Embry:  “What’s bothering me is what David Stockman referred to on KWN last week, which is the constant interference in all markets by primarily the US Fed.  It’s created a false illusion....

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“The Fed will not let the stock market reflect reality, and at the same time they are running a zero interest rate policy.  So they try to keep interest rates as low as possible, but bond buyers are not being paid for a default risk, or, more importantly, a growing inflation risk.

And there isn’t an hour that goes by where there isn’t interference in the gold and silver markets.  But the good news is that there is strong physical buying in this space, and now there appears to be a bid in the paper market as well.  Consequently, even though they try, with their algorithm programs, to force the price back down, it doesn’t work -- gold and silver bounce right back and head even higher. 

All of this is just a precursor to a much larger move.  We have to have this basing action to head significantly higher, but we’ve seen a lot more power in the gold and silver markets than we’ve seen in quite a long time.  If you look at the past year, any time they (central planners) put pressure on gold and silver they would crush the price.  Now they seem to move gold down only $10 or so, and then gold bounces right back and wants to surge higher.  So I think this is a very promising development, and it is also being supported by the action in the mining share market as well.”

Eric King:  “Stockman was also warning about the fragility of the financial system.”

Embry:  “I couldn’t agree with him more.  I remember when Stockman was in there as Reagan’s budget director. and he was a real good numbers guy.  And when things started to get really out of control, he just washed his hands of it.

He’s like my business partner, Eric Sprott, who is also a brilliant numbers guy, and when you run the numbers, they don’t work.  And yet we get this constant propaganda out of the Fed, the mainstream media, and the government, as if there is absolutely nothing wrong.  But the financial system itself is so incredibly fragile.

Stockman brought up a brilliant point, the fact that we have hundreds of trillions of dollars of interest rate swaps, which are polluting the world’s banking system.  If we see growing volatility in interest rates, and I think that’s inevitable with what’s going on, that would cause spasms in the financial system.  And if something goes wrong in the derivatives market, Heaven help us because the leverage that is imparted to the banking system through these derivatives is unholy.”

Eric King:  “Stockman told KWN, ‘The single greatest danger is that the game the central bankers are playing today will come to an abrupt and destructive end ... The danger is that one of these days the whole system will fail because it is unnatural and artificial, and when that happens it’s going to be a pretty difficult (and chaotic) time,’ -- your thoughts on what Stockman said.”

Embry:  “If you try to distort reality for too long, eventually it catches up with you.  You can do it only for so long, and they’ve gotten away with it a lot longer than they thought they would.  So, consequently, the fragility is even more extreme.  It will end badly because we have to return to reality, and the leverage in the system has never even been anywhere close to the levels we see today, particularly with this derivative exposure on top of it all.”

Eric King:  “As this great experiment comes unwound, how ugly will it be?”

Embry:  “My greatest fear is this whole Ponzi scheme coming unwound.  Honestly, I wish I were wrong about this because the world has been a pretty good place for anyone who grew up in North America after World War II.  Under the worst circumstances you will see social unrest, and that would be a really, really unpleasant situation.  I sincerely hope that doesn’t come to pass, but the numbers will only lead us in  a catastrophic direction.”

Embry added:  “People need to be extremely careful here with their money because I have repeatedly warned that the world is going to witness a historic transfer of wealth when this thing finally blows up.  I will tell you, Eric, that my own personal money is invested 100% in hard assets.  I own physical gold, silver, gold and silver shares, oil shares, real estate, and collectibles.  Those people who are sort of hanging in traditional paper assets are going to take a terrible beating, and those who are invested in hard assets will not only maintain their wealth but most likely will enhance it.”

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The audio interviews with Art Cashin, Rick Rule, David Stockman, John Mauldin, Eric Sprott, Bill Fleckenstein, Egon von Greyerz, Dr. Paul Craig Roberts, MEP Nigel Farage, James Dines, Gerald Celente and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

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