………….

Embry has been following the gold sector for 35 years (that’s since the early 1970’s) and is one of the leading authorities on gold. Embry is currently the Chief Investment Strategist for Sprott Asset Management – a legendary name to long-time gold investors.

Andrew Mickey: Precious metals have been getting a lot of attention lately. But it seems like there has been a divergence between gold and silver. We’ve been watching the gold to silver ratio (the number of ounces of silver which can be bought for an ounce of gold) get wider and wider. Gold to platinum too. Do you see the divergence tied to the industrial aspect of metals like platinum and silver, gold is the supreme precious metal, or is there something else going on behind the scenes?

John Embry: No – it’s a very strong manipulative aspect at work. If you go to the COMEX and look at the trading patterns and the short positions and such, clearly the prices are being messed around with.

Silver is a smaller market and can be messed around with more easily. I think silver probably has a bit more upside potential because the price is so far behind where it should be.

Andrew Mickey: So do you see silver as one of the bright spots?

John Embry: Oh yeah, it’s an extreme bright spot. I could easily see it three times where it is now in the not-that-distant future.

Andrew Mickey: As far as gold supply, there is one period in the world gold supply where gold production kind of crested around 2007 or 2008. Are we facing a “Peak Gold” kind of situation?

John Embry: Yeah, we have most assuredly crested in terms of mine supply without question.

Andrew Mickey: So, when you look at five, ten years out…let’s say in a world where gold is $2000 or $3000 or higher, how much more gold can realistically be produced in a year?

John Embry: Zero, I think. In fact, I think you probably need a lot more lead time – maybe five to ten years.

Just look at what happened in the ‘70s. The gold price went from $35 to $800 and, believe it or not, gold production was at a lower level worldwide after that 10-year period.

Now, the big question is what will happen this time? Number one, a lot of the existing mines are being depleted quite rapidly. Number two, when the gold price goes up a lot, mines generally tend to sort of drop the grade they mine because they can make a lot of money with lower grade and they can keep the good stuff for the bad times.

So by definition, they will be mining in the same number of tons but they will be taking the gold grade out of it, so collectively they will be mining less gold. They will make more money because the price is up but they will be mining less.

The other problem is that so many of the new interesting deposits that may or may not be developed in the future are located in these God-awful third world countries. They are having a real battle now with the governments, getting permitting, deciding who makes the money out of the mine, environmental issues etc. The gold deposits are all over the place and the governments are going to delay projects.

Say you find an ore body today. It would probably take a minimum of five years before the gold hits the market with all the attendant problems there are getting it into production. So all that’s already baked in the cake. The gold price could be doing anything it wanted for the next four or five years…gold production isn’t going to increase much – if any – at all.

Andrew Mickey: Amazing, gold production declining in the last great bull market for gold. So what does this mean for gold stocks, from your perspective? Where should we focus our investments across the whole range – from explorers all the way up to the majors?

John Embry: Right now, I think the majors are reasonably priced compared to the overall list. People have sort of focused on liquidity so they have gone after the majors and they bid them up aggressively and left a lot of the more illiquid situations behind.

That will all change. As gold becomes more popular and the price rises, at that point, money will filter down the food chain from the larger companies and they will go looking for the good quality smaller ones.

I particularly like some of the smaller producers now for a lot of reasons.

For one, they are going to make a ton of money in the current environment, particularly if they are producing outside the United States. Like some of the ones that are producing in Canada. The gold price yesterday was I believe $1,230 Canadian.

Another reason is because all of the costs of gold mining are dropping right now. Energy costs, steel prices, and all the things that went up so much and really hurt gold miners’ profitability. They are all going the other way now and at the same time the price of gold is going up. So I think that people are going to be pleasantly surprised going forward by the profitability of some of these mines, which have struggled up until recently.

So I am pretty bullish on small producers and anybody who has got a legitimate ore body that can be exploited sometime within the foreseeable future. I think they are going to be viewed positively too.

But the key thing to focus on is when their production will begin. If they don’t have to worry about getting through the environmental hurdles and getting the finance and et cetera, et cetera, they are going to make a lot of money.

…………..

So that’s what I am talking about. It’s such a fabulous mine if it were in a good geopolitical environment. It would be being built as we speak, but there is no progress towards building it at this point.

Andrew Mickey: The gold ETF (like the GLD) has been the number one recommended way to invest in gold in the U.S.

It’s a hot subject of debate by those who are new to gold and those which have been following it for while. The new people to gold always recommend the GLD. What are your thoughts?

John Embry: Well, they are just plain wrong in my opinion.

I think gold and silver are the ultimate insurance policy. When things got really bad in the system you want to make sure the vehicle you own has the gold and silver that it allegedly is supposed to have.

