Sprott Discusses The Global Ecoonomy

Tyler Durden
Eric Sprott was discussing the global macro picture earlier in an interview with Bartiromo. Here are his key observations:

I still have a deep, deep concern about the leverage in the banking system. I look at the inability of governments who are spending vast amounts of money to generate much growth in GDP. I can give the example of running a $1.5 trillion deficit last year and GDP goes up $200 billion. So we are not getting much bang for the buck but we still owe the buck at the end of the year. I also worry about what's going on in China. The Chinese government has asked the banks to cool down their lending, the latest data in March show that lending has gone down from $300 billion per month to $100 billion. That's $2.4 trillion a year less. And obviously it has to have an effect on their economy as the lending of $2 trillion did positively last year. When you look back at China in 2009, they had a $4 trillion economy, they lent $2 trillion to people, they had a $600 billion stimulus: those should generate some GDP growth. I am not even convinced that 10% growth which would be $400 billion is a good response to all the measures that were taken.

Sprott then goes on to discuss something very dear to gold holders: physical gold and specifically his gold trust, the PHYS (Sprott Physical Gold Trust) which competes with SPDR's GLD. The main difference, as most people know, is the PHYS actually has real, auditable physical gold to back the underlying, not to mention the 15% vs 28% tax differential. Sprott goes on to defend why gold, which has been the investment of the decade, looks even better today than it has ever looked:"We have sovereign risk on the economic risk today, that we didn't have before. As I look at the problems in Greece and I see poeple take $4-8 billion out of the banks, where do the people put that currency? It is obvious that lots of them putting it into gold."

Sprott also loves silver, which he thinks will act better than gold as there is not as much silver inventory in the world as there is gold inventory.

The ultimate catalyst for PM price explosion "We'll just see how long those governments' people will continue to buy their sovereign debt. When they stop buying that sovereign debt, then the reason why we are liking gold will become more and more apparent." More...