higher prices for gold....


Continue reading the Stephen Leeb interview below...  




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“There are structural problems the Fed will not be able to fix, but they are going to try anyway and in trying they are going to add to already existing inflationary pressures.”


Leeb also had concerns about supply disruptions in the oil market:  “If the supply of oil is disrupted for a month, we can make that up with our strategic reserve.  But what we can never make up is some sort of turmoil that might occur in Saudi Arabia.  That could happen on the heels of a very aggressive strike against Iran.


I think the elephant in the room is not Israel, it’s not Iran, it’s Saudi Arabia.  For people to be complacent in the face of this is surprising.  So oil is higher but I believe gold has not yet reacted.  


If there is a major supply disruption in Saudi Arabia we are going into a depression.  In that scenario gold would fall very sharply, but then come back aggressively.  I can’t predict exactly the path that gold will take to get through $1,900 but whether or not it gets through $1,900 is not in question, it will.


When gold clears that level ($1,900) it will be the official start of the second leg of this bull market, which I think promises to be much bigger than the first leg.” 


Dr. Stephen Leeb: Chairman & Chief Investment Officer of Leeb Capital Management and the

author of “Red Alert: How China's Growing Prosperity Threatens the American Way of Life”

Just released, to order from Amazon CLICK HERE.



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Eric King

KingWorldNews.com

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