Stephen Leeb continues:

“We have been seeing tensions rise between Japan and China.  When you look at what’s happening in the Middle-East, you have to be prepared for resource wars.  The best case scenario is that the world can use a period of very high inflation to get out of its debt problem.

We have two major problems in front of us....

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“One problem, of course, is high debt.  That can be solved by inflation.  But there are very few ways, if any, ways of solving the second problem which is resource scarcity.  Countries have to come together to solve this problem.

When it comes to inflation, we’ve lived through 12% to 13% annual inflation in this country.  Yes, it’s chaotic, and if it got to 20% it would be even more chaotic.  But what really keeps me up at night is the thought of not having enough resources for the people living on this planet. 

The marginal cost of oil today in Saudi Arabia is $100 a barrel and rising at double digit rates.  That’s what worries me.  We’ve got to wake up or this could become total chaos.  I’m hoping it doesn’t.”

Leeb also added:  “Although the Japanese have been printing money, they are having trouble keeping up with the US and Europe.  We are in that race to see who can print the most money.  It’s a race to see who can debase their currency the fastest.

Under these conditions, people are going to eventually panic out of paper money.  They are going to be grabbing for things that are real, that are tangible.  So countries are vying to create the cheapest currency, and history tells you that under these kinds of circumstances you are not going to go wrong with gold. 

Bernanke said he was going to print for the foreseeable future with no deadline on it.  What was lost in the shuffle was that he said he was going to continue this policy well after the economy recovered.  Bernanke was actually saying that wants to create more inflation.  That’s his goal because he wants people to spend now.  The question becomes once it starts will he be able to stop it?  I don’t think so. 

This excessive money printing, in many ways, is destined to short circuit itself.  Prices of commodities go much higher in this type of environment.  Of course gold and silver will lead the way higher.  But the food and energy components rise and this serves as a tax on an already crumbling middle class.

This is going to eventually set off a big boom in commodity prices.  The other contributing factor is going to be China’s urgency to spend more on infrastructure projects.  The Chinese plan to spend up to $2 trillion over time on a smart grid.

This is going to be a world in which the tailwind on commodities is going to be enormous.  The big winner in all of this is going to be gold and silver.  Silver will blow right through $100 and continue higher. 

I have been saying to your readers that gold will hit $10,000.  Well, Barron’s ran something over the weekend saying it could happen.  Gold is rapidly becoming the premier currency of the world and this trend will continue.”

© 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.

Dr. Stephen Leeb: Chairman & Chief Investment Officer of Leeb Capital Management and the

author of “Red Alert: How China's Growing Prosperity Threatens the American Way of Life”

Just released, to order from Amazon CLICK HERE.

The interviews with Bill Fleckenstein, Egon von Greyerz, Felix Zulauf, Rob Arnott, Michael Pento, Gerald Celente, James Dines and Marc Faber are available now.  Also, be sure to listen to last week’s line-up of other KWN interviews which included James Turk, Art Cashin, Egon von Greyerz, and Sean Boyd 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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