good morning. more inflation coming my investor friends.
“So when you have communiques coming from the Federal Reserve like this, and since inflation is never an accident, inflation always comes from a central bank monetizing the national debt, if they stop doing that, if they are indeed serious about doing that, it has massive implications for the stock market, for precious metals and for the economy in the short-term.
…If the Federal Reserve exits monetization of the middle of the Treasury curve, real interest rates will rise in the short-term, and that is deadly for an economy that exists on borrowing money to the tune of trillions of dollars per annum, and most of that is monetized.”
When asked about the implications for the economy Pento replied, “You have to look at what’s going on in the labor market. Initial jobless claims, they are above 400,000, existing homes sales dropped to an annual rate of 5.05 million and the prices of those homes continues to fall, they are down 5% year over year. The months supply (of homes for sale) is surging above nine.
So there is no healing for the economy, the economy has started to fall off a cliff even before QE2 ends. What’s going to happen when they completely stop? Now understand, in the long-term we need this to occur. We need to have a sustainable and viable economy that is not based on borrowing and printing, but when you have that removed, the government thinks the training wheels can come off the bicycle, but the training wheels have become the entire bicycle.
The entire economy is artificially driven. When those training wheels come off, you better have your crash helmet on…They (the Fed) think the economy is healed, but if you look at a very simple calculation, look at the total of non-financial debt as a percentage of GDP. It is now 244%, it has never been higher.
So if the problem with the economy stemmed from debt, and we have actually added debt to a record nominal level…how could it possibly be that the Fed is feigning the idea that they could raise interest rates, that we are not going to have another 2008 collapse of the economy. It’s impossible, it’s going to be even worse if they are really serious.”
When asked in that situation how soon QE3 would be initiated Pento stated, “Well, it can’t be far off on the heels of QE2, that’s why I say you are a fool if you want to sell all of your gold. For those who are long-term investors, I wouldn’t sell any at all…but there is going to be a better buying opportunity.”