Pento: “All we’re waiting for is another round of counterfeiting…”

Michael Pento Reality Check:  “All we’re waiting for is another round of counterfeiting from a central bank to bail out our assets, as we watch the middle classes and the lower classes get flushed down the toilet.”

Audio Podcast: seven eleven

What will this “counterfeiting” look like?

Pento suggests we look at Europe for a clue as to what the Fed may do: As of last week, the ECB is no longer paying any interest on its overnight deposit facility, where banks have hoarded around 800 billion euros ($976 billion) of excess cash in recent weeks (That should logically give banks an incentive to mobilize those reserves by lending, either to other banks, or to the economy, or in bond markets).

So far, it’s working:  Today, the ECB said overnight deposits from financial institutions dropped by more than half to the lowest level in almost seven months after policy makers stopped paying interest for the funds. Banks in the 17-nation euro region parked 324.9 billion euros ($397.2 billion) at the ECB yesterday, down from 808.5 billion euros the previous day, the Frankfurt-based institution said. That’s the least since Dec. 21.

Pento on King World News:

  • Commercial Banks have $1.42 Trillion in excess reserves parked at the Federal Reserve
  • Adopting the Basel III Accord (no capital requirement on owning sovereign debt)
If the Fed stops paying interest on excess reserves and Basel III is adopted, the system will get FLOODED with inflation to finance government spending to the “Nth” degree.

Meanwhile, the actual business world is continuing to deteriorate.

National Federation of Independent Businesses

Current Survey: “Small Business Optimism Dives in June”

Japanese machinery orders down 15% in May

Cummins (manufactor of diesel/natural gas engines) CEO Tom Linebarger:

“Order trends in the U.S. for trucks and power generation equipment have softened and demand in Brazil, China and India is not improving as we had previously expected. Our revenues have also been negatively impacted by the appreciation of the U.S. dollar against a number of currencies.”

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