Pento:  “We had the Non-Farm Payroll Report released yesterday which disappointed Wall Street.  There were also some revisions in the back months that took the numbers down quite significantly. 

The most important point I took away from the employment situation in the United States is that people continue to drop out of the labor force, which tells me quite clearly that the number of people working in the United States that are able to support the people who are dependent on the government continues to drop. 

This is also putting more and more pressure on the long-term fiscal condition of the US....

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Eric King:  “Michael, what did you make of the bond market hitting new lows this week?”

Pento:  “While the schizophrenic Fed dithers about whether they are going to taper or not, the free market is doing that for them.  So the 10-Year Note has gone from 1.5% in May, to 3% on Thursday.  Clearly the bond market is concerned, and rightfully so, about the credit, currency, and inflation risks associated with owning US Treasuries.

Foreigners are abandoning our Treasury market, and so the Fed has been the only primary buyer of US debt.  If they indeed stop buying that debt, interest rates have nowhere to go but up, and that will have devastating consequences for our over-leveraged economy, which has only increased its leverage since the Great Recession began.”

Eric King:  “Michael, the idea that the Fed can just continue printing money and keep interest rates low, how preposterous is that?”

Pento:  “One of the main metrics you look at when buying someone’s debt is, what is the credit risk, and what is the inflation risk associated with owning that debt?  And if someone was to tell you they had a massive counterfeiting machine that would continue to spit out $85 billion a month of new Fed credit, which would continue to increase the monetary base at an annual rate of more than $1 trillion, how could that possibly placate you into believing that they were fighting inflation?

I harken back to (former Fed Chairman) Paul Volcker -- Paul Volcker killed inflation.  When inflation was running at 15%, he took the Fed funds rate to 20%, and that vanquished inflation.  That also reduced the money supply, and crumbled asset prices that were in bubbles.

So, if you look at this Fed, what is their methodology for addressing the perpetual inflation and perpetual asset bubbles that we must face -- that they themselves have created?  Well, their answer was to increase the monetary base by $3 trillion, and take interest rates to 0%.  Both things cannot be true.  You cannot fight inflation by raising interest rates, and lowering money supply, and also fight inflation by making money essentially free for years, and also printing trillions more dollars.

So that’s why I think the situation is going to be dire, and people who have summarily dismissed the inflation threat are going to regret it.” 

Eric King:  “Michael, there was a move by the Polish government to seize $37 billion of pension money.  They literally just stole it.  I’m just wondering if you think we are going to see that in other parts of Europe and even in the United States?”

Pento:  “The confiscation of wealth isn’t a new phenomenon.  For many years it has been done through insidious inflation, and then what happened in Cyprus, and now in Poland.  But the United States still prefers surreptitious use of inflation to steal from its citizens.

I think the confiscation of savings and wealth is going to continue to occur.  It’s going to increase in intensity, and this will go on for years and years before they resort to more overt action of direct confiscation of wealth.”

Eric King:  “Michael, you say that government theft of assets will increase as they become more desperate?”

Pento:  “Yes, absolutely.  There is no doubt in my mind that as revenue shortfalls intensify, they are going to resort more and more to inflation, possible default, and direct confiscation of wealth.”

Pento also discussed gold:  “Investors have to own some physical gold and silver as insurance.  The metals have faced a headwind, but when the Fed acquiesces to the notion that they cannot taper, this is when you will see some major upside movements in gold and silver.

I believe that the 10-Year Note will go to around 4% over the next quarter or so.  This will be enough to send the economy back into an official recession.  At that point, all talk of tapering will cease.  This will be accompanied by more weak economic data, which we see a bit of already.

As conditions worsen, you will see the Fed back away from tapering.  It is at that juncture that I think we are going to enter into a massive move higher in gold, silver, and especially the mining shares.”

IMPORTANT - This week’s KWN Weekly Metals Wrap link is now working and you can listen to it by CLICKING HERE.  The Bill Fleckenstein audio interview is also available now and you can listen 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 Bill Fleckenstein, Pierre Lassonde, Dr. Paul Craig Roberts, Art Cashin, James Turk, Eric Sprott, Egon von Greyerz, James Dines, William Kaye, Hugo Salinas Price and Marc Faber are available now. Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf to listen CLICKING HERE.

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