Michael Pento continues:

“So people are now clamoring for another round of QE from the Fed and another round of the LTRO from Mario Draghi.  But we have to face the fact the two rounds of the LTRO did absolutely nothing to rescue the economy in Europe.  If you look at Spanish yields, they hit an all-time record high this week.  So Europe continues to fall apart. 

People have to acknowledge the fact that the US 10-Year Treasury is at 1.6%, and mortgage rates are at an all-time record low 3.8%.  So what exactly is going to happen from another round of quantitative easing?

In the unlikely event that the Fed does more QE, I would expect a short pop to the averages, but it will do further harm to the economy.  It will also serve to destroy what is left of the middle class purchasing power, and it will do absolutely nothing to fix the solvency issues in Europe or the United States....

Continue reading the Michael Pento interview below...


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“Here is the reality, we have a situation in the developed world, particularly Europe and the United States, where the level of debt at the public sector level has become so onerous that the tax base no longer supports the solvency of the states.  When you get to the point where the tax base cannot support the stability in interest rates, the international bond market starts to lose faith in the credit market and interest rates rise. 

The idea that you can bring down interest rates by creating inflation through never-ending counterfeiting on the part of central banks is absurd.  It doesn’t make any sense as an economic theory or in the real world.  You cannot create endless rounds of inflation for the purpose of keeping interest rates low.  You destroy your economy, and you send the cost of borrowing on the sovereign level much higher when you continually print money. 

Someday soon central banks will learn that lesson.  I can assure you that the central bank of Hungary learned that lesson in 1946.  The central bank of Zimbabwe also learned that lesson.  A central bank cannot continually become the only buyer of a nation’s debt.  That is where we are in Europe, that is where we are in Japan, and that’s where we’re headed in the United States.

When your central bank becomes the only buyer of your debt, you enter into an inflationary death spiral.  That is where we are in Europe, and if it doesn’t end, you are going to have the euro going the same way as the Hungarian pengo.

Regarding the Fed, the bottom line is the Fed doesn’t have the political capital to either extend its balance sheet right now or do a dramatic increase in Operation Twist.  So the Fed will be on the sidelines today, I’m going on record saying that.

As I said earlier, if the Fed is stupid enough to enact another round of quantitative easing right now, at best you would see a temporary blip in the equity markets, but it would further serve to further destroy the fundamentals of the economy.

The people who are clamoring for QE3 to save the equity market are flat out wrong in my opinion.  QE3 will most likely be a fourth quarter event.”

© 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 Mauldin and Egon von Greyerz are available now.  Also, be sure to listen to this week’s line-up of other KWN interviews which include Gerald Celente, John Embry, Bill Fleckenstein, MEP Nigel Farage, and Michael Pento 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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