Saturday, March 29, 2014

The Big Time Bomb is Derivatives and Leverage in the Banking System

"They don’t want any bank to start the liquidation process because that’s when we find out what things are really worth, and they are not going to be worth anything compared to what the banks have on the books.

So the big time bomb is derivatives and leverage in the banking system. We keep getting these comments out of Europe that some country has got to raise $25 billion to boost the capital of the banks. This is in an environment where the paper assets have been allowed to appreciate. Imagine a situation where they start depreciating.

The leverage is just way too high and to me that’s always been the lingering huge fear. We could throw in wars, continuing economic decline, which I think we are having, but a bank collapse would be by far the biggest item in terms of how it would affect the financial markets, and in particular in how it would just blow interest into the precious metals area."

- Eric Sprott via King World News: