Stockman - Unprecedented Global Financial Wipeout Is Coming

kingworldnews.com

Today David Stockman warned King World News that investors need to brace themselves for an unprecedented and historic global financial wipeout.  KWN takes Stockman’s warnings very seriously because he is the man former President Reagan called on in 1981, during that crisis, to become Director of the Office of Management and Budget and help save the United States from collapse.  Below is what Stockman, author of the website contracorner, had to say in his powerful interview.

Stockman:  “There is going to be a massive repricing in the financial markets.  As I’ve indicated, everything is overvalued, from stocks, to real estate, to big-cap companies, to speculative small-cap companies, and derivatives of every kind.  They are all correlated in the bubble expansion and they are all going to be correlated in the big repricing that’s coming....

“And what that means is the bond market is going to have a massive dislocation.  The stock market is going to have a deep plunge.  The central banks of the world are going to be left high and dry, scrambling, and suffering from a dramatic loss of credibility as the world begins to see that this house of cards they have put together is unstable and unsustainable.”

Eric King:  “Let’s talk about that loss of confidence, David -- that’s the key.  As that loss of confidence begins to engulf the world, what are we looking at?”

Stockman:  “I think we are looking at the Great Repricing that is imbedded, implicit, in the vastly inflated bubbles that we have today in all the financial markets.  The only thing that has kept this game going has been the liquidity injections by the central banks, which I think are (now) reaching their maximum extent.

... That means collateral is going to shrink in value because everything is collateralized today, everything is repledged or hypothecated (LAUGHTER), that’s how this great debt and financial bubble has been built.  So when the repricing comes and the asset values begin to deflate, then that (enormous and unprecedented leverage) is going to unwind.  As that gathers momentum, as debt is liquidated and collateral loses value, there will be more selling and you will have a downward adjustment that will be pretty traumatic and violent.” 

Eric King:  “David, how is gold going to fare in that chaotic environment?”

Stockman:  “I think that will be the asset of choice when the Great Repricing comes because the Great Repricing is only the consequence of a loss of confidence in the central banks.  And so when the whole central bank regime craters, then there will be a flight to something people can trust and believe in, and that will be the traditional monetary asset of gold.”

Eric King:  “David, we saw that mania in 1979 -1980 where gold skyrocketed, silver skyrocketed, is it going to be that kind of ride this time?”

Stockman:  “Yes.  That (1979 - 1980 skyrocket in gold) will be recorded in the history books someday as simply the warmup for what is likely to occur.  The central bank regimes that we’ve had for 20 years, and that have infected the whole world, from the BOE (Bank of England), to the BOJ (Bank of Japan), to the ECB (European Central Bank), the Fed, the People’s Bank of China, and the rest of them, when that regime comes apart, when that regime fails, there is going to be a reset in terms of the way people look at financial values.  That’s when we will have another round of flight to gold and other traditional monetary assets (such as silver).”