Below is Fitzwilson’s exclusive piece for KWN:

Fitzwilson:  Alexander the Great is the source of a phrase used in modern times to describe resolving an apparently unsolvable problem by ‘thinking out of the box’.  While traveling in modern day Turkey near a region called Phrygia, Alexander deviated from his march to visit a city called Gordium. 

He was keenly aware of a prophecy that surrounded a cart and a yoke held together by a knot of cornel bark.  The prophecy foretold that the person who could untie the knot would rule all of Asia.  Many had tried, but none had succeeded.  It was apparently so for the impetuous Alexander....

Continue reading the Robert Fitzwilson piece below...  


To hear the man with over 40 years of experience in the resource

markets and how he is positioning his clients to weather

the current financial storm click on the logo:

“Frustrated at his own lack of success, he drew his sword and slashed through the knot.  It was not the solution that had been expected, but it did seem to give him the result he wanted.  He and his army left and did conquer quite a bit of territory.  Not all of Asia, but he became the most revered and emulated general in Western military history.  Perhaps solving the Gordian Knot gave him that extra edge.

Our central bankers, politicians and financiers now face a modern day version of an intractable problem dramatically worse than untying a knot.  They will get no sympathy.  The situation is completely self-inflicted, but we are all, unfortunately, unwillingly along for the ride.

As anyone knows who takes the time to ponder the situation, there is no solution which does not avoid immense pain and suffering for just about everyone on the planet.  Generations of norms and expectations will be destroyed and dreams dispatched, as savings are destroyed and retirement incomes are depleted.

In recent weeks, we have seen central banks attempt to break out of their predicaments with bruises to show for it.  In Japan, the government bond market started to trade by appointment as they say, when it had to be halted several times.  The Nikkei stock index has been trading like a dot com era IPO.

In China, the government struggles with reigning in real estate prices and draining liquidity to no avail.  Globally, various measures are being implemented to coerce people from protecting their savings with gold and silver, but those too will fail.  The recent images of 10,000 people queued up in China to buy gold is a powerful indication that demand for metals remains unabated, despite the barrage of jawboning and misinformation.

Meanwhile, the macroeconomic outlook in the U.S. is in stall mode.  With the unexpectedly high number for producer prices, we could be seeing the transition to the dreaded stagflation of the 1970s.  What we see are the following:

*Leading indicators flattening out, and that is despite the boost from stock prices.

*Real GDP flat, and that is using the official measures for the CPI, not the significantly higher estimates from Shadowstats.

*Required reserves of financial institutions on a steady climb.  While that puts the institutions on a sounder footing, it also sterilizes liquidity that could be used to create growth in economic activity.

*Corporate profits after-tax on a year-over-year basis resuming a strong downtrend begun in early 2010

Consumer confidence might be up, but retail sales are trending down.

*New orders for durable goods are in a strong downtrend.

*New orders for manufacturing on a year-over-year basis also in a strong downtrend.

Although the popular stock market indexes have not yet broken their moving averages, the rise in interest rates in recent weeks has definitely caused damage to several of the leading sectors of the stock market.  Housing-related companies were particularly hard hit.  While housing is not the significant driver for the U.S. economy, it certainly is a bellwether that affects the psyche of investors and the confidence of consumers.

The bottom line is the central planners face an enormous Gordian Knot dilemma.  Their Keynesian policies have not produced real growth, yet they face enormous demands just to keep the banking system afloat, and to fund annual budget deficits, as well as trillions of unfunded liabilities. 

In fairness to Keynes, we firmly believe even he would be shocked at the current financial dilemma we are all facing.  The retirement system and savers continue to be ‘strip-mined’ by the policy of low interest rates.  An attempt was made to test the waters for raising rates, but that resulted in tremendous disruptions in global markets.  The planners face an unenviable set of choices, perhaps without a traditional solution.

As Alexander utilized an ‘out of the box’ solution to his Gordian Knot predicament, we can only shudder at the thought of what happens if the central bankers wield new financial and economic swords to end this current stalemate.  While we await their actions, the only path for investors is to continue to accumulate value. 

The images from the ‘20s of wheelbarrows full of cash are dramatic.  However, what those people were doing was exchanging the rapidly depleting currency for something, anything of value.  It is foolish to wait until circumstances are extreme.  Energy, gold, silver, and shares of companies with outstanding growth prospects are prime examples of value in these troubling markets.”

© 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 Egon von Greyerz, Gerald Celente, James Turk, John Embry, Dr. Philippa Malmgren, Bill Fleckenstein, Eric Sprott, Stephen Leeb, Rick Rule, Jim Grant and Art Cashin are available now.  Also, be sure to hear the other recent KWN interviews which include Marc Faber and Felix Zulauf by CLICKING HERE.

Eric King

To return to BLOG click 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.

Subscribe to RSS
KWN Blog