Sprott - We Are Staring At Chaos & Collapse In Front Of Us

Today billionaire Eric Sprott spoke with King World News about one of his frightening predictions, “I always postulated that the financial system would go bankrupt, and it has, save for one thing, it got bailed out.”  Sprott, who is Chairman of Sprott Asset Management, also added, “But I don’t think the central planners have a winning hand here.  They’re not going to win.”  

Sprott then warned, “God knows when we get there (to the end of the current system) what we are all staring at.”  But first, here is what he had to say about the last decade:  “When I reflect back over the decade, I think I can come almost come up with 2,500 tons of net change in physical demand, in a 4,000 ton market on the supply side, which hasn’t changed in that 12 years, that was in balance 12 years ago.  How do these ETF’s get to buy gold?  How do these central banks go from sellers to buyers?”

Eric Sprott continues:

“How does China come in and buy 500 tons?  How did all of this happen with no increase in the supply of gold?  It’s getting more extreme by the day.  If I take today’s numbers, I think there’s probably a 2,500 ton shortfall of physical gold.  I must conclude that the G6 central banks are continuing to lease their gold into the market.

It’s not called a ‘sale’ because theoretically they still own it (on paper), but it’s been leased to a bullion bank that’s sold it to someone, and it’s not coming back again....

“I am sniffing that there’s going to be a day when those central banks that are leasing it, realize they won’t get it back, are going to put up the sign and say, ‘No mas.  We’re not going to sell any more.  We’ve lost this game.’  (They will ask themselves) what are we doing here?  Why do we keep suppressing the price of gold?  

Everyone knows there’s a financial crisis going on.  And if they (central banks that have leased out gold) ever try to get it back, they’ll never get it back, and who knows where the price of gold can go, but it can go a long, long way from here.

I argue that there is 6,500 tons of demand and 4,000 tons of supply (each year), and the extra 2,500 tons is coming out of central banks that are leasing it.  Imagine if they just stopped leasing it.  Who knows where the price would go?  You would get such chaos (disorderly upside trading in gold).  

I can sense it has a lot of upside here.  Total chaos can happen when we all realize that on a sovereign basis, the ‘Emperor has no clothes.’  Who knows how high it’s going to go, but we’re not talking about just hitting a new high above $1,920.  We’re looking at much bigger numbers. 

I sense big things happening in gold, in a tsunami-like sense, where all of the sudden you get this whole new group of people moving in there.  The ownership of precious metals is so small in the world, like 3/4 of 1%.  And if you take out guys like Paulson and myself, and others, who are so concentrated in (gold), what does the average guy have in gold?  Nobody is there, and none of these pension funds are there.

There have been lots of studies done by prominent thinkers, suggesting gold should be a way more significant part of a portfolio, minimum 2% to 5%.  If you want to get a little aggressive (according to the experts) 10%.  Well, you and I both know you cannot get that kind of money into gold at these prices.  Yes you can, if the price wants to go way up.

There’s a shortage of physical gold already (that’s available for sale at these levels).  We have these Ponzi paper markets that hide what’s going on in the physical market, but I can assure you the physical market is well tied together here.”

Sprott also added: “I always postulated that the financial system would go bankrupt, and it has, save for one thing, it got bailed out.  But it was bankrupt.  So, yes, they’ve deferred it and pushed it out.  This has all played out according to script, although people interfered with the script.

They changed all of the rules with things we had never heard of in our lifetimes.  But I don’t think the central planners have a winning hand here.  They’re not going to win.  God knows when we get there (to the end of the current system) what we are all staring at.  

There’s only one way to survive it, and that’s to own something that will maintain its value, and certainly gold and silver are on the top of that list.”

Sprott had this to say about silver:  “I’ve alway been a believer that it (the gold/silver ratio) will go back to its historic ratio, which is 16/1.  If the gold price went to $3,200, that would imply the silver price would go to $200.  Well, a move from (the recent low of) $26 to $200, is a hell of a lot better than the move from $1,600 to $3,200.”

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/8/24_Sprott_-_We_Are_Staring_At_Chaos_%26_Collapse_In_Front_Of_Us.html