We Will See A Global Financial Meltdown

Today acclaimed hedge fund manager William Kaye told King World News that despite the move in global stock markets, another financial crisis is staring the world in the face.  He is predicting an increase in interest rates that will create “... a very high likelihood of a global financial meltdown.” 

Kaye, who 23 years ago worked for Goldman Sachs in mergers and acquisitions and who is the founder of Pacific Group in Hong Kong, strongly believes the central planners have put the world in the frightening position where once again the financial system will freeze up.  Below is part II of a three part series of written interviews that will be released today with the outspoken hedge fund manager from Hong Kong.

 

 

Eric King:  “Bill, we’ve seen runs on banks, we’ve (also) seen that during the Great Depression, and banks just failed.  You are basically talking about a run on gold here that is going to cause this entire paper Ponzi scheme that’s out there in the gold market to completely unravel and for gold to skyrocket.”

Kaye: “Yes.  That’s exactly what we see happening.  The key question is what will be the catalyst?  As we return, and ultimately we will return, to what would be a much more normal level of interest rates around the world, the stock of debt that currently exists in the world cannot and will not be serviced.  That is what people (and investors) need to focus on....

“Right now there has been so much intervention and manipulation by central banks to create an atmosphere of financial repression, artificially low and suppressed interest rates, that the stock of debt, so far, has been serviceable.  It’s been serviceable because interest rates are so unbelievably low. 

This is not a natural condition.  This is what investors need to understand.  This is not a natural state of the world.  And as we return, which we ultimately will, to a more normal state of the world, once again we will be staring at a very high likelihood of a global financial meltdown.

The only way that could be avoided would be an actual acceleration of the money printing that’s already taking place, and I don’t have to tell you what that would do to the price of gold.”

Eric King:  “The governments are running a Ponzi scheme.  We have the insolvent financing the insolvent in Europe.  This goes to your point that there is going to be another meltdown in front of us.  What could set this (financial system) into meltdown mode?”

Kaye:  “All we need is for the Fed to live up to its promise that it has an exit strategy.  I’m here to say that they don’t have an exit strategy.  There isn’t an exit.  A return to a normalization of interest rates, a withdrawal by the Fed and other central banks in their efforts to monetize debt and artificially suppress interest rates, as soon as that ceases, the system itself will freeze up just as it did a few years ago.

The reason it will freeze up is the system can’t handle anything close to what would be considered historically normal interest rates.  The stock of debt globally at that stage cannot be serviced.  So the system, inevitably, will break down.  The problem this time is likely to be much worse than it’s ever been in the past because the debt bubble has never been this big at any point in the past.”