Sprott's John Embry:“The Current Financial System Will Be Totally Destroyed“

Tyler Durden's picture

Sprott strategist John Embry has never been a fan of the existing financial system. Today, he makes that once again quite clear in this interview with Egon von Grayerz' Matterhorn Asset Management in which he says: "I think that the current financial system, as we know it, will be totally destroyed, probably sooner rather than later. The next system will require gold backing to have any legitimacy. This has happened many times in history." Needless to say, he proceeds to explain why a monetary system based on gold, one in which one, gasp, lives according to one's means, is better. Logically, he also explains why the status quo, whose insolvent welfare world has nearly a third of a quadrillion in the form of unfunded future liabilities, will never let this happen. Much more inside.

From Matterhorn Asset Management

“The Current Financial System Will Be Totally Destroyed“

John Embry, the chief investment strategist at Sprott Asset Management, talks in this exclusive interview about the motives and the means of certain interests to prevent a free gold market; tells the reason why the gold price will remain high; shows the opportunities in silver; and explains: “Gold is about the furthest thing from a bubble that I can think of.“
By Lars Schall
An industry expert in precious metals, his experience as a portfolio management specialist spans more than 45 years: John Embry, the chief investment strategist at Sprott Asset Management. He began his investment career as a Stock Selection Analyst and Portfolio Manager at Great West Life. Mr. Embry then became a Vice President of Pension Investments for the entire firm. After 23 years with the firm, he became a Partner at United Bond and Share, the investment counseling firm acquired by Royal Bank in 1987. Afterwards he was named Vice-President, Equities and Portfolio Manager at RBC Global Investment Management, a $33 billion organization where he oversaw $5 billion in assets, including the Royal Canadian Equity Fund and the Royal Precious Metals Fund. In March 2003 Mr. Embry joined  Sprott Asset Management with focus on the Sprott Gold and Precious Minerals Fund and the Sprott Strategic Offshore Gold Fund Ltd. He plays an instrumental role in the corporate and investment policy of the firm.

Mr. Embry, the perhaps best report I have ever read on the gold market was “Not Free, Not Fair: The Long-Term Manipulation of the Gold Price,” written by Andrew Hepburn and you. (1) I would like to talk with you at the beginning about the findings of that report. First of all, why do you think it is relevant whether the gold price is free or not?

John Embry: Thank you for the very generous compliment. It is essential that the gold market be free. It functions as the so called “canary in the coal mine” and its price should be allowed to reflect excesses in a pure fiat monetary system. The continued suppression of the gold price was a key factor in the many financial bubbles which have essentially wrecked the monetary system as we know it.

What has the evidence been that the gold market isn’t a free market?

John Embry: Our report which was written 7 ½ years ago revealed all sorts of chicanery in the gold market and we only used evidence which could be corroborated. Considerable additional evidence has piled up subsequently but two smoking guns are the repetitive counter intuitive price action and evidence of widespread clandestine leasing of western central bank gold.

Who are the ones that don’t like a free gold market and which objectives do they have in mind by preventing a free gold market?

John Embry: The western governments, their central banks and the allied bullion banks are the culprits. They view gold as a mortal enemy of the fiat currency system. Gold has been real money for centuries and every paper money system in history has ultimately collapsed. This drives them to continuously denigrate and manipulate gold.

Through which tools is the gold price “managed“?

John Embry: The worst damage occurs in the so-called paper gold market where derivatives, naked shorting, vicious margin hikes, etc. are employed to fleece the long side who don’t have as deep pockets. In addition, the western central banks have supplied the physical gold necessary to effect the plan through their leasing.

Recently, I was told by a former chairman of the Federal Reserve, Paul A. Volcker, that to his best knowledge “the U.S. has not intervened in the gold market for more than 40 years.“ (2) Do you think Mr. Volcker has the truth on his side?

John Embry: Mr. Volcker admitted that the U.S. had made a mistake by not intervening at one point in the gold market some 40 years, so to think that nothing has happened subsequently is extremely naïve. Technically he might be correct in the sense that swaps could have been employed and the intervention using U.S. gold could have been conducted by another party. Recently retired Fed Governor Kevin Warsh acknowledged U.S. gold swaps in correspondence with GATA just last year. (3)

Furthermore, Mr. Volcker seemed to suggest that central banks have some interest in the price of gold because of its effect on the currency markets. (4) What kind of relationship does exist between gold and the currency markets which are much bigger than the gold market?

