Eric Sprott - We’re Headed Over a Cliff, Be Wary of Paper Assets

“Well I’ve always believed the fundamental problem with the capitalist system if you will, is the fact that the banks are over-levered.  There is only one way to get rid of over-leverage and that is to shrink your balance sheet.  

I always find it interesting that every time a bank fails we find out exactly what the losses were and typically not only did the bank lose their capital, but they lost their capital six times over.  That’s the average cost, which really means that your dollar of assets was undervalued by about 30 cents on the dollar and I think that’s the case almost throughout the banking system.  So if we ever marked things to market, we would be in big trouble.”

Read the full interview here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/6/10_Eric_Sprott_-_Were_Headed_Over_a_Cliff,_Be_Wary_of_Paper_Assets.html