Re....eric Sprott... Eric Sprott - The Current Financial System Will End In Ruin
March 15, 2013
Today billionaire Eric Sprott told King World News that the current financial system will end in ruin. Sprott also stated, “It’s unfortunate for those of us in the precious metals sector that, in essence, we are fighting the Fed all of the time ... but I have no doubt that we will win.” This is the first in a series of interviews with Sprott that will be released today which reveals, despite mainstream propaganda, the reality of the increasingly desperate situation Western central planners face. Below is what Sprott, who is Chairman of Sprott Asset Management, had to say.
Eric King: “Dr. Paul Craig Roberts (Former Assistant Secretary of the US Treasury - interview to be released in a couple of hours on KWN) spoke with King World News earlier today about the fact that the Fed has produced a perfect storm which could consume the US and perhaps the entire Western world. What’s in front of us, the financial collapse, can you talk about how you see that playing out?
Sprott: “My concern early on about the financial system was leverage in the banking system, that the banks were levered 20/1. By interpretation this means that for every dollar of assets there is 5 cents of capital, and if that dollar goes down by 5 cents there is no capital.
That’s before we even get into the derivatives which are out there, and would take that ratio from 20/1 to probably 50/1 or even higher, which means you can only lose 2% of your money before there is no capital. And I think it’s this huge derivatives book that is just going to blow up one day.
There is $1 quadrillion of derivatives out there, which is a number that bears no relationship to world GDP....
“It’s all in the hands of the banks, and someday we are going to find out that one of the counterparties is not going to pay because their capital will have been dissipated.
And as we have to witness one bank after another failing, the whole study of the financial goings on would suggest it’s just rampant in all the banking systems. They play games, and they manipulate things (such as gold and silver). They are so lucky because they get to borrow money at zero (percent) and lend it to people. They are given this right to make money, and then they turn around and lever it up, and throw derivatives on top of that.
I totally agree that someday it will just fall apart and we will find out that none of the counterparties can pay. I’ve never been hopeful for the financial system. Ever since the 2008 financial crisis all we’ve had is printing of money and backstopping of banks. The one thing which has happened since Lehman, Lehman was a liquidation, and there has never been a liquidation allowed since.
Nothing is allowed to liquidate, whether it’s Fannie, Freddie, various banks, nobody is allowed to liquidate, and I know exactly why they are not allowed to liquidate, because if they liquidated the first domino falls. And once the first domino falls, everyone starts worrying about counterparties and the whole system fails.
That’s why they need to keep propping it up week after week. Somebody is always getting bailed out. It’s just ongoing and anybody who has any common sense at all knows it will end in ruination.”
Sprott also added: “It’s unfortunate for those of us in the precious metals sector that, in essence, we are fighting the Fed all of the time. We are fighting all of these insane policies, but I have no doubt that we will win.”