Embry: We’re On The Edge of Collapse, We’ve Run Out of Time

Today John Embry told King World News, when referring to what is needed to bail out Europe, “All I know is that these numbers are staggering ... We are on the edge of collapse. We’ve run out of time.” Embry, who is Chief Investment Strategist of the $10 billion strong Sprott Asset Management, also told KWN that if the euro does split apart, it “will be extraordinarily chaotic.” Here is what Embry had to say about the crisis: “We’ve got to focus on what’s coming up in the short-run with regards to the European situation. It’s going to be an extremely interesting summit they are hosting this Thursday and Friday. The problems are piling up at such an enormous rate they can’t be ignored anymore.”

John Embry continues:

“There was this amazing back and forth today, where Merkel said, ‘There would not be euro bonds as as long as she was alive.’ Then, not longer after, Monti, the Prime Minister of Italy, came out and said that if there weren’t euro bonds, he was going to resign.

So this is turning into a comedy, even though it’s a tragedy....

“The only way this can be dealt with, in the short-run, is by enormous monetary creation. If Merkel and the Germans want to block that because they don’t want to give the ECB that power, the euro is going to split apart and that will be extraordinarily chaotic.

If the euro doesn’t split apart and they do create the money, it will ultimately be very inflationary. So the Germans are caught between a rock and a hard place. You’ve got to remember that the Germans have seen their currency destroyed twice in the last century. The know full well that if you go too far down this path, you are headed towards hyperinflation. They have been there.

I think the money will be created. I was very intrigued by Don Coxe’s fantastic interview with you earlier today. He outlined the degree to which the European banking system is impaired. He used the number $2 trillion. To me, once you get into those numbers, it’s open-ended.

All I know is that these numbers are staggering. It wasn’t even that long ago that one trillion was a number that we couldn’t even fathom. Now they throw it around as though we’ll just print it up tomorrow.

For what it’s worth, if the euro were to break-up and the Germans were to introduce their own currency, that currency would go to the moon relative to most of the others. This would make them uncompetitive in many ways. The Germans have a lot on the line here, so I think they print.

In the very short-run, if they create enormous amounts of money, it could buoy markets a bit, but it doesn’t solve anything. The fact is the system needs unlimited liquidity just to keep floating all of the boats.”

Embry also warned: “We are on the edge of collapse, it’s imminent. We’ve run out of time. If they don’t take action, continue to play this brinksmanship, and this thing gets away on the downside, when you get a hard deflation going, it’s really difficult to reverse.

I don‘t think you can say anything with total assurance, for the simple reason that we have never, ever been remotely in a condition like this in all of world history. So the only things that I am comfortable in at this moment are physical gold and silver and gold and silver shares.”

Global slump alert as world money contracts

Growth of the world money supply has dropped to the lowest level since the financial crisis of 2008-2009, heralding a severe economic slowdown later this year unless authorites rapidly take action.

By Ambrose Evans-Pritchard

The latest data show that the real M1 money supply – cash and overnight deposits – for China, the eurozone, Britain and the US has been contracting since the early Spring. Any further falls risk a full-blown global recession.

Clear signs of trouble are emerging in the US, until now the last bastion of strength. The New York Institute of Supply Management said its ISM business index – a proxy for business demand – flashed a "screeching halt" in May, crashing to 49.9 from 61.2 in April, where anything below 50 denotes contraction. Unemployment is rising again after grim jobs data for April and May, indicating that the economy may have fallen below stall speed.

Central bank governors and finance ministers from the G7 bloc are to hold an emergency teleconference call on Tuesday to grapple with Europe's escalating crisis. There is mounting anger in North America and Asia over the failure of the Europeans to use their vast resources to contain the brushfire in Spain.

The world money data collected by Simon Ward at Henderson Global Investors show that real M1 for the G7 economies and leading E7 emerging powers peaked at 5.1pc in November and has since plunged to 1.6pc in April. The data explain why commodity prices are falling hard, with Brent crude down to a 16-month low of under $97 a barrel.

China's money data are falling at the fastest pace since records began. The gauge – six-month real M1 – gives advance warning of economic output half a year ahead. "Europe needs to start quantitative easing [QE] immediately and China must ease policy," said Mr Ward.

The Americans may act first. Goldman Sachs expects Federal Reserve chair Ben Bernanke to open the door for QE in testimony on Thursday.

Stock markets rallied in Madrid and Milan led by bank shares on rumours of an EU plan to recapitalise banks directly with funds from the EU bail-out machinery.

Olli Rehn, the EU economics chief, said use of the European Stability Mechanism to bail out lenders was a "serious possibility", adding that it was imperative to "break the link between banks and sovereigns".

However, there is no sign yet that Germany will be willing to drop its veto on such action, viewed by Berlin as the start of debt mutualisation. Chancellor Angela Merkel crushed talk of an instant "banking union" after meeting commission president Jose Barroso, saying their could be no quick fix. She called instead for EU banking supervision as a "mid-term goal".

Her spokesman said any options that "resemble eurobonds" are for the distant future. "It's up to national governments to decide whether they want to avail themselves of aid. That also applies to Spain," he said.

Use of the ESM for bank bail-outs would meet fierce resistance in the German, Dutch and Finnish parliaments. A senior EU official said even Germany's Social Democrats are cooling on eurobonds. "They looked at the polling data and shivered. The German people are not willing to send money into a bottomless pit," he said.