Greyerz:  “Eric, I’m looking at the eurozone here and they are really under pressure.  Inflation is slowing down.  It’s at .07% now, and inflation has been falling in the last 3 months.  This is of course why the ECB cut rates buy .25% recently....

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“Germany opposed this cut because they don’t want to pay Italy and other Mediterranean countries.  As we know, deflation is the biggest fear of an over-indebted world, with both individuals and governments borrowing money they can never repay, even at low interest rates.

These debts can only shrink by making paper money worthless by printing unlimited amounts, and that’s what they will do.  Deflation is a debt trap leading to non-repayment and a collapse of the financial system.  Eric, all European figures are weak.  The PMI is weaker than expected, at a 3-year low.  France is now in contraction with their Manufacturing Index now down to 47%, which is a 6-month low.  Of course the leader in France now has only a 20% approval rating.  The French don’t like bad times.  France is now the next sick patient of Europe.

Since individual European countries can’t devalue, instead they are cutting labor costs.  That’s happening in Portugal, Spain, Ireland and Greece.  Of course cutting labor costs means people are earning less.  So these people are even less likely to repay their debts.  The ECB is considering negative deposit rates now, so banks will lend more money to individuals and businesses.  The latest news is that the ECB is considering cheap loans to countries in order to enact economic reforms.

So the ECB will print more money and the eurozone countries will take on even more debt which they can never repay.  Eric, we know, and the ECB knows, that with deflation Europe will collapse under the weight of its own debt.  But the Fed, the ECB, and the IMF will not allow this to happen.  This is why there will have to be major QE packages that will probably start in 2014.

Expect for Germany, the UK is the only European country showing some signs of life.  But the temporary improvement in England is due to QE supporting a remarkable 25% of their GDP.  The UK also has a consumer who borrows more than ever, leading to a massive current account deficit.

If move to the US, we see the real economy deteriorating.  The Philly Fed Index had a major drop, new orders have fallen, and the same with thing the Empire State Manufacturing Index.  We know that US GDP is also QE-induced.  US GDP adjusted for real inflation is down 6% since 2007, and it looks set to fall further in real terms.  So the nominal growth that official figures show are just credit-and-QE-induced and have nothing to do with real growth.  It’s the same with industrial production and retail sales, which are down 20% in real terms since 2000.

In the meantime, the US stock market is making new all-time highs, also fueled by QE.  Stock investors are totally oblivious to what’s happening the real world.  This is a dangerous market which will end in tears during 2014.  The percentage of bears is the lowest in 23 years, at 15%.  And earnings estimates are now going down, while stocks are going continuing to go higher.

Of course the Fed knows, and Yellen knows, that there is no chance of stopping QE.  Stock markets would collapse.  Bond markets would collapse, and so would the whole economy.  The Chicago Fed President Evans just confirmed that QE could be $1.5 trillion next year.  In my view QE will be a lot higher thereafter.  I believe that in January and February there will be no real solution to the US debt limit, and this will trigger dollar selling and bond markets falling.

In the meantime, the West is offering the East the most priceless gift that anyone can receive by manipulating the paper price of gold lower.  This is allowing the East to acquire real physical gold at prices that will never be seen again.  And the East is gratefully taking all that is being handed to them.

I agree with your excellent interview with William Kaye.  The world is too short-term oriented.  Real wealth is created and preserved by waiting patiently for assets to reach their intrinsic value.  So the dollar will soon reach its intrinsic value of zero, and gold will reach stratospheric levels that are difficult to imagine today.”

IMPORTANT - KWN will be releasing extraordinary interviews all day today and this weekend with Andrew Maguire and many others.

UPDATE - On the 50th Anniversary of the JFK assassination, KWN has the blockbuster interview with the man who was asked by former Governor John Connally, who was shot along with JFK in his limousine on that fateful day in 1963, to meet with him.  It was Connally’s first time back to the scene of the assassination and you can listen to this incredible audio interview by CLICKING HERE. 

© 2013 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 audio interviews with Michael Pento, Andrew Maguire, Gerald Celente, David Stockman, Art Cashin, Dr. Stephen Leeb, John Hathaway, Bill Fleckenstein, James Turk, William Kaye, Eric Sprott and Jim Grant are available now. Other recent KWN interviews include Marc Faber and Felix Zulauf -- to listen CLICK HERE.

Eric King

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