Michael Pento (Euro Pacific Capital) thinks Japan is the next sovereign debt crisis after Ireland. And then the United States. Here are a few important points he made on Tech Ticker with Aaron Task.
Japan: "I think Japan because their savings rate has plummeted from 15% to 2%. Very soon they're going to have to tap the outside sources other than the Japanese to finance their debt. And that's when interest rates soar and that's when they become insolvent." [Related: Hedge fund manager Kyle Bass is short Japanese Bonds (CNBC video, 8/18/2010), see Japanese Government Bond quotes/charts]
U.S: "Lets look at some facts of what we're doing in this country (U.S.). We have negative real interest rates, inflation that is growing, debt that is soaring and a Dollar that is chronically weak. That is going to cause them (foreigners holding our debt) to sell their bonds. Interest rates will spike here and that makes our debt situation untenable and makes us insolvent. That's the whole key to this Aaron. We have to preserve the U.S. Dollar as the world's reserve currency and we're doing everything we can to destroy that.."
Gold: "It's negative real interest rates that are becoming more negative. So nominal rates are being pushed down at least temporarily by Bernanke, inflation is getting higher, real rates are falling. If you have an interest rate spike that spikes faster than the rate of inflation then gold's going to sell off. So keep your eye on nominal rates, keep your eye on real rates. And keep buying gold until that situation changes."
More segments from Tech Ticker featuring Michael Pento:
"A Complete Failure": The 7 Things QE2 Won't Do
U.S. of "Irony and Hypocrisy": We're No. 1 ... At Currency Manipulation, Pento Says
Deficit Commission's Proposal D.O.A., But Make Congress Vote On It Anyway, Pento Says
Also listen to Michael Pento debate with Gary Shilling about inflation/deflation on Schiff Radio on November 10, 2010 (link).