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Rule - $150 to $170 Oil, Gold, Fraud & Dangerous Times
With continued volatility in gold, silver and oil, today King World News interviewed Rick Rule, CEO of Sprott USA. Rule told KWN the world is out of $60 oil and maybe out of $70 oil. He also said the circumstances in Greece bring up the issue of moral hazard and the situation is extremely dangerous. Here is what Rule had to say: “I don’t know if it spins out of control, but it’s clearly fraud. Greece had an engineered default, which they chose not to call a default. This is just plain fraud and if you and I tried to do this, in the context of a private issue, we would go to jail. The fact that people who operate under a sovereign do it is very strange and very dangerous.”
© 2012 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 This material may not be published, broadcast,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.
March 13, 2012
Rick Rule continues:
“This situation brings up the issue of moral hazard. This causes people’s behavior to change. We are now living in the era of payback for moral hazards. The idea that you have this broadly sanctioned fraud, which holds harmless the idiots who bought Greek debt, this encourages the same type of behavior.
The sovereigns encourage this nonsense because it’s what keeps them in business. We live in very dangerous times and while I think the CDS situation is problematic enough, the thing that is more problematic is what it says to global capital markets....
Continue reading the Rick Rule interview below...
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“This strengthens the power between sovereigns and allegedly private sector banks, which are increasingly instruments of central power. This is also very bad for savers who put money in banks and the banks turn around and stupidly lend the money to sovereigns. The sovereigns then turn around and bail out the banks, in effect nationalizing savings and risks.
As I said, it’s a very dangerous set of circumstances and everybody needs to understand this behavior for what it is which is fraud, Eric. I am assuming your readers because they are your readers, will equate the set of circumstances we described with regards to Greece as fraud.
I am similarly assuming that the same people will look at the bailout of the US banks, AIG, people who bought houses they couldn’t afford, and the people who loaned money to people who couldn’t afford the houses they bought as fraud. If your readers concur those things are fraud and the liquefaction of those losses, in terms of QE or counterfeiting as fraud, my suspicion is you have to be a goldbug.
I also don’t understand how a sovereign entity like the United States can take in by way of revenues, less than 40% of what it spends. The US then makes up the 50% of the difference by encumbering our children’s future and the other 50% by counterfeiting. How people can observe the events we are witnessing, understand them to be fraud and counterfeiting and not be a goldbug.”
When asked about the crude oil market, Rule responded, “I think a couple of things are happening. One is liquified natural gas prices are strong, which pulls oil up and this is happening because the Japanese are taking every available cargo. They are doing this because their nuclear power plants are down.
The second issue is the concerns that there is going to be hostilities in the Straits of Hormuz. This has kept the oil quote high, as refiners are making sure they have sufficient inventories to withstand any supply disruptions.
Looking beyond those two things, oil appears to be trading unreasonably strong. So it is possible for oil to come down to a more normal $90 to $95. However, if hostilities do commence with Iran, you can pick a number on the topside for oil.
60% of the world’s export crude oil passes through roughly 60 kilometers in the Straits of Hormuz. If the Iranians take out a couple of tankers, which they could easily do, it would be easy to see $150 to $170 oil. Think about a desperate power doing everything it can to disrupt world trade, in order to bring about a favorable settlement. Not a pretty picture.
For whatever it’s worth, the world is out of $60 oil and maybe out of $70 oil, but the world is certainly not out of $100 to $150 oil. To the extent there is continued debasement of currencies, those numbers continue to rise.”
For readers who are interested in a more thorough discussion, an excerpt of Rick Rule's PDAC presentation is available to KWN readers by emailing rrule@sprottglobal.com and requesting Rick Rule's PDAC excerpt.
© 2012 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
