Despite Rally, Global Financial Crisis II Is Imminent

Today John Embry told King World News that, despite the rally, investors should brace for “global financial crisis II.”  Embry also said this crisis will be “more unpleasant than the first one.” Embry, who is Chief Investment Strategist of the $10 billion strong Sprott Asset Management, also told KWN that gold and silver will reign supreme during the upcoming turmoil.  But first, Embry had to say about the Egon von Greyerz prediction of a massive global bailout:  “I believe that’s very realistic.  They will go down the path of trying to continually bail this system out to prevent a collapse.  Nobody wants to be at the helm when the ship goes down, so they will try to move heaven and earth to prevent that.”

“The only way they can do that is with exactly what Egon (von Greyerz) suggested, and that is with a massive, global bailout.  I think it’s absolutely essential that the listeners be aware of the depth of the problem, and not listen to the mainstream media which glosses over everything and tells you to be in the conventional assets and that everything is going to work out fine.  I don’t believe that’s going to be the case.

I see one of two outcomes.  Basically you have a debt-logged world economy.... 

“If you subscribe to the tenets of Austrian economics, like I do, once you reach this state, you cannot grow because you can’t take on anymore debt.  You need more and more debt creation, at this stage, to get real GDP growth.

I think that’s what we’re seeing all over the Western world.  So far the BRIC’s have maintained a fairly good growth pattern, but almost without exception they are all weakening too.  I don’t see any letup in this for the simple reason that there is no palatable outcome to this (scenario).

Either you take the debt clean-out right away, and that means a very hard deflationary depression, or you do what I suspect they will try to do and that is keep pumping money into the system to keep the whole banking (system), derivatives and economies afloat.

That will lead to some sort of monetary distress that could end in hyperinflation.  I think that’s the worst outcome, but there is no good outcome.  Basically you have a set of circumstances, that past events have created, which leads to no good avenue going forward.”

When asked how long this process can continue, Embry responded, “That’s a very good question.  It comes very quickly.  I’d say 2 to 3 years.  It will probably take decades to work through, but I think the fantasy that we have a solution to this will be dismissed.  2 to 3 years would be my expectation.”

Embry also added:  “Everybody talked about global financial crisis one as being shockingly bad.  They have (since) built more leverage and pumped more paper into the system to try to keep it afloat. 

When global financial crisis II hits, I think it could be more unpleasant than the first one.  That’s one of the reasons I’m very enthusiastic about gold and silver because they are the true safe havens.  Somehow that truth has been obscured quite well by all of these paper raids on both of them.  But I think that will be overcome in global financial crisis II.”