Embry:  “Many of the short-term news releases from the mainstream media are simply propaganda.  But when you take a step back and take a look at the big picture, quite frankly the big picture does not look good at this point for the global economy.

I will get into that more in a minute, but first I was really impressed with a number of the interviews that you had last week which illustrated the extent of physical gold shortages in the system....

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“I strongly believe this will be a major factor when things really starts to roll.  I fully expect that once we get this dull summer behind us that we are going to see some big moves.  We may head higher at any moment, but even if we see continued consolidation, it is simply building a larger platform that will launch the metals higher.

But going back to the backdrop of the world economic situation, the fact that we are seeing the global economy roll over is going to lead to absolutely astounding amounts of money printing.  The reason for this is there are no solutions to what ales the global economy.

Late last week the U.S. had the consumer confidence number release and it was stronger than anticipated, but the reality is that even the dullest of people today knows that the United States is in deep trouble with what is unfolding.  So they are just making these numbers up.  I don’t believe that consumer confidence number in the least.

People in the U.S. should be focused on what happened in Detroit.  This has unearthed a lot of issues, particularly on the pension front.  There are numerous cities and municipalities that aren’t going to be able to come close to meeting their future obligations.  The implications of this for the longer-term outlook of the economy are very, very serious.  So I think that Detroit was a watershed event last week and it’s going to lead to more and more scrutiny of the whole financial situation in the United States.

If we turn to Europe, despite the Eurocrat’s rhetoric, the situation in Europe is not improving.  I would go so far as to say the situation is now dire in Greece, Italy, Spain and Portugal.  France, which is a socialistic state, only has 17 million employed out of a population of 68 million.  France isn’t far behind those peripheral countries that are in deep trouble.  So I don’t see any improvement to speak of in Europe, and I would add that their banking system is in dreadful condition. 

But then if you go to Japan, I think things are beyond redemption over there.  You have a massive public debt issue, and an aging, shrinking, xenophobic population.  So the idea that you can stimulate your way out of that mess is preposterous.  I also believe that Abe’s policies will destroy the currency and their massive bond market at the same time.  I think their going to be a simultaneous destruction of the currency and the bond market before this is over.

Finally, I see absolutely nothing encouraging in China.  With each passing day there are further revelations about the extent of the debt problem, particularly at the local level.  At the same time, the higher yuan and the rapidly rising wages are putting the country at an increasing disadvantage in the export market.  This is on top of the fact that the export market is already contracting because of the weak global economy.

So you put that together with a massive overcapacity issue in the country, and I can see little possibility of China even approaching a 7.5% growth rate in the foreseeable future.  Most people take that 7.5% growth rate as a mantra, but I just don’t see it.  I believe China has seen the best of its growth rate for quite a long time.

When I put all of these things together, I just see ever-greater money creation everywhere in order to combat the deflationary impact of excessive debt in the global system.  To sum up, this is a perfect environment for higher gold and silver prices.  And this is aside from the massive physical shortages which were covered so well last week on KWN by people such as Eric Sprott and Egon von Greyerz.  All of this will simply add more fuel to the fire of this money printing orgy we are already in the process of expanding.”

Embry also added:  “I think the Chinese realize that their economic weakness is one thing, and their wish to back the yuan with gold is another.  The Chinese have massive reserves, particularly denominated in U.S. dollars, and what better thing could you do today than sell U.S. dollars and buy gold?  So I don’t see any abatement in their accumulation of gold as long as the prices remain anywhere remotely attractive, and I think the price is attractive under $2,500 an ounce.”

When asked about silver, Embry responded, “I don’t think a pure silver mine can mine profitably at anything under $25 to $30 an ounce.  If you look at Goldcorp’s latest earning release, their silver mine in Mexico contributed a huge loss to the company’s earnings.  But the fact that silver demand continues to be robust among those around the world that hoard physical silver, I don’t think the price can stay down here for very long.  And when it goes, it’s going to jump like a scalded cat.”

Embry added this regarding the mining shares:  “I honestly believe that before this is over the mining shares will trade the same way the internet shares traded during latter stages of the internet mania.  The only difference will be that the gold and silver shares will have much better fundamentals to support their price explosions.”

© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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Eric King

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