Embry, Pento - Gold, Silver, Bernanke Destroying the Dollar

Ahead of tomorrow’s Fed meeting and with the US dollar lower along with gold and silver, King World News spoke with John Embry of Sprott Asset Management and Michael Pento of Europacific Capital. 

John Embry had this to say;

“I picked up the USA Today and a record 18.3% of the nation's total personal income was a payment from the government.  Wages accounted for the lowest share of income, 51.0%, since the government began keeping track in 1929.  If the US fiscal debate wasn’t so serious it would be viewed as a farce.  I mean it’s just outrageous what is going on."

When asked about gold, Embry remarked, “The Richard Russell piece that you released on gold was fascinating.  On the big stuff (Russell) never makes a mistake.  He’s made a lot of strong statements on gold before, but never anything like that.  And (Jim) Sinclair is saying the same thing.  The last few days I’ve been reading his site and he’s pretty comfortable with the fact that this is going to be a breakaway move shortly.” 

Regarding silver, Embry stated, “Sentiment was too frothy on silver.  We probably need several weeks or maybe not even that long just bashing around a bit and that gets rid of all of the latecomers and nervous Nellies.”

Michael Pento from Europacific Capital had this to say ahead of the Fed meeting tomorrow, “In an effort to bail-out his true master—the financial services industry--Bernanke is well along in the process of destroying the dollar and the middle class. Therefore, his press conference tomorrow will more be an effort to get Americans to “pay no attention to the man behind the curtain” and in the manner of a svengali, convince the public that the inflation they are witnessing is just a mirage.

 

But the bottom line is that the Fed Funds rate will remain exceptionally low for an extended period of time and Bernanke’s balance sheet will not be allowed to decrease. As a consequence, the dollar will continue to fall and commodities will barely notice a hiccup.

 

However, there are some questions that Bernanke still needs to address:

·  Which mandate takes precedence; full employment or stable prices? The housing market and GDP are double-dipping. And initial jobless claims are now rising along with inflation. So what battle are you going to fight?

·  If you were to raise interest rates and sell the MBS and Treasuries on your balance sheet—thus lowering their value--would the Fed become insolvent?

·  And lastly, “If raising interest rates in the middle of the last decade caused asset bubbles to pop and a global credit crisis to ensue, why would it be a different outcome this time around, since the overall level of debt in the nation remains at an all-time high?”

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