John Embry: Very simple. Gold is a currency. Arguably it is the ultimate currency and the central bankers are acutely aware of this fact. Gold’s role as currency is once again coming to the  fore and the central bankers hate that fact.

Are gold swap arrangements between central banks a) important for the “management“ of the gold price, and b) do they represent a means of intervention in the gold market?

John Embry: They are most certainly important because it allows central bankers to technically tell the truth because it is always another central bank that is utilizing the swapped gold to intervene in the market.  It is a subterfuge.

Do you think the Western central banks have as much gold as they claim they have?

John Embry: I strongly suspect that they have materially less than they try to represent. The IMF permits a one line entry on their balance sheets which aggregates physical gold with gold receivables. That’s ridiculous and it is done to deceive analysts. For example, if the Americans had the 8,161 tonnes that they say they have, they would be delighted to submit to an outside audit and shut their detractors up. However, they stonewall all requests.

With its “QE to infinity“ program: would you say the Fed has exposed itself in a way as a hardcore goldbug entity?

John Embry: I believe they are fully aware of the extent to which they are debasing their money. We, the public, have to be the hardcore gold bugs to protect our wealth from their depredations.

It seems as if more and more gold is moving towards certain central banks and not away from them.  Is this a solid assurance that the gold price will remain high?

John Embry: I believe so. The eastern central banks (China, Russia, et al) have accumulated a lot of dollars and realize they are at risk. Ergo, they buy gold. At the same time, I think the western central banks have run their inventories down to levels beyond which they won’t go. Thus, I think central banks collective gold buying will have a salutary impact on the price going forward.

In the event of another market meltdown, which seems rather likely, do you expect a sell-off in gold?

John Embry: There could be a minor sell-off just because there are so many algorhythyms influencing the market.  It would be short lived because big money in the world now knows they need gold for protection.

Gold is in a bull market for ten years now. So an increasing number of people say it is in a bubble. Why would you say, in Gershwin’s words, “it ain’t necessarily so“?

John Embry: Gold’s price is directly related to the constant debasement of the currencies in which it is denominated. The creation of new paper money is dwarfing the amount of gold available. Gold is about the furthest thing from a bubble that I can think of.

What do you think in particular about Warren Buffett’s constant “Gold is in a bubble, I go for stocks“ talk? Does he serve here as an influential opinion maker in a specific role because he gets a lot of public attention? In other words: is he a fool or does he only act like a fool? (5)

John Embry: Warren Buffet sold out a long time ago. It’s too bad because he was a great stock picker once. Now he owns insurance companies, Wells Fargo and was a buyer of Goldman Sachs and G.E. in the global financial crisis. He is a member of the American establishment and has a lot to lose. He should have listened to his father Howard Buffett who was a U.S. Congressman and a true “hard money” advocate.

In your view, gold will gain in importance as a monetary asset in the years ahead, likely regaining an official role in the world’s financial system. Why do you think so?

John Embry: I think that the current financial system, as we know it, will be totally destroyed, probably sooner rather than later. The next system will require gold backing to have any legitimacy. This has happened many times in history.

The mining stocks both in gold and silver seem to me extremely undervalued. Do you agree?

John Embry: They are indeed, and they are being heavily manipulated by the same entities active in suppressing the gold price. In addition, many nefarious hedge funds now are active on the short side. The U.S. financial scene has become a  total cesspool.

Are there key levels in the XAU and HUI that one should pay attention to as starting points of a mining stock rally?

John Embry: I tend to pay more attention to the HUI because it is the pure gold index.  When the HUI takes out the 555 level with gusto, I think we are away to the races. However, this level is being aggressively defended by the bad guys. A higher gold price (through $2000 per oz.) will rectify this issue.

Why are you at Sprott Asset MGMT so very bullish related to silver?

John Embry: We think the supply-demand equation is ultimately better than even that of gold. New industrial and medical uses are exploding and because silver is “poor man’s gold,” investment demand for silver will go crazy when gold gets priced out of the average citizen’s capacity to buy. Given the small size of the market and very limited inventory, the price should go ballistic.

