Don Coxe continues:

“So Italy’s situation is truly serious because they also have a short duration on their debt.  If you were holding a three-year Italian bond, but it’s only got three months to maturity, you are probably not going to sell it now because you want to get your money out.  But you are not likely to roll it over, unless you are an Italian bank.

So what’s happened is we’ve gradually narrowed down the range of those who, even when the bonds are maturing, want to buy more.  We’ve converted the entire European banking system into a funding for the government deficits.

Therefore, we have this situation of two drunks, at night, leaning up against each other, bad governments and bad banks, but the amounts involved are at mind-boggling levels....

Continue reading the Don Coxe interview below...


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“If they had started doing this a year ago, I could see how they could have managed it all.  As it is now, they are still talking about reducing their deficits in they year ahead.  This is preposterous.  This is like the French trying to decide which wine to serve as they saw the German tanks assembling on the other side of the Maginot Line.

It used to be that the number that would solve things was $500 billion, then it got to $1 trillion, and now I’m reading responsible people who say, ‘We will really need about $2 trillion over the next twelve months because of debts maturing.’

I just don’t see where that’s going to come from because the European Central Bank doesn’t have money.  The IMF has lined up $450 billion, including about $34 billion from China, but that’s not going to be dispensed if you realize that it would be swallowed up in a matter of weeks, and they would be back for more.

She (Christine Lagard) is not going to drain the IMF’s money.  So they are going to say, ‘We don’t want the IMF to become purely a eurozone financing bureau.’  It was set up to handle emerging economies, not submerging, old European economies. 

As for the European Stability Fund, that’s about $400 billion, and it’s pretty much spoken for.  So I don’t know where this money is going to come from.

Meanwhile, within the banking system there is a more immediate problem, and that’s where the $2 trillion (figure) comes from.  The $2 trillion includes the money that’s needed, within the European banking system, to cover the fact that they have borrowed huge amounts of money, in dollars, under currency swap arrangements.

The Fed has been supplying a lot of these.  A lot of this stuff is not being rolled over.  As soon as it matures, they take the money out.  So the European banking system is short hundreds of billions in dollar liabilities.  That’s something that is of more immediate concern because you’ve got dozens and dozens and dozens of banks that are having to come to the well every other week.

So it could actually be a banking thing that does it, before the governments do.  And the governments aren’t really in a position to subsidize their banks when they are desperately coming to central authorities to fund themselves.

If I had to say what will burst the thing, it will be banks that do it.  And if banks start to go down, we know from 2008, when banks start to crumble, then the whole system falls.  You can postpone the collapse of a government, but you can’t postpone the collapse of a bank if the people are lined up outside and saying, ‘Give me my money.’”

Coxe also added:  “Gold’s problem, why it has maxed-out at and pulled back to $1,500, is people say, ‘Well, it had a big move, going from $250 to that ($1,900) level, but it’s still just a theoretical asset, it isn’t doing anything.’  So the moment gold comes into the system and starts doing things, I suspect that’s when we are going to get a significant up-move in gold.”    

The information above was just a small portion Don Coxe’s extraordinary interview.  Because of recent turmoil in the markets, this timely and important interview with Don Coxe 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 interviews with Ben Davies and Nigel Farage are available now.  Also, be sure to listen to this week’s line-up of other KWN interviews which include James Turk, John Mauldin, Egon von Greyerz, Gerald Celente and John Embry by CLICKING HERE.

Eric King

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