Now, I may buy gold and have it in my own possession. I know I have it. And then there are other gold and silver vehicles like Central Fund of Canada (NYSE:CEF) or Central Gold-Trust (NYSE:GTU), to cite a couple, where the gold is allocated. It’s in a vault and there are regular audits to prove everything that’s behind the vehicle is in fact there. So you are getting what you pay for.

Now, in the case of the ETF I am not totally sure. I mean if you read their prospectuses closely enough you’ll see there is some wiggle room. What they are trying to do is just track the gold price so you don’t necessarily need the physical gold. They could be using paper derivative types of products to back the stock.

What really made me kind of uncomfortable recently, was there was this dramatic ramp up in the amount of money going into the GLD ETF in particular. I looked around and I am going like, where is gold coming from?

As you know, the gold market is acknowledged by virtually everybody to be tight. I know mine supply is falling, I know that – I didn’t see any appreciable change in any of the inventory levels or any of the recognized exchanges like COMEX etc., and there was no particular acceleration in the Central Bank dispositions. So my question is, if suddenly all this new buying appeared because of the ETF having to sort of stock up, where did the gold come from?

I am not sure it bought any gold. I think they might have gone to COMEX and just bought a paper contract.

I don’t know. I just think there are better vehicles than ETFs.

Andrew Mickey: Switching gears a little bit here, let’s talk about the big picture. Everyone wants to know what’s going on.

It’s a crazy time. What’s your take? What going on in the general markets and where are we headed?

John Embry: I think we are probably headed for the worst economic debacle since the Depression – if not worse than that.

And the response for that by governments around the world is going to be, I think, a blizzard of paper money creation. They will run massive deficits, trying to prop up these economies.

So I think the major development is going to be ongoing issues of currency debasement. The value of paper money against real tangible assets is going to fall considerably. Right now, we are going through this deflationary scare. It won’t last. It will change into a hyperinflationary environment in the not too distant future.

Andrew Mickey: A kind of stagflationary situation like we saw in the 1970’s?

John Embry: No, worse than that. I think the inflation would be more intense. The decline in economic activity will probably be worse.

Andrew Mickey: What are the kinds of conditions that bring us to that state? Is it avoidable?

John Embry: Basically, we have already put the conditions in place. We ran economies with constantly too much leverage and debt.

Eventually, you reach a certain point where you can’t really add any more debt because the capacity for the system to handle it has been exhausted. Once it reverses, it’s very hard to change. They are going to try to change it by simply debasing the money.

Andrew Mickey: You seem to focus on the debasement of currencies as a government “solution” – for lack of a better term – to the problem. What are some of the best ways to protect ourselves from this situation? Which are you employing?

John Embry: Our strategy is pretty simple. What we really like is the monetary precious metals gold and silver. We don’t like anything in the financial sphere at this time. The companies that we like are the more solid companies providing basic services and what have you. We like the ones which don’t have overly leveraged balance sheets.

RT: Mister Douglas, let’s get right down to it. What is the reason for the gold demand surge?

Adrian Douglas: The reason why gold demand is surging is for all the traditional reasons. It is that gold is a stored wealth and it has been a stored wealth for over 6,000 years of recorded history.

But gold is also a unique financial asset. When you buy gold bullion it has no counterparty risk. You don’t rely on any third party for your gold to store your wealth. Every other financial asset has what we call counterparty risk. And this is why investors are turning to gold, because they are starting to get worried about their bank deposits because they are scared the banks will not be solved. They are starting to get worried about their stock portfolio because they are scared the companies they have invested in will not stay in business. And they are concerned about their bond portfolio because they are scared that governments will default on sovereign debt. So gold eliminates all of these counterparty risks and this issue is now driving investors towards gold.

RT: What about people that possibly do not have portfolios, they have a little bit of savings in a bank. Should those people take their money out of the bank and buy gold?

A.D.: Yes, they should. Gold and silver will go to astronomic numbers as currencies are inflated to very little purchasing power.

The US government is announcing almost on a daily basis how trillions of dollars are being put into the system and this that is money is created out of nothing has no backing. It will eventually lead to hyperinflation and reduce the purchasing power of their currencies. So how could you protect yourself? By taking money out of the bank and buying gold from a broker.

You must own physical gold. There are a lot of gold substitutes out there which are paper promises for gold, and they won’t protect you. You need to have either allocated gold or gold in your hot sweaty hands that you own yourself.

RT: Tangibly holding it and having it in your home?

A.D.: Yes, in the interim while gold prices are going very high people will be able to cash in their gold for the currency as and when they need it.

