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Ing:  “It’s not a surprise that the Fed did not taper last week when you stand back and look at the fact that the Fed itself is addicted to debt creation. We have never seen any quantitative easing on this scale in all of history, nor have we ever seen an exit to anything like this in history.  So, obviously an exit is not such an easy thing.


There is this unwinding that theoretically needs to occur of the positions of the Fed....


Continue reading the John Ing interview below...




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“We know that the Fed has been buying 70% of all new issuances of US Treasury debt.  Well, how do you unload that?  That’s problem number one.  Problem number two is if the Fed withdraws from the market, if they stop buying Treasuries, then who is going to buy?


We know from the data that the Chinese aren’t buying US Treasuries, and the Russians aren’t buying it either.  So who is going to buy America’s debt in a period of rising interest rates?”


Eric King:  “It seems like the Fed can never get out of this situation.  Where does that leave us?”


Ing:  “Unfortunately, the pattern we have seen in history when countries spend beyond their means and take on too much debt and can’t pay that debt, then we see default.  Default seems ridiculous because everybody says, ‘America can always print more.’ 


But we must look at Argentina as an example.  We are going to see the second default in 10 years in Argentina of sovereign credit.  So, unquestionably there is going to be a line in the sand.  It’s going to be twisted and bent line, but just as tapering can’t happen, the exit is going to be rebranded and it will just be an attempt to pile on even more debt.  The problem is, as we have seen in Europe, it’s unsustainable and it will end in tragedy.


All of this will be left to Bernanke’s successor.  We also know that because Bernanke’s successor will be dovish, the harsh reality is that eventually America is going to have to be told to stop printing.  America will essentially be told that they can’t keep producing dollars to service their debt.  But the dollar will experience a major devaluation.  That is what we are going to see rather than default.


America has been prolific at debasing its currency, and for a long time everybody has accepted that.  But the problem America faces going forward is the rapid emergence of the Chinese currency.  The Chinese already have one of the top ten currencies in the world.  However, my expectation is that the classic currency choice in the future will be gold.”


Eric King:  “Where is gold headed from here in the aftermath of last week’s Fed disaster?”


Ing:  “We have seen a very good rally in gold off the lows.  Gold is now pulling back after running into resistance.  But we have definitely seen the lows in gold.  There are repeated raids in the gold market by bullion banks which are grabbing profits on short-term trades.  This is being done through the use of derivatives.


But the reality is still that the physical demand remains very strong, and we are rapidly approaching events that are going to force massive short covering in gold such as the debt ceiling negotiations.”


Eric King:  “Sentiment is almost identical today to what we saw when gold was sub-$1,200.  Where do we need to see gold move in terms of price to really send gold hurtling to the upside?”


Ing:  “Two numbers stand out on the gold charts.  The first is $1,450 and the second is $1,550.  A break above $1,450 will really cause a scramble among the gold shorts.  But a break through $1,550 will really send gold moving solidly to the upside.  


As I said earlier, gold has already seen its lows and we are now coming up to a seasonal period where there is always strong demand for gold.  So there are some very powerful forces for gold, and as long as America keeps running these deficits and believing they can continue to pay for it through quantitative easing, this will continue to drive gold much higher over time.


We have had 12 years now of a bull market in gold, and this has been against the backdrop for the past 5 years of intense global QE.  Well, guess what’s been the best performing asset since Lehman Brothers?  Gold.  I expect this trend to continue for many years to come.”


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Eric King

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