The Real Reason Why Global Markets Are Melting Down
June 3, 2012
With global stock markets in turmoil, gold on the move, and panic in Europe, today Michael Pento, of Pento Portfolio Strategies, writes exclusively for King World News to let readers know exactly why markets are melting down. Here is what Pento had to say about the situation: “Most investors and market pundits continue to misdiagnose the reason behind the worldwide economic malaise. The underlying problem isn’t ‘uncertainty’ or any other platitudes Wall Street and politicians like to offer. The truth is that massive sovereign debt defaults (if central banks allow them to be written down honestly) are very deflationary in nature.”
Michael Pento continues:
“Debt defaults destroy the assets of non-bank investors and also wipe out the capital of financial institutions. Without adequate capital, these banks are unable to make new loans and expand the money supply, causing bubbles to burst.
For a good while Wall Street was holding on to the ridiculous idea that the U.S. and China would be spared from a meltdown of the second largest economy on the planet. However, last week’s data should have put a dagger through the heart of that notion….