In the aftermath of the gold and silver plunge, today billionaire Eric Sprott spoke with King World News about the ongoing war in the gold market. He also issued a very big warning to Western central planners, and in particular the Fed. Below is what Sprott, Chairman of Sprott Asset Management, had to say in part II of this remarkably powerful interview series.
We know that there is massive selling of bonds, whether it’s the Chinese, or the Japanese, and I would imagine a lot of the emerging countries are now selling US bonds.
So this housing market has got to fail. The Fed knows this. The charges against the US Treasury are rising as rates are rising, which means the deficit is going to go back up. I wrote a paper, I guess it was about three or four months ago, asking, has the Fed lost control of the interest rate markets? And I suspect they have.
Eric King: “Eric, we have the Fed decision coming up next week, and you and I are starting to believe they are not going to taper. In that environment you (as the Fed) wouldn’t want to have gold launch from higher levels. You would have to smash it (gold). That’s exactly what we’ve seen.”
Sprott: “I’ve always believed that the Fed is in a very difficult situation and the ‘taper’ was just talk. And we’ll see whether they ‘walk the walk’ or just ‘talk the talk.’ As you know, Eric, yields have doubled over the last 12 months, and in particular with the reintroduction of the taper talk.
“We’ve seen redemptions of bond funds. I, for my life, can’t see how at this point in time the Fed pulls back on their bond buying because rates would just go crazy (to the upside).
The jobs numbers that came out in the last two months, you know we averaged about 130,000 (jobs) when they adjusted July down, and August was kind of so-so -- and you can drive a truck through the numbers anyway. It’s my suspicion that there are a lot of the jobs are part-time jobs, and so I think we have a really weak economy here.
And if they do taper, and rates go higher, we already have a crushing situation in housing, where literally the cost of buying a house on a monthly basis, i.e. the interest rate cost, the principle cost, and the cost of the house has gone up 10% or 15%, is up (in total) 50% year-over-year. And nobody’s income is up 50%. I would be surprised if it’s up 2%. In fact, it’s probably down with the increase in social security taxes.