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There Is No Solution, Only Catastrophic Outcomes

With continued volatility in global markets, 40 year veteran, Robert Fitzwilson wrote this exclusive piece for King World News. Fitzwilson is founder of The Portola Group, one of the premier boutique firms in the United States. Here are Fitzwilson’s observations: “In the minds of most people, the first reactions to the crisis of late 2008 were programs such as TARP, to stabilize the financial system, as it had gone into figurative cardiac arrest. QE1 began in March of 2009, to get the world economy back on a recovery track. QE2 then followed along with Operation Twist. The debate now is to whether or not we will see QE3.”

Robert Fitzwilson continues:

“We must admit that the actions taken became necessary. Our preferred path would have been to bolster Main Street, not Wall Street, followed by tens of thousands of prosecutions, but that was not the direction chosen. Wall Street and the international banking system were resuscitated while Main Street languished.

Talking about whether we will see QE3 or not, distracts from the fact that all of what has transpired since late 2008 has been quantitative easing....

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“First of all, we should dispense with the ‘easing’ part of the phrase. Since interest rates are at record lows, and enormous sums have been dished out around the globe, it is hard to make the case that this is ‘easing.’

Second, the funds for the various programs, since that late-2008 and early-2009 period, with the exception of China (perhaps), have not come from savings or taxes, but from simply creating money out of thin air. Segmenting what has occurred into programs and acronyms does not change the fact that this is classic monetary debasement, as practiced throughout most of recorded human history.

In the United States alone, we are borrowing an increasing percentage of the amount spent in each fiscal year. Since that money must be printed, every program over-and-above the tax revenues is quantitative easing. The debates about whether we will see another round of quantitative easing takes our collective eye off of the ball. The fact is that we are doing QE every day with every borrowed dollar.

Since our Federal Reserve is the central bank for the world, any program that involves spending more money, over-and-above savings and taxes around the world, is quantitative easing. This is the case, whether or not it is seen as our Fed taking the lead or Europe dealing with their own problems. It is the same checkbook and the same printing press. We have long since passed the nice and orderly process of easing, and are now engaged in what I would call ‘quantitative spewing.’

How long this can last is anyone’s guess. Nobody is in favor of an economic collapse. We have now transitioned into an economic ‘no-man’s land,’ the magnitude of which has never been seen. There is no solution, only outcomes that have to be managed. We must now print to infinity and hope that unexpected events will provide a positive path out of this morass.

So, what should investors be doing with their money? For portfolios, history and common sense tell us that real assets should be the predominant allocation. One should also include high growth companies taking advantage of pockets of global demand. Solid, high yielding global companies should also be considered as well as a foundation allocation to energy, gold and silver.”

The Eric Sprott and Egon von Greyerz audio interviews are available now. And be sure to listen to this week’s incredible line-up of other KWN interviews, which include Rich Yamarone, John Embry, Jim Sinclair and John Hathaway. You can listen to these interviews by CLICKING HERE.

Eric King

KingWorldNews.com

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