For your physical silver ETF you want to re-acquire physical silver in a big way. Do you think you could be pioneers (for other fund managers) in direct engagement with mines through direct and forward transactions, instead of going to the Comex? You certainly don’t want to “whoop” the silver price by your own buying, correct?

John Embry: I think that is a potential avenue particularly when the supply-demand equation gets progressively tighter in the future.

Is the silver market also subject of surreptitious interventions?

John Embry: Without question. In many ways it may be worse because it is a smaller market and J.P. Morgan Chase’s activities have been egregious. The fact that the CFTC has been investigating this for nearly four years without resolution is one of the great jokes of all time.

What is your information: to which extent the US silver ETFs are short and how many stocks of those have been used for covering future short contracts?

John Embry: I believe that they are but I can’t provide any information on the extent. When the very same organizations that have manipulated the market for years act as custodians for the ETF’s, it would be wise to be wary.

One highly interesting issue for me personally is the point in time when the Middle East countries will no longer sell their oil and natural gas for paper money. When do you think  they will be paid for it with precious metals?

John Embry: I suspect this whole phenomenon could occur very quickly. When confidence in paper money is lost and I think we are rapidly approaching that moment, something like that would undoubtedly come to pass.

How do you think about the conflict around Iran viewed from a perspective of the petrodollar?

John Embry: The whole Iranian issue is very disturbing and I think the U.S ‘s motives might have more to do with the petrodollar than Iran’s nuclear ambitions.

One final question. IF the financial system goes under, one can expect massive supply shortfalls and disruptions in goods and services, particularly in the energy sector. Would you recommend to our readers to take precautions for such a scenario instead of hoping for the best outcome of the global financial crisis?

John Embry: Unfortunately yes. I am a great believer in cognitive dissonance. Most individuals don’t want to face the truth, particularly if it is very unpleasant. Those that do not suffer from this condition should take precautions because the world situation is presently very dangerous.

Thank you very much for taking your time, Mr. Embry!


(1) John Embry / Andrew Hepburn: “Not Free, Not Fair: The Long-Term Manipulation of the Gold Price”, published by Sprott Asset Management in August 2004 under:


(2) See Rob Kirby: “Manifest Destiny Derailed: Treason from Within“, published at Goldseek on January 31, 2012 under:


(3) Compare http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf.

The relevant passage of Mr. Warsh’s letter to GATA said:

“In connection with your appeal, I have confirmed that the information withheld under Exemption 4? — that’s Exemption 4 of the Freedom of Information Act — “consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

(4) See Rob Kirby: “Manifest Destiny Derailed: Treason from Within,“ Footnote 2.

(5) Compare for example in this context what Marshall Auerback has said in an interview about the supression of the silver price:

“It’s in contrast to the gold suppression, which is a central-bank orchestrated scheme. You’ve got a situation now where it seems to be being done amongst the banking community, but I have no doubt that it has being done with official encouragement, explicit or implicit. To give you an example, 10 years ago Warren Buffet bought a silver position, and he liquidated it a few months later. The story I heard from one of his dealers was that he basically told them, “Boys, it’s not politically correct to speculate in silver.” Now who told him that I don’t actually know; I suspect it came from government sources. More interesting to me is that he had had a significant position, and it was liquidated with a great degree of ease with a loss at time when it wasn’t easy to do. This suggests that there was an external agency involved. I have no doubt that there is some degree of government involvement as well, but the primary agents are the investment banks, the commercial banks here.”

See: http://resourceclips.com/2011/04/05/marshall-auerback-on-silver/.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
nope-1004's picture

The current financial system IS destroyed.

It's being held together with masking tape, a string, some HFT computers, and lying politicos influencing the MSM.

The system is dead.  Doesn't take much to realize anyone not preparing for the inevitable reset button will be looted.


slaughterer's picture

Jetzt geht die Scheisse los.  

AbruptlyKawaii's picture

iway oveslay emay omesay inesechay oodfay inlay

nope-1004's picture

Ud ya say?


axmay isherfay is aygay.

francis_sawyer's picture

He's a fucking dickwad... (There... fixed it for you)

trav7777's picture

all I know is the Sprott gang has been taking gullible silverbugz to the cleaners with that premium runup to NAV on pslv and then yanking the rug out from under them by issuing secondaries

SWRichmond's picture

hast du in die hasse schiesse?

