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Eric King:  “Rick, today’s rally aside, we’ve been seeing markets around the globe tumbling recently.”


Rule: “This reminds me so much of what my friend and business partner, Eric Sprott, said in one of your interviews with him about four months ago, which was something to the effect that when the Fed begins to taper the amount of vodka they put in to the punch bowl, the party will end....


Continue reading the Rick Rule interview below...




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“We are seeing investors in global markets, be they debt or equity markets, reacting to the modest threat of a decline in stimulus and a reduction in the amount by which the interest rate is manipulated down.


What we saw yesterday was very clearly a reaction to the fact that the United States government while it will not stop quantitative easing, which you and I call ‘counterfeiting,’ it will reduce it.  The very fact that they intend to reduce it will probably reduce downward pressure on interest rates, which will lower the capitalized value of distributions on long-dated government debts, and increase their competitiveness with the equity markets.


So we are seeing difficulty with the thesis surrounding convergence, lower interest rates, and liquidity-fueled debt and equity markets.  And we are seeing that unfold on a global basis.  One of the reasons that the response has been so dramatic, despite the modest tapering, is because of the leveraged nature of trading which takes place on a global basis.  So what you are seeing now is a leveraged unwinding take place in global markets.”


Eric King:  “Is this going to feed on itself and accelerate?”


Rule:  “It depends on the response from the other central banks.  There are other sources of counterfeiting out there besides the Fed.  The Japanese and the Europeans have also been busy at counterfeiting their own currencies.  But if these other central banks do not step in to fill the liquidity void, then I think you are doing to see an equity and debt rout that goes on in earnest.”


Eric King:  “Short-term rallies aside, how out of hand could this get on the downside?”


Rule:  “The only symptom of the 2008 crisis that was addressed was short-term liquidity in the market.  Every other cause -- overleveraged financial institutions and unsustainable government deficits -- all of those exist today.  We never know what the event will be that will produce a crisis of confidence, but certainly all of the conditions precedent for that crisis to occur are in place today.  Meaning, since we haven’t dealt with the conditions that manifested the 2008 collapse, why can’t we repeat them?”


Rule added:  “What’s been interesting during this decline, at least up to this point, is that gold has found a bid as a safe haven.  Often during broad-based declines, gold and silver decline with everything else because the sell decisions are made by margin clerks.


So it is interesting, at least in the near-term, to see the separation of global equity markets and precious metals markets.  This may represent safe haven and value-based buying, or the fact that the physical markets, which have been extremely strong, are beginning to get the upper hand against the financial futures or paper markets -- where volumes have been steadily declining.”


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© 2014 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, Dr. Paul Craig Roberts, Nigel Farage, James Dines, Gerald Celente, Michael Pento, Eric Sprott, Andrew Maguire, Rob Arnott, William Kaye, David Stockman, Art Cashin and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.


Eric King

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