RT: You are the head of the Gold Anti-Trust Action Committee. And from what we heard the gold market was suppressed for over ten years. What does that mean? That there was suppression of the gold market in US for over a decade?

A.D.: In the first place in 1999 we recognized that there was a total mismatch between the demand for gold and its price performance. And we have met a lot of evidence over the years that was showing that the gold market has been suppressed. This suppression is an effort to maintain the value of the US dollar and also to keep trust rates low.

The whole mechanism for this has been described in a paper by Lawrence Summers, who was ex-Secretary of the Treasury, but when he was professor of the economics of Harvard University he wrote a paper called “The Gibson paradox and the gold standard”. In that research he explains how in a freely traded gold market the real interest rates and the gold price should move in inverse relationship to each other. In other words, if trust rates are low, the gold price should be high and visa versa.

What we’ve seen through the 90s and most of this decade is that we’ve had a low gold price and low interest rates. So, the conclusion we made was that the gold market is not freely traded and it has been suppressed.

RT: Lawrence Summers is part of President Obama’s cabinet.

A.D.: Yes, he is one of his economic advisers and so we can summarize that the suppression to gold price is ongoing.

RT: You’ve referred to this as basically a Ponzi scheme.

A.D.: Yes, the Western central banks, with the leaders of federal reserves and governments, have investigated this scheme of suppressing the gold price. And this is what is at the core of the strong dollar policy. If you can suppress the gold price and not make it a free market then you can have low interest rates and a low gold price.

The low gold price essentially switches off the alarm in the financial system. What the purpose of the strong dollar was so that the US Government could issue lots of dollars without the alarm bells going off. The benefit for the US has been to live beyond their means. They managed to import goods from foreign countries and they have paid for them essentially with overvalued treasure debt. And they have even been so successful they have convinced other central banks that US treasure debt is a reserve asset. Now central banks around the world are sitting on trillions of dollars of treasure debt as a reserve asset which has a huge counterparty risk now of the American government – they will not repay it.

RT: So we’ve been inflating the dollar like a balloon. Is this balloon going to pop?

A.D.: Yes, the suppression of the gold price is coming to an end. The gold prices have already risen from as low as $255 in 2001 to a high recently of $1000. This is a sign that the scheme is starting to lose attraction because it depends on central banks being able to continue to put an extra supply of gold into the market to keep the price down. The central banks have been doing this for 15 years. Now, on our estimates, they have probably consumed 50% to 60% of their gold reserves. At the same time demand for gold by the general public is going up. Obviously the breaking point is coming where gold will skyrocket and it will go to numbers which will probably surprise even the most bullish people.

RT: In 2008 the Wall Street Journal published a warning of impending financial disaster due to the suppression of the price of gold. What was their response?

A.D.: What they say was ignored for 10 years has largely been ignored by the US press and of course by the government officials.

And we’ve got frustrated with that. We took out this full page ad in Wall St Journal, it cost us $64,000 and warning the general public that if this manipulation of gold price has not stopped, then there would be a significant catastrophe and disaster in the market. We have got no response. The problem with the scheme is that it is in lots of people’s interest in the financial world and of course they need it to continue.

RT: Do you credit one Russian government official as the first anywhere in the world to acknowledge your claims of gold manipulation.

A.D.: This was deputy chairman of the Russian Central Bank who made a speech in 2004 to the London Bullion Market Association. In that speech he mentioned that a group of economists have got together and came to the conclusion that the gold price is manipulated and that that suppression is allowing the US the exorbitant privilege of being able to spend a lot more than it should be allowed to spend.

RT: You say the entire financial crisis that the US and world is living through right now has come out through derivatives. What are derivatives?

A.D.: This is not understood by a lot of people and it is not mentioned in press very much.

Derivatives are essentially like an insurance contract. And you can take out an insurance contract against something happening, well, because the system is being rigged and many of the big money central banks and large insurance companies like AIG have known that the system was rigged but they could capitalize on it. So they have been able to sell trillions of dollars of derivative contracts to be able to get insurance premiums basically every month of these contracts. And be very wealthy out of that knowing that they would never have to pay out on the contract because the system was rigged. And this is where the problem has recently developed that the sub prime mortgage created defaults of the derivatives. That created a daisy chain effect through the system, but now these contracts are payable. So instantaneously black holes of trillions of dollars appeared on the balance sheets of many banks, and this is what is being referred to its toxic assets.

RT: So instead of these stimulus plans that keeps getting push from Washington, what would you suggest or needs to be done to save the US economy?

A.D.: First of all we need to outlaw the OTC derivatives. Second thing we need to do is to abolish the Federal Reserve and nationalize the banks.

