KWN has been getting bombarded from readers around the world on the Michael Pento piece titled, “This Major Fed Move Is About To Cause Gold To Skyrocket.” Today we followed up with Michael Pento because there was such tremendous interest in knowing more about this major move he expects from the Fed. Today Pento told King World News that this move he is predicting could add a staggering $15 trillion to the money supply.
Pento, of Pento Portfolio Strategies, also said that if this move happens, “you will see the gold market fly far past its nominal record high in extremely short order.” Here is what Pento had to say: “So let me put it together for your listeners. We have $1.42 trillion of excess reserves. We are now going to be told that there will be no capital reserve requirements on owning sovereign debt. You will have commercial banks flooding the market with the purchase of sovereign debt. Not just US debt, Portuguese debt, Spanish debt, Greek debt, all of that debt will have zero capital requirements.”
“Let me be clear on this, I’m not saying it could increase M2 money supply to $15 trillion, this could increase it by $15 trillion. So we’re talking perhaps about $24 trillion. It has the potential to increase to rapidly increase the global money supply, and it would be a tremendous boost to commodities, oil and precious metals.
However, I would add that it will only vastly exacerbate the stagflationary environment that we see gripping the entire developed world....
“It’s much worse than a QE3 because QE1 and QE2, because the vast majority of that money created is sitting with the central bank, it’s laying fallow at the central bank. But if you have a mechanism like I just described, no longer having sovereign debt have any capital reserve requirements, the notion to stop paying interest on these excess reserves, you will have all of that money that was laying fallow, flood into the economy at once.
So there is no easy answer. Bernanke doesn’t know what he’s doing. He spent too much time studying the Great Depression. He’s going to get a chance to study one firsthand in my opinion.
What he needs to do is let the free market work, and I can tell you that unleashing $1.5 trillion into the American economy, and having that money roll-over and multiply (to $15 trillion), through the money-multiplier-effect, is not a very good idea.”
Pento also added: “I am a big advocate of hard money policies around the world, and I love gold. However, I am not a broken clock. If gold was going to go into a bear market, I’d be the first one to tell you. I have been on the record, on King World News, telling people when I thought gold was overbought.
I’ve been on record telling people that we’re in this cyclical period of truncated deflation, but if they do the two things I just described in this interview, which is to implement the Basel III Accord, and cease paying interest on excess reserves, you will see the gold market fly far past its nominal record high in extremely short order.”
