Expect Shortages Of Gold As Soon As Next Month

Today John Embry stunned King World News when he warned, “We are moving toward a fundamental shortage of gold, and I believe it may start as soon as next month.” Embry also cautioned, “The problem now is that the global economy is contracting at a time when the debt levels are catastrophically high.”

Embry, who is Chief Investment Strategist of the $10 billion strong Sprott Asset Management, also discussed Europe, but first, here is what Embry had to say about the drought and inflation: “I am very concerned about this drought that is happening, particularly in the United States. You look at a weather map in the Midwestern United States, the temperatures are just staggeringly hot and there’s no moisture.”

“Already the corn crop has been reduced dramatically. Aside from the fact that it will have a big impact down the road in the economy, because food prices will move up sharply, on a basic level this is the difference between starvation and survival for people in certain parts of the world.

There are already food shortages in some of those areas, and now we are going to see the prices rising on top of that....

“This is a potential catastrophe and I’m very worried about it.”

Embry had this warning regarding Europe: “If you look at the news coming out of Europe, it’s almost like can it get much worse? And it gets worse. The Spanish stock market has been down 12% in a few days. That’s the equivalent of 1,500 points in the Dow.

The Spanish market is now at levels last seen in 2003. Their interest rates just surged to news highs over 7.50% on the 10-Year. I also see six Spanish regions are asking for bailouts, and where’s the money going to come from? The Spanish government hasn’t got any money. The European nations are trying to recapitalize Spain, but they don’t really have any money. So in the end it’s going to have to be created out of thin air.

I really appreciated the fact that an insider came out from the IMF, that resigned, and wrote this scathing public letter about all of the failures of the IMF. It’s all true. I mean to me the IMF has been a massive failure and they are part of this troika that’s attempting to deal with the Greek situation, which to me looks hopeless.

I see the Greek Prime Minister just said they are in a massive depression. The idea that they can take much more austerity to meet the terms which allows them to access more funds is a non-starter. In the meantime we are now being told the world is prepared for a Greek departure. I don’t believe that’s true. I think it would be incredibly traumatic if that were to happen.

The problem now is that the global economy is contracting at a time when the debt levels are catastrophically high. The only thing propping up the system, at this point, is the fact that there is still this move into the bonds of the perceived ‘safe’ countries.

There have been a number of times in history where investors have gone nuts and participated in ridiculous manias like the South Sea Bubble, the Dutch Tulip Mania, and Japanese real estate in the 80s. I think when the bond bubble is looked at in the fullness of time, sovereign debt trading at the levels it is right now as its proliferating everywhere, will be seen as ones of those bubbles.”

Embry also added: “Right now you are very hard-pressed to put your finger on any place in the world where the economy is improving. China is really weakening. They are essentially decelerating. The only way they can ramp things up in China is to jam more paper loans into the system, but I think the problem is that will have a very inflationary impact.

There’s no easy out on this thing and what was seen as the engine of the world is now sputtering.”

When asked about gold, Embry responded, “We are moving toward a fundamental shortage of gold, and I believe it may start as soon as next month. I think the bottom is being put in right now. You see once again with the stock market trading lower, they just turn the algorithms on and grind the price down.

But this action is all just building a massive base in gold. I think the big issue going forward is this growing shortage of available physical gold. I strongly believe one of the reasons for the shortage is a lot of it is headed East. The last four or five months of the year gold should challenge and easily take out its all-time high.

For what it’s worth, there is an enormous amount of interference in the gold and silver share market. I think that will end as soon as gold and silver break their highs. When that happens, I think it’s going to unleash a rally in these stocks that is absolutely going to stun people. People will be shocked that don’t understand the full extent of the manipulation and how cheap these stocks have become as a result of it.”

$15 Trillion To Be Added To Money Supply & Gold To Ascend

KWN has been getting bombarded from readers around the world on the Michael Pento piece titled, “This Major Fed Move Is About To Cause Gold To Skyrocket.”   Today we followed up with Michael Pento because there was such tremendous interest in knowing more about this major move he expects from the Fed.  Today Pento told King World News that this move he is predicting could add a staggering $15 trillion to the money supply. 

Pento, of Pento Portfolio Strategies, also said that if this move happens, “you will see the gold market fly far past its nominal record high in extremely short order.”  Here is what Pento had to say:  “So let me put it together for your listeners.  We have $1.42 trillion of excess reserves.  We are now going to be told that there will be no capital reserve requirements on owning sovereign debt.  You will have commercial banks flooding the market with the purchase of sovereign debt.  Not just US debt, Portuguese debt, Spanish debt, Greek debt, all of that debt will have zero capital requirements.”

“Let me be clear on this, I’m not saying it could increase M2 money supply to $15 trillion, this could increase it by $15 trillion.  So we’re talking perhaps about $24 trillion.  It has the potential to increase to rapidly increase the global money supply, and it would be a tremendous boost to commodities, oil and precious metals. 

However, I would add that it will only vastly exacerbate the stagflationary environment that we see gripping the entire developed world....

“It’s much worse than a QE3 because QE1 and QE2, because the vast majority of that money created is sitting with the central bank, it’s laying fallow at the central bank.  But if you have a mechanism like I just described, no longer having sovereign debt have any capital reserve requirements, the notion to stop paying interest on these excess reserves, you will have all of that money that was laying fallow, flood into the economy at once.

So there is no easy answer.  Bernanke doesn’t know what he’s doing.  He spent too much time studying the Great Depression.  He’s going to get a chance to study one firsthand in my opinion. 

What he needs to do is let the free market work, and I can tell you that unleashing $1.5 trillion into the American economy, and having that money roll-over and multiply (to $15 trillion), through the money-multiplier-effect, is not a very good idea.”

Pento also added: “I am a big advocate of hard money policies around the world, and I love gold.  However, I am not a broken clock.  If gold was going to go into a bear market, I’d be the first one to tell you.  I have been on the record, on King World News, telling people when I thought gold was overbought.

I’ve been on record telling people that we’re in this cyclical period of truncated deflation, but if they do the two things I just described in this interview, which is to implement the Basel III Accord, and cease paying interest on excess reserves, you will see the gold market fly far past its nominal record high in extremely short order.”