Greyerz:  “Eric, the Fed decision surprised me because there is no logical or financial reason to taper.  But in Bernanke’s final few weeks as Chairman of the Fed he has to play to the audience.  Perhaps he believes he is leaving on a high note because of this....

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“But during Bernanke’s reign he will be remembered for presiding over a staggering increase in US debt in just 8 years.  Us debt increased from $8 trillion to $17 trillion, and he also increased the Fed’s balance sheet from $800 billion to $4 trillion.

So if you look at total money created, he’s gone from $9 trillion to $21 trillion.  That’s an increase of 133%.  It’s absolutely astonishing.  And of course we know that the US cannot survive without the continuation of money printing.  Bernanke also presided over the US unemployment rate rocketing to well over 20%.

That unemployment problem is something the next Fed Chairman will have to deal with.  That’s why the Fed has now said that they will maintain rates at zero for as long as necessary.  They are not even going to stop if the phony unemployment rate reaches 6.5% -- they made that clear.

So as I said, the tapering was totally cosmetic and they are aware of the problems.  The Fed knows it can’t stop QE.  In fact, it will be increased over time.  Just look at the US banking system, it’s in a mess.  And if all of the banks apply the Volcker Rule to mark all of the toxic debt at market, no bank would be standing today.

That is why there will be no significant tapering in 2014, and you will even see a massive increase in QE.  Just look at the recent data:  The Philly Fed Index dropped to 7, and 10 was expected -- that’s a seven month low.  There was a big drop in the average work week, number of employees, as well as new order shipments.  Also, capital expenditures had the biggest 3-month drop in 5 years.

Home sales also had their first fall in 29 months.  Housing has only been strong because of subsidies and institutional buying.  So we are now developing another housing bubble in the US.  Higher interest rates in the US are also increasing the cost of housing quite significantly.  But it’s not just in the US, it’s also in many European countries as well. 

If we look at China, I’ve talked about the credit explosion in China.  Now the banking system is under real pressure.  The PBOC had to add funds to the banking system in the last few days.  The 7-day Repo Rate surged to 9%.  This is the highest it has been since the June banking panic which almost crashed the system.

The Shanghai Stock Exchange has now been falling for nine straight days.  The yield on the 10-Year in China is at the highest it has been in 8 years.  The banking system in China needs more cash as it is under extreme pressure.  So the problems are worldwide, not just in the US.  Japan also remains a basket case with no improvement whatsoever.  Japan’s situation is truly frightening.

The situation in southern Europe is getting a lot worse.  The percentage of population at risk of poverty in southern Europe is now between 25% and 35%.  These are people in countries such as Spain, Portugal, Italy, and Greece.  There is now major unrest in Italy as a result of this catastrophic situation.  There are protests, blocking of borders, blocking of roads, etc.

The Italian President, Napolitano, has just said that he has a major fear of social unrest in Italy.  I agree with that.  There is a high risk, and Italy has a history of social unrest.  The 5-Star Movement is now gaining in popularity because they are anti-EU, anti-state, and anti-immigrants.  The Italian people are tired of the present politicians.  So things could turn very nasty in southern Europe in 2014, with a lot of hungry and desperate people.”

Greyerz added:  “Now if we turn to gold, the short sellers have already tried to push gold to new lows at under $1,178.  We were almost there yesterday, when gold hit $1,187.  Although the market could get a bit weaker, we are seeing bullish divergences on the daily and weekly charts of gold.

Gold priced in other currencies has already made substantial new lows since the June bottom, except priced in dollars.  Gold in all currencies is now back to 2010 levels.  But just look at what’s happened in the US since then:  In 2010, the US debt was at$12 trillion, today it’s $17 trillion.  The Fed’s balance sheet was $2 trillion, and it’s now it’s at $4 trillion.

So the total debt and Fed balance sheet has gone from $14 trillion to $21 trillion since 2010.  That’s an increase of 50%, or $7 trillion.  So $7 trillion has been created from debt and money printing since 2010, and yet gold is somehow back at the 2010 levels.  The realty is that gold has only declined during this time period because of manipulation, and the massive credit creation has not been reflected in the gold price.

But we are now coming to an end of this manipulation in my view.  The Western central banks are running out of gold, and the London bullion bank stocks are at lows due to the massive buying from China.  So 2014 will be the year the gold bull market resumes, and gold will go back to properly reflecting the destruction of paper money.  If we add to that a short squeeze due to the total distrust in the paper gold market, we should see some real fireworks in both the gold and silver markets in 2014.”

IMPORTANT - KWN will be releasing interviews all day today and this weekend with Andrew Maguire, former US Treasury Official Dr. Paul Craig Roberts and others.  Also, Andrew Maguire’s remarkable audio interview will be available shortly and you can listen to it 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 Dr. Paul Craig Roberts, Andrew Maguire, Michael Pento, Rick Rule, Gerald Celente, Dr. Marc Faber, Bill Fleckenstein, Eric Sprott, Grant Williams, Egon von Greyerz and David Stockman are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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