The Federal Reserve is a private bank and the government has to pay them their interest for creating money out of the thin air which the government could do on its own without having to pay any interest. The third thing we need to do is to back the currency with gold. And we need of course to reinstate discipline in landing and enforce the rules that keep the stock market honest and keep the banking system honest.

RT: Do you think that the Obama administration is going do any of the four things you have just mentioned?

A.D.: It would take a lot of courage to do the things which I’ve said. Because there are a lot of advisors who have vested interests so that those things are not done.

But the American people need to wake up and realize what is happening to their country. And I think if the American people make enough noise then perhaps President Obama might listen to the people instead of listening to some of his advisors who have another agenda.

Millions of baby boomers born into the dawn of the most spectacular economic expansion in history are being forced to re-imagine their retirement futures. Few news outlets have failed to seize upon the low-hanging pun: the boomers have gone bust.

Among the adjustments forced by the new circumstances, perhaps the cruelest twist for many boomers is the need to join younger generations in the roommate queue. The housing crash has forced record numbers of late-middle age homeowners to take in boarders or risk becoming boarders themselves. From California to Vermont, home-share organizations founded to assist the elderly are scrambling to meet the demands of newly bust boomers.

“In the last few months we’ve experienced explosive growth in interest by homeowners age 50-plus to find rooms and roommates,” says Jacqueline Grossmann, Chicago coordinator for the National Shared Housing Resource Center. “The trend now is getting younger and younger. People in their 50s and 60s are losing their nest eggs and increasingly willing to give up their privacy in exchange for rents of $500, $600 a month.”

“We’ve seen a 400 percent increase over the last few months of people nearing retirement age,” says Rita Zadoff, director of Housemate Match, a shared-housing program serving the Atlanta area. “We haven’t been this busy since we helped Katrina victims find housing.”

Kirby Dunn of Home Share Vermont reports a “huge increase” of boomers seeking roommates in the last six months. “There has been a dramatic shift from elderly clients seeking a ‘protective presence’ to younger people with ‘too much house’ seeking financial help to make mortgage and utility payments,” she says.

Most of the nation’s home-share organizations were set up with the disabled and seniors in mind. They now appeal to bust boomers because they are generally free services that screen potential housemates carefully. “Older people aren’t comfortable finding roommates through Craigslist,” says Zadoff. “They aren’t as used to the idea of letting strangers into their homes.”

Boomers are maximizing room occupancy for the same reason that their kids in their 20s and 30s are still competing for the best group rentals on Craigslist: they’re broke.

The extent to which boomer wealth was based on home values is highlighted by a new report from the Center for Economic and Policy Research, entitled “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble.” The report details how the collapse has left the majority of those around retirement-age almost completely reliant on entitlements. The net worth of median households in the 45 to 54 age bracket has dropped by more than 45 percent since 2004, to just over $80,000. Households headed by those aged 55 to 64, meanwhile, have lost 38 percent of net wealth.

“The collapse of the housing bubble has already destroyed almost $6 trillion dollars in housing wealth for homeowners,” says report co-author Dean Baker, who testified last month before the Senate Special Committee on Aging. “This is compounded by the recent collapse of the stock market. The result is that many baby boomers will only have entitlements to rely on in their retirement.”

Make that entitlements, roommates, and each other.

As more and more boomers scale down their retirement plans and consider alternative living arrangements, it’s worth asking: Is shared housing such a bad thing for aging boomers? Does a return to the Communal idea, borne of economic necessity, also have emotional, social, and environmental benefits? Why wait for the retirement home or hospice to live with other people? With the nation full of worthless, ridiculously large, and mostly empty houses, why not fill them with the newly penurious and like-minded boomers in need of housing?

Better yet: why not abandon these suburban houses altogether, and find more appropriate housing arrangements closer to urban cores, or build tightly knit communities on cheap rural land?……

Ut in nisi eu ante adipiscing rhoncus. Pellentesque ullamcorper eros nec lacus. Donec turpis. Donec purus massa, rhoncus in, placerat eget, venenatis id, velit. Fusce vel augue eu massa laoreet posuere. Curabitur quis lectus sed diam tempor blandit. Ut neque urna, adipiscing et, accumsan at, eleifend vitae, ipsum. Morbi mauris lacus, venenatis a, hendrerit sed, malesuada id, dolor. Cras vitae urna sit amet nisl laoreet imperdiet. In laoreet risus at lacus. Nullam aliquam venenatis velit. Sed eu mi. Donec lorem quam, ultricies nec, condimentum non, blandit non, nisi. Nulla id velit nec ante vulputate iaculis. Morbi vel nunc. Pellentesque sit amet quam. Quisque convallis neque ac orci.