Michael Pento continues:

“Instead of allowing the 25 basis points to be given to them by the Federal Reserve, they go out and buy distressed European debt, and they hedge it by buying a CDS (credit default swap).  Then the hedge blows up and they report a loss.  So, once again, the Fed and the banks are to blame.

Now, you don’t need any new regulations.  All of these Keynesians come out and say, ‘Well, we have to over-regulate the banks and step up more Dodd-Frank and all of these regulations.’  Well, we had a good regulation, it’s called the ‘gold standard.’  That’s the best bank regulator ever conceived.  It’s a free market based system of money. 

Under a gold standard, banks would be much more careful when they make a loan.  They knew (under the gold standard) that the Federal Reserve wasn’t there to bail them out....

Continue reading the Michael Pento interview below...


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“There is no central bank ready to expand the money supply by decree (on a gold standard).  So, what would banks do?  They would make loans to create capital goods, factories, mines, utilities, commercial and industrial loans, loans that grow an economy.  (They would) not gamble on a synthetic CDO that blows up in their face.

That’s what happened in 2008 (a derivatives blowup), and unfortunately the sovereigns decided to bail out the banking system.  Now the sovereigns need a bail out.  Who’s going to bail them out, Eric?  Oh, I forgot, it’s the central banks.  That’s called hyperinflation.” 

Pento also added: “If you cannot grow the monetary base to which it grows today (because you are on the gold standard), you can’t get all of these derivatives and this prop trading and these huge asset bubbles.  You’ll fix the whole problem, but not until it blows up.  

When it blows up, people will be clamoring to return to sound, honest money, free market based money.  But not until the whole thing blows up, and it’s blowing up right now in Europe.  Spanish banks have hundreds of billions of dollars in distressed debt.  Their unemployment rate is 24%.  If you happen to be under 25, the unemployment rate is 50%.  

If the banks have hundreds of billions of dollars in defaulted loans already and the unemployment rate is soaring, these banks are insolvent and they cannot be bailed out by the sovereign nations because they (the nations) themselves are insolvent.

That’s why we believe this summer is going to be disastrous for equity prices across the globe, but especially in the United States.”

This is a chance for KWN listeners globally to hear Michael Pento discuss gold at length, along with other key markets.  He also discussed the mining shares and what to expect this summer. The interview with Michael Pento is available now and you can listen to it by CLICKING HERE. 

© 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.

The Rick Rule and Bill Fleckenstein audio interviews are available now.  Also, be sure to listen to this week’s incredible line-up of other KWN interviews, which include MEP Nigel Farage, James Turk, Pierre Lassonde and more by CLICKING HERE.

Eric King

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© 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.

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