From Jim Sinclair - May 15, 2012
John Embry has paid me a great compliment. Please check out the article below.
Embry – This is One of the Greatest Statements of All-Time
With global stock markets tumbling, along with gold and silver, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry discussed gold and other major markets, but first, here is what Embry had to say regarding recent derivatives turmoil: “This makes me very uncomfortable because I’ve always been very wary of the whole derivative situation. I believe the notional value of the outstanding derivatives is comfortably north of one quadrillion dollars. The Bank of International Settlements changed the definition, so they said there is only $700 trillion worth of them, rather than one quadrillion.”
John Embry continues:
But it doesn’t make any difference, these (derivatives) are many, many multiples of the world GDP. If these things get in any trouble, and I think the JP Morgan thing may be the first sign of significant trouble again, it’s fantastically important to the whole financial situation. In a rational market the gold price should have been up $100, not down $40 in the wake of this.
I would defer to Jim Sinclair, who I have the utmost respect for on this one. He has said for a long time that the derivative situation ‘guarantees quantitative easing to infinity,’ which is one of the great statements of all-time….
“I think this JP Morgan revelation just confirms that everything Jim’s been saying for a long time on this subject is dead right. The fact that we will have QE to infinity would suggest that an intelligent person would be buying every single ounce of gold and silver he can get his hands on at these prices.
They are trying to sell this idea that gold goes down on the ‘risk off’ trades that we are experiencing now. And that the ‘risk off’ buyers all go running into the US dollar and the US bond market. I think those are two of the riskiest things on the planet. But somehow they are still getting this ‘Pavlovian response’ that when things are bad out there, you should sell your gold and buy US bonds. It’s ridiculous.
It’s important, at this time, that people who have been around, and have a pretty good grasp of what’s unfolding, should express their views to the public just to counteract the propaganda they are receiving from mainstream media. It’s tough enough out there without being lied to all of the time.”
Jim Sinclair’s Commentary
Do not be discouraged by the gold enemies within and outside of the community. No problems have been solved. In fact they have gotten worse.
Stay the course!
A whale in the waters of negative yields By Bill Gross
In nature, the mighty whale depends upon the lowly plankton for its survival and the same analogy rightly applies to global developed economies, which have dominated trade and finance at the expense of developing nations. Now the tides may be turning as once minuscule global economies find themselves in possession of a plethora of reserves. The hunted may be turning into the hunter and the global monetary system, which has evolved and morphed over the past century – but always in the direction of easier, cheaper and more abundant credit – may have reached a point at which it can no longer operate in the same way. Major changes to our global monetary system may lie on a visible horizon.
The struggle between financial whales and plankton – powerful reserve-ladened creditors and much weaker debt-ladened borrowers – is significantly dependent on the successful functioning of how the world conducts and pays for commerce (our global monetary system). Historically, several different systems have been employed but they have either been commodity-based systems – gold and silver primarily – or a fiat system – paper money. After rejecting the gold standard at Bretton Woods in 1944, developed nations accepted a hybrid based on dollar convertibility and the fixing of gold at $35 per ounce.
When that was overwhelmed by US fiscal deficits and dollar printing in the late 1960s, President Nixon ushered in a rather loosely defined system that was still dollar-dependent for trade and monetary transactions but relied on the consolidated “good behaviour” of G7 central banks to print money parsimoniously and to target inflation close to 2 per cent.
Heartened by Paul Volcker in 1979, markets and economies gradually accepted this implicit promise and global credit markets and their economies grew like baby whales, swallowing up tonnes of debt-related plankton as they matured. The global monetary system seemed to be working smoothly, and instead of Shamu, it was labelled the “great moderation”.