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Dan Norcini continues:

“If the elections tilt a certain way and Greece leaves the euro, the question becomes, is this a harbinger of things to come?  Meaning, will Spain and Italy also leave the euro.  The other possibility is the Greeks vote to accept the austerity and stay in the euro.  Obviously the markets are waiting to see what the outcome of that vote is.

Polls have been banned over in Greece, so the truth is nobody knows what the outcome will be.  The bottom line is if Greece leaves and brings back the drachma, that may very well set the precedent for Spain and Italy leaving as well....

Continue reading the Dan Norcini interview below...  


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“In this environment, investors are not willing to hold sizable positions ahead of that Greek election.

When you look at the collapse of 2008, the US had a banking crisis.  What the US did was the government basically took on the debt.  The government went in and bought up those mortgages, and in a sense helped to recapitalize the banks.

When you contrast that to what we are seeing today in Europe, you have, in Europe ,a sovereign debt crisis.  It affects the European banks because the banks own most of the sovereign debt. 

What is so strange about what is happening in Europe is the European Stability Mechanism is being funded by the various countries that make up the eurozone.  Ironically, many of the countries involved in the funding are insolvent and bankrupt themselves.  This is a situation where if it wasn’t so serious it would be comical.

So you essentially have bankrupt countries pledging money to a fund which comes in and rescues the very same bankrupt country.  This money is then used to buy the sovereign debt from the banks to help liquify the banks.  These countries want the ECB to get involved in backstopping everything.

The problem is this morning you had the German Bundesbank President Jens Weidman say he is not in favor of that deal.  He said, ‘The ECB should resist calls to expand its mandate.  The ECB should avoid letting inflation rise, and should adhere to its primary goal of price stability.’  So you have the markets expecting more QE, but you still have Germany resisting.” 

Norcini also added: “Initially there was a little bit of pressure put on gold when that news hit the wire.  Gold had moved up into that resistance zone, Eric, between $1,620 and $1,630 on the topside.  Gold has had some struggles at that level. 

We had a decent increase of over 5,000 lots yesterday on that rally.  So all of that fresh money was being met by some pretty heavy bullion bank selling.  So gold was being capped by the bullion banks at that level.  It would seem the gold market is looking for an indication of more QE from the ECB in order to overcome that resistance.

At the same time, gold has seen physical buying from central banks on weakness because of diversification and continued currency turmoil.  But I believe the bullion banks will continue to cap gold until such time as there is an indication of a more friendly posture towards additional QE.”

© 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 interviews with John Embry and Bill Fleckenstein are available now.  Also, be sure to listen to this week’s line-up of other KWN interviews which include Egon von Greyerz, Nigel Farage, Michael Pento, Dr. Stephen Leeb, Don Coxe ($538 billion BMO), Art Cashin ($612 billion UBS) and Rob Arnott (oversees $100 billion) by CLICKING HERE.

Eric King

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