Black Forest's picture

Promising and developable. Better use the correct term:

Hast Du in die Hose geschissen?

natty light's picture

 Gescheissen Sie sich den Hosen?

Black Forest's picture

Promising and developable. Better use:

I never bought gold, silver or other precious metals, and do not plan to do so.


He_Who Carried The Sun's picture

Children, if Mister Silver says we will all be using silver coins by tomorrow, what do you think about such a statement by that man? Bogus? Misleading?
There is one reason why its not going to happen: Expenses. It is way too expensive to revert to Silver or Gold. Simple!

Mr Lennon Hendrix's picture

Silver is worth $500 and gold is worth $10k.  Move along....

Tortfeasor's picture

It's too expensive not to revert to silver and gold backing

Free Markets's picture

After a financial crash (months maybe), all commodities will lose value to become a true market price.... No fed manipulation. The difference is that your dollars will be worth nothing while gold and silver will hold some value. People will be able to obtain it at a new market price. Gold shouldn't be valued in $ terms but dollars should be valued against gold.

He_Who Carried The Sun's picture

Look, I do understand your argument, I just do not think its going to happen as guys like this prescribe and I have no reason whatsoever to believe that this system is going to revert to sanity because its too costly. That's all.

sun tzu's picture

It was also too costly for the Roman Empire to collapse. 

He_Who Carried The Sun's picture

Who said their empire collapsed? You must be English!

grid-b-gone's picture

Hopefully, the Fed will pull back from their current printing trajectory if there are signs that confidence is being lost in the dollar. 

If not, the cost of transition will be irrelevant because it will be like a flash mob breaking into dance. Sellers will demand to be paid in something of value, something other than a paper dollar - precious metals, food, tools, forms of barter, etc.

If the prohibitive expense you envision is that all currency is replaced by gold and silver coins, you may have a point. I think most gold bugs would agree the Treasury would resist that move in every way possible.

Your opinion speaks to the cognitive dissonance mentioned in the article. Those who can not conceive that U.S. dollars could be printed (digitally created) to the point that the full faith and credit of taxpayers means nothing are not preparing. If people like you are correct, PM hoarders will take a bath due to their paranoia. If the hoarders are correct, people like you will be part of any panic buying that may finally reveal gold's top.

The fact remains, we are at 105-110% debt to GDP. By definition, the 'full faith and credit' promise is already being exceeded. If, as in WWII, this is a short-term situation, no harm, no foul, and everything will revert to the mean, including the price of gold.

Japan is muddling through at 200% debt/GDP, so we may be able to exceed that 'full faith and credit' for another decade if that model holds up.

Then again, the Fed has stated they intend to continue with the current plan through 2014, which includes overspending by $1 trillion+ for another three years. 

We are already running on the faith and credit promise, and if a Maine caucus group of 22 can't even trust that their wishes will be honored as reported, the rot may already have spread to most of the barrel.  


TruthInSunshine's picture

glitch in the Matrix. Double tap.

TruthInSunshine's picture

Ben's just getting warmed up.

The printing the ECB is about embark on, once Germany gives the green light (in screwing over its own citizens by debasing their living standards at the fastest clip since...pre WWII) will provide the perfect cover for 'Ben "I will not monetize deficit spending" Bernankhole.'

Max Fischer's picture



In April of 2011, a pro-silver article was written by Sprott and posted on ZeroHedge.  Within a day or two, Sprott began selling millions and millions worth of his PSLV.

In December, another pro-silver article was written by Sprott and posted on ZeroHedge.  Five days later, PSLV collapsed due to their secondary offering.

Now, what's unique about both these timely articles is that neither article was actually posted on Sprott's main website where his "real" investors go for information.  He has a section for media information with all sorts of articles, but both of the aforementioned articles where never included. What does this mean?  Using YouTube and the blogosphere, he lures in the dumb retail money with hyperbolic nonsense right before PSLV gets monkeyhammered.  And he deliberately does not do this to his "real" clients who use his website for investor services.

Beware of Sprott....

Max Fischer, Civis Mundi 

TheFourthStooge-ing's picture

Max Fischer, Civis Morondi wrote:

Using YouTube and the blogosphere, he lures in the dumb retail money with hyperbolic nonsense right before PSLV gets monkeyhammered.

The only thing monkey-like that I see is you flinging feces, Cheetah.

