Today legendary trader and investor Jim Sinclair told King World News that central banks are trying to keep the price of gold from rising violently. Sinclair also believes we are entering a period where currencies will lose their ability to function as money and instead will act more like casino chips, while gold ascends. Here is what Sinclair had to say about the ongoing financial crisis: “What needs to be understood by our listeners, Eric, is when a haircut takes place, what you give with one hand, you take with another. Now the problem becomes the problem of a bank’s asset having been reduced and the bank’s ability to function reduced and the bank’s abilities to positively pass tests of liquidity have been reduced. And the psychology of the stability of a system has been reduced.”“When that takes place there has to be something on the other side called liquidity, which is injected into the banks to overcome the haircut reduction. Not only that, but it is impossible that Greece be treated in a certain way and requests from other nations for similar treatment doesn’t take place.
So this can kick coming up now, this haircut in the 30% area, is kicking a can of such dimension that in fact it is the dead end. The dead end is really liquidity perdition. It is the point where buying power is so significantly impacted, not necessarily the relationship between entities, the dollar euro, although that will change, but also the insular and international buying power of the currency.
You reduce the currencies to becoming casino chips with flags on them and not really functioning as money. So as a result of that logic you have seen the ascendancy of gold and it’s clear that gold is not moving away from systems, but it is moving towards the system….
“I am not a member of the school that believes central banks are trying to keep the price of gold from rising. Central banks are trying to keep the price from rising violently. Volatility is the key. Price is secondary to the volatility of the gold market as it challenges currency markets and creates an imperative to action.
The attempts and activities of the central banks, in gold, is not by any matter of means to control price, as it is to control volatility. (This is being done so they don’t have to) unmask the mechanism of what is bringing to you a new monetary system. The mechanism is called liquidity. Gold is liquidity.
Whenever we do this (type of activity) we pass debt on. The problem we have now, this is not a good economic environment. The job market is not as advertised in the last report by any matter of means. The debt must be, at some point, met. What we are doing is marching our children up to sign on the loan agreement, which is the amount of international debt that will have to be paid or endured in some manner.
So what we’ve done is we’re getting easy money, QE, but the person signing the loan agreement is not you and I and the listeners, it’s our grandchildren.”
Sinclair also added: “What was done in the 70s cannot be done now. Very simply, the advent of a Volcker backed by an administration to drive interest rates to historical levels is simply impossible because of the economic impact even a suggestion of that entails.”