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Rick Rule continues:
“Both of them have said they will do what it takes to restore the economy. They will not in fact do what it takes to restore the economy. What it takes to restore the economy is to have a purge. What they will do is continue to substitute liquidity for solvency. They will continue to bail out brain-dead banks.
They will continue to fund liquidity so that governments can print new money, to borrow from themselves....
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“And as I already said, they will continue to substitute liquidity for solvency. I think we can count of them doing that. What that means is, in the near-term, our nervousness is not deflation, our nervousness is inflation.
That very much supports the thesis we’ve been talking about on your show for the last 3 year, Eric, which is stronger bullion prices as a consequence of weaker currencies, and stronger relative commodity prices.
This means commodity prices buoyed up not by stronger demand, which should also be good over time, but rather because the denominator, the value of the currencies that these commodities are priced in falls. So the relative price of the commodities rises.
I think it’s important to note, Eric, that these governments are in a box. They have created economies that are dependent in the near-term on forced or fake liquidity. In other words, these are economies that are reliant on counterfeiting. They also have a situation where they have encountered the moral hazard which economists have been warning about for three decades, with is the sort of too large to fail circumstance.
And they are boxed in by an increasing dependency of their populace on government programs which attempt to forestall the inevitable decline in living standards. We are in that situation as a result of people living beyond their means for 25 or 30 years.
So let’s recap this again, we will see more quantitative easing in the near-term and the intermediate-term. Quite frankly, this is because the electorate is demanding it, and Western economies are reliant on it. This is inflationary in the near-term.”
Rule had this to say regarding the resource markets: “Finally, Eric, with regards to resource investors, the news is good again. We have seen the market’s response in the last couple of weeks to several spectacular discoveries. Africa Oil has moved from 80 cents to $10. Reservoir Minerals has moved from 30 cents to $3 and change, and of course, GoldQuest Mining from 6 cents to $1.60.
We are now 10 years into this resource cycle, and that’s how long it takes. We’re in a discovery cycle. Because the overall mining share market (the HUI) has been down 27% in the past year, people don’t feel the successes that are occurring in the market. But when these successes take place, the market stands up and takes notice.
What kind of a ‘terrible’ market gives you a response from 80 cents to $10? What kind of a ‘terrible’ market gives you a response from 6 cents to $1.60? You get my point. Exploration successes are, first of all, good for individual portfolios, but they are also the way that you turn a market.
Adding hope and adding liquidity to a sector as beat up as the juniors can provide some spectacular catalysts. So I would say this week, Eric, for junior resource speculators, the news varies from good, to very good, to excellent.”
Rule also added: “You know, Eric, bullion prices have been doing very well, as you yourself suggested they would three months ago. While part of me is happy about your being right, the other part of me would prefer to buy on dips. Having said that, it is my belief that the gold and silver prices will trade higher in the six to twelve month time frame.”
© 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 James Turk, Egon von Greyerz, Art Cashin (UBS $612 billion), Agnico CEO Sean Boyd, John Hathaway and Eric Sprott are available now. Also, be sure to listen to last week’s line-up of other KWN interviews which included Jean-Marie Eveillard, John Mauldin, Gerald Celente and Ben Davies by CLICKING HERE.
Eric King
Rick Rule - Spectacular Home Runs In Gold, Silver & Oil
Today Rick Rule spoke with King World News about spectacular home runs some investors have been hitting in the gold, silver & crude oil markets. Rule, who is now part of Sprott Asset Management, also predicted, “... gold and silver prices will trade higher in the six to twelve month time frame.”
But first, here is what Rule had to say regarding QE and the inflation/deflation debate: “A few things are on my mind right now, Eric. Recent statements by both Draghi and Bernanke, suggest to me the inevitable fact, and near-term inevitable fact, that both the European Central Bank and our own central bank officials, will be engaged in what they call some form of quantitative easing. This is what we would call counterfeiting.”
© 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.
September 4, 2012