Disclaimer: Long, and ahead, PSLV.


SWRichmond's picture

John Embry: We think the supply-demand equation is ultimately better than even that of gold. New industrial and medical uses are exploding and because silver is “poor man’s gold,” investment demand for silver will go crazy when gold gets priced out of the average citizen’s capacity to buy. Given the small size of the market and very limited inventory, the price should go ballistic.

Gold is going to be my capital going forward.  Silver is going to make me a rich man.

trav7777's picture

ROTFL..the dream of every silverbug, to get rich speculating.

Gee, you guys are so different from the financial wall street trash and the squidzez

sun tzu's picture

Unless they leveraged 40:1 and losses are backed by the US taxpayers, they are very different you inbred dumbfuck

trav7777's picture

gullible lemming silverbugz like you must enjoy getting taken to the cleaners

sun tzu's picture

Inbred shitheads like you must enjoy getting assraped by your daddy

LynRobison's picture

Right, we should all trust Ben Bernanke instead. 

Fluffybunny's picture

You don't have to trust anyone. Come to your own conclusions.

Tsunami Wave's picture

Just ignore his dumb ass, Max Fischer is red neck repugnicant. He's also a political fanatic.. like what Winston Churchill described, someone who won't change their mind and won't change the subject.

sun tzu's picture

I saw nothing political in his message. Attacking a strawman?

linrom's picture

All these guys are the same. It's a family run business too.

pazmaker's picture

you can red arrow vote down Max, but investigate what he says here about PSLV and you will discover it is the truth.

You get a green thumbs up from me.

sun tzu's picture

PSLV has nothing to do with physical silver

TrulyBelieving's picture

Let's assume that you are correct in that Sprott capitalizes in certain situations that may be questionable. Would your still agree that his view of the economics situation is pretty accurate?

Pegasus Muse's picture

Agree with Max.  Sprott also gets a free ride from Eric King at KingWorldNews and other Hard Asset sites, besides here on ZH.  Sprott never gets called on the carpet for lying to potential investors and his clients.  He said he would not do follow-on offering in PSLV .... that he learned his lesson after investors pummeled him for screwing them over with follow-on offerings in the PHYS fund.  Promised he wouldn't do it.  Then did.  He has no ethics.  No morals.  He lies just as smoothly and adroitly as the most skillful sociopathic Wall St Gangster Bankster con man. 

You are not free of financial liars and shysters unless you hold physical in your own hands.  Period.

vamoose1's picture

Ditto  to  you, every word of your post is false, which  takes some doing,   best to  jamie asswipe.

sun tzu's picture

Once again, why attack a strawman? What he says about silver prices in the short term has nothing to do with silver prices in the long or short term. Sprott is not the silver market

vamoose1's picture

You are an epic  fucking horses ass,  and a cheapjack  shill,... you neglect to  mention that the PSLV premium  in APRIL  was 24 percent,  and he rolled his sale proceeds into PHYSICAL  SILVER capturing a ridiculous premium.

    More recently in PSLV2  the PSLV  premium  hit 34.22 percent pre issue,  it was being jammed by  JPM  to  desperately try and render PSLV2 an  unmarketable instrument,  it was a loss leader strategy yo  try and protect their criminal  short position. My  best  to  jamie and Blythe when  you  pick up  your next cheque,  you   supperating fuckspittle.

Crumbles's picture

Is it uncontrollable anger messing with your attempted posts ?

Or perhaps you need a newer keyboard and spellchecker.

(lean back a little, take a deep breath, and remember that thumbs hitting the spacebar advance the cursor with every stroke)

Nervous much ??   or just plain out-of-control ?

kito's picture

would be nice to hear from tyler on this.....shirley zh isnt carrying every pro pm advocate merely for the sake of them being pro pm............especially when they are allegedly pulling goldman sachs type moves.............

Black Forest's picture

"Auch wenn wir einen langen Atem brauchen: Mit den jüngsten Beschlüssen für eine Stabilitätsunion hat Europa den Weg geebnet, dass der Euro gestärkt aus der Krise hervorgehen kann ... Von Alarmismus und Krisenangst wollen die Menschen wenig wissen ... Dem Jahr 2012 sehen die Deutschen relativ gelassen entgegen."


P.S.: Just a joke. I deeply apologize.