Bambrough writes:
"The following actions of governments around the world and the state of the global fi nancial system support this approach:
• A large number of fi nancial institutions around the world are insolvent. The extent of toxic debt around the world is unclear, but the estimates keep rising each day. Although the focus to date has largely been on U.S. banks, the problem is clearly global and it is spreading beyond banks to insurance companies, pension funds, endowment funds and other entities.
• Governments around the world are prepared to absorb the losses of many insolvent fi nancial institutions, either through outright nationalization of such institutions, purchases of their underperforming assets and/or capital injections. These actions have dramatically increased global public debt and will continue to do so. In the case of certain large fi nancial institutions located in smaller countries, their liabilities may be too great for their host countries to absorb, in which case larger states will be called on to assist.
• Governments are committed to massive stimulus spending on infrastructure projects and to support industries, such as the automobile industry, which are unable to survive in their current form without government assistance. This spending will further increase public debt.
• Revenues for all levels of government have fallen and will likely continue to do so. Governments are unlikely to cut costs to match their revenue declines. The result will be a further increase in public debt.
Management believes that these government actions and the state of the global economy generally will make it increasingly diffi cult for governments to fi nance their borrowings, as lenders begin to question how such borrowings will be repaid. Ultimately, this should result in higher government borrowing costs, which would be crippling, and/or increased monetization of public debt and a corresponding decrease in the real value of fi at currencies. Such prospects support the Company’s holdings of gold and silver bullion and management believes that, in time, a greater number of people around the world will increase their holdings in gold and silver bullion as they begin to lose faith in fiat currencies. Such a loss of faith should, in time, be supportive of commodities and real assets generally, as holders of low-yielding debt instruments, both private and government issued, exit such instruments and move to hoard commodities and real assets."
Click Here To Download The Sprott Resource Corp. Annual Report
|