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Pento:  “It’s all about the Fed and the removal of their bid, Eric.  We were told for years and years that the foreigners had to buy U.S. debt, and (they) had no other choice.  We learned a few days ago that in June they sold a record $40.8 billion of (U.S.) Treasuries, and that was an all-time record going back to 1977. 


So even foreigners are now concerned about the final removal of the Fed’s bid, and massive manipulation of our interest rate yield curve spectrum.”


Eric King:  “Michael, there has been some discussion on KWN recently about how this could be destabilizing for the entire financial system because of the derivatives exposure there.”


Pento:  “Right, there are hundreds of trillions of dollars worth of interest rate derivatives around the world, and that’s just the beginning of the story....


Continue reading the Michael Pento interview below...




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“The level of interest rates has immense repercussions across the entire globe.


For example, the Federal Reserve used to keep the Federal Funds Rate at around 5%.  The 5% effective Federal Funds Rate was in place since about 1970.  It spiked all the way up in the late 1970s to early 1980s, came back down to Earth, but if you make an average of that very key interbank overnight lending rate, it’s about 5%.


The Fed, after the collapse of the real estate market, took that down to 0%.  But taking the effective Fed Funds Rate from 5% to 0% wasn’t enough -- they decided they had to manipulate interest rates across the entire yield curve.  That’s what QE is all about.


It’s about taking the long of the curve from where it was historically at 7%, down to 1.5%.  So we have all kinds of distortions (in the financial markets) --  not only in the cost of money, but (also) in currencies.  This interest rate manipulation has incredible and massive reaches across the entire globe, and we are just beginning to see the cracks in the foundation.”


Eric King:  “How destabilizing could this be to the entire financial system?”


Pento:  “I think it could be exponentially worse than what we experienced in the collapse of the dot-com bubble and the collapse of the real estate market ... The bond market has already started to taper for the Fed ... Interest rates are set to soar.  The Fed doesn’t realize it yet, but they will soon. 


Interest rates have already started to climb.  That’s just the beginning -- I think they go to 4% by the end of the first quarter of 2014, and that is where your watershed moment occurs where the Fed says, ‘Enough!  We are now permanently in the business of manipulating the long-end of the Treasury yield market.’  That’s when you had better be exposed to precious metals and mining shares because these investments should then soar in price.”


IMPORTANT - This write-up is only a small portion of what Michael Pento had to say in his incredibly powerful audio interview.  The KWN audio interview with Pento is available now and you can hear to it by CLICKING HERE. 


Michael Pento: President & Founder of Pento Portfolio Strategies and the author of

“The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market”

To order from Amazon 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.


The audio interviews with Michael Pento, James Dines, William Kaye, Grant Williams, Dr. Paul Craig Roberts, Gerald Celente, Hugo Salinas Price, Chris Powell, David Stockman, Art Cashin and Marc Faber are available now. Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf to listen CLICKING HERE.


Eric King

KingWorldNews.com

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