James Turk continues:

“Bankers are running scared because so many banks are on the verge of insolvency or have already reached that state.  So they are not lending.  They are still way over-leveraged and trying to work off all the bad loans they still have on their books.

Because it is difficult for companies to finance their operations, economic activity, pretty much everywhere throughout the EU, continues to contract.  This in turn is causing more bad loans at the banks and yet more contraction of bank loans to businesses.  

This downward spiral has all the outer appearances of being a deflationary collapse, except that inflation in the EU is rising, not falling.  This presents an interesting conundrum.  I think the answer is twofold.  Clearly, ECB money printing is inflationary.... 

Continue reading the James Turk interview below...  


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“Second, the demand for the euro is falling as people take their money out of Europe.

The scary talk, coming from the newly elected politicians, is accelerating this process.  It is an important trend that needs to be watched carefully to see whether it turns into a flight out of the euro.  This could open the floodgates and lead to massive chaos.

Another chaotic outcome would also occur if Greece exits the euro.  If that occurs, there would be a contagion that would impact the other EU countries, many of which are already sliding into a Greek-like economic contraction and banking crisis.”

When asked about the decline in gold and silver, Turk responded, “It depends on how you look at it, Eric.  The decline looks worse in dollars than euros because the euro itself has been declining against the dollar.  But here is another way of looking at it.  

When crude oil was $107 a barrel a few weeks ago, with gold at $1650, a barrel of crude oil cost 2 grams of gold.  Now with crude oil at $94 and gold at $1550, a barrel of oil only costs 1.9 gold grams.  So, by owning gold, your purchasing power over the last few weeks increased by 5% versus oil.

Admittedly, one would have done better if they were holding dollars, but who wants all that risk?  You have to find a safe bank to place those dollars, and then be guaranteed that the Fed is not going to launch QE3.  You would also need to be guaranteed that the federal government is going to drastically shrink its deficits. 

My opinion is that holding physical gold, with no counterparty risk, and continuing to accumulate more on dips, is how savvy investors are positioning themselves.  The same logic also applies to silver.

Right now, the gold market is in the middle of a battle between the paper traders and the holders of physical metal.  We are seeing huge Chinese import stats for physical gold and robust demand elsewhere for physical metal.  So gold will eventually win this battle, just like it has for more than a decade.  The reason gold will prevail is there are oceans of paper money swirling around, but so little physical gold.”

© 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 John Embry and Michael Pento audio interviews are available now.  Also, be sure to listen to this week’s incredible line-up of other KWN interviews, which include Rick Rule, Bill Fleckenstein, 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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