Eric King: “Kevin, I know you’ve been communicating with many of the sovereign wealth funds overseas. What are you hearing from them?”
Sprott Inc. President Bambrough: “The burning question that I always have, I’m amazed at their ongoing willingness to continue to accumulate, and hold, such large amounts of US denominated bonds. It’s been my view that they are basically playing a Ponzi scheme.
I’ve had that confirmed when I’ve had long discussions with different sovereign wealth funds and different government agencies around the world. They’ve been willing to play this game, but more and more now, as their domestic economies have grown and the US portion of their exports becomes smaller, and with the amount of T-Bills that they have (already) accumulated, I believe they’ve reached the boiling point where they are really going to be unwilling to grow their reserves (of US Treasuries).
Just the process of not growing their reserves is going to be very disruptive. If they are not willing to accumulate more T-Bills, this is going to force the trade deficit closed. I think that is really going to rock the financial world at some point in the near future.