$15 Trillion To Be Added To Money Supply & Gold To Ascend

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.”

Top global accounting firm Deloitte says US debt crisis is 'bigger than you think'

* US Government debt "could spiral out of control"
* Interest payments add a new level of fiscal pain
WHAT is the real cost of the US Government's nearly $US16 trillion ($16.07 trillion) debt?

"The debt crisis is likely bigger than you think," a report issued by Deloitte, one of the world's largest accounting firms, concluded.

That is because interest payments on the country's massive debt add a whole new level of fiscal pain to the problem.

Interest payments on the national debt alone, it noted, are expected to total some $US4.2 trillion over the next decade.

And that number could go higher depending on rates.

The lead author of the Deloitte study, director Bill Eggers, stressed that US Government debt could quickly spiral out of control if investors become less willing to lend more money.

"If interest rates go up by simply three per cent over the next decade, the additional cost to the Treasury, just for interest payments, would equal the peak combined cost of the wars in both Afghanistan in Iraq," he said.

The report showed that $US4.2 trillion being spent on interest could instead:

- build 130,000 kms of highways
- pay tuition for every science/math/engineering college degree in the country
- triple US government general research and development funding
- build six international space stations
- offset 80 per cent of global warming pollution in the atmosphere as recommended by the Intergovernmental Panel on Climate Change

But not all economists are on board with the implications of the study.

"The major holders of government bonds are agencies and individuals within the US," Robert Stonebraker, an economics professor at Winthrop University, told FOXNews.com.

"So if you pay $US1 trillion in interest on the debt, a lot of it will go back to Americans anyway."

But Mr Eggers noted that a lot of the interest payments do go overseas.

"If you look at the interest payments going to foreign countries, soon we're going to be spending enough to essentially finance the Chinese military," he said.

Currently, foreigners own some $US5 trillion in US Government bonds, $US1 trillion of which is owned by China.

Not all economists agree with the study.

"I think they're overhyping the need to fix the debit crisis in short run," Dr Stonebraker said.

"It's not appropriate to cut spending during an economic slowdown -- that is exactly when you need deficit spending to stimulate the economy and get people back to work," he said.