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SilverAndGoldShop.com - News
3 Articles on The Over Consumption of Silver

Silver History
Investment Rarities

Silver is a commodity that has been known and used since the dawn of civilization like gold, copper, grain, and fibers. For thousands of years silver was produced and utilized by man, mostly in coinage, jewelry and utensils. It was coveted by the ancient Egyptians. It was in the Old Testament. Jesus Christ was betrayed for 30 pieces of it. To some extent, the Western Hemisphere was discovered,
plundered and developed because of it. Silver was taken from the earth’s crust and accumulated. It clearly altered history and trading patterns throughout Asia and the Indian Subcontinent. It was
at the heart of monetary systems of most nations in the world, including the United States. Then came two discoveries that would benefit just about every inhabitant of the world. Silver as the best conductor of electricity, and the key critical material in photography, went from being desired and coveted through the ages to something much more. It went from an object of desire to an object of necessity. Now all the silver from the time of the Pharaohs, the Romans, Marco Polo, and the Conquistadors is gone.We mined billions of ounces of silver throughout history. Where did all the silver go? Industrial consumption.

 

Going, Going, Gone!
by Ted Butler

Please understand and envision that 50 centuries’ worth of accumulated silver production is gone forever.This is the most bullish factor that any world commodity ever experienced. The fact that such big hoards of silver have disappeared means we are fast approaching a time when no more silver is available to industry at today’s low prices. There won’t be enough supply to go around.We will have to ration what supply there is.

There will be great pressure by the silver industrial consumers to get silver at any cost. Individuals may not need silver to survive, but industrial users do. It’s a matter of life and death to them. When the assembly lines are threatened with shut down due to lack of material, do not expect the silver consumers to sit idly by and watch their companies die. They will do all in their power to assure a steady supply of silver.

How many times do you think opportunities like this, for the average guy, have occurred throughout history? I don’t think ever. Nor do I ever think there will be such an opportunity in my lifetime again.Will you ever see the cheapest historical price for a commodity at the time of its greatest historical demand? Will you ever again see anything in chronic short supply selling at a grossly undervalued price level? Will you ever see such low risk?

Never! In my opinion you will never see a market so convoluted or insanely undervalued ever again.


New Technology
by David Morgan

When electricity is generated, not all the power reaches the end user. A large percentage of it is simply eroded away by the resistance it encounters in the lines through which it is transmitted. In fact, this ‘line loss’ sometimes runs in excess of 30 percent. However, there is a method that, for practical purposes, can reduce the line loss to almost nothing. It involves a technology called superconductivity.” One of the companies developing this technology is American Superconductor
Corporation, who claims to be “a world leader in developing and manufacturing products utilizing superconducting materials and power electronic devices for electric power applications.”

“According to the Silver Institute backgrounder, the superconductivity technology requires one ton of silver per mile of superconducting transmission line. A ton per mile! Now that’s a lot of silver – a reality you have to admit even if you’re bearish on silver.To illustrate, let’s hypothesize a transmission line from New York to San Francisco – a line that would require about 3,000 miles of superconducting wire. That would be 3,000 tons of silver. Stated in more familiar terms, that’s approximately 96 million ounces of silver. Ninety-six million! That’s roughly one-quarter of last year’s total industrial consumption of silver – for just one transmission line.

“There’s absolutely no evidence of an impending drop in industrial demand for silver. Although you certainly don’t read about most of them in the popular press, more and more applications are developed for silver every year – especially in the high-technology sector. In fact, there are so many new uses that silver might possibly be viewed as the ultimate ‘technology stock.’”
 

 
 
Why Are Silver Sales Soaring? by Jeff Clark
June 26 , 2010  

Why Are Silver Sales Soaring?

By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

April, 2010


The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.

While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.

Yikes.

This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals.

To be sure, mine production is not the only source of silver. In 2009, approximately 52.9 million ounces were recovered from various sources of scrap. Further, the U.S. imported a net of about 112.5 million ounces last year. (Dependence on foreign oil? How about dependence on foreign silver!) So it’s not like there’s a worry there won’t be enough silver to produce the Eagle you want next month.

Still, why so much buying? The silver price ended the quarter up 15.5% from its February 4 low – but it was basically flat for the quarter, up a measly 1.9%. We tend to see buyers clamoring for product when the price takes off, so the jump in demand wasn’t due to screaming headlines about soaring prices.

I have a theory.

For some time, silver has been known as the “poor man’s gold.” Meaning, silver demand tends to increase when gold gets too “expensive.” The gold price has stubbornly stayed above $1,000 for over six months now and spent much of that time above $1,100. You’d be lucky to pay less than $1,200 right now for a one-ounce coin (after premiums), an amount most workers can’t pluck out of their back pocket. But Joe Sixpack just might grab a “twelve-pack” of silver.

What would perhaps lend evidence to my theory is if gold sales were down in the face of these higher silver sales.

The U.S. Mint reported a decline in gold bullion sales of 20.8% this past quarter vs. the same quarter in 2009. Further, other world mints have seen sharp declines in gold bullion coin sales as well: the Austrian Mint reported an 80% drop in sales for the first two months of the year and the Royal British Mint a 50% decline in gold coin production for the first quarter.

What’s even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped $10,263,500 from a year earlier – but silver sales increased by $61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790.

Is the rush into “poor man’s gold” underway?

Why the answer to that question is significant is that a shift toward silver for this reason could signal we’re inching closer to the greater masses getting involved in the precious metals arena. And that – for those of us who’ve been invested for awhile now – would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it’s game on.

I’m not saying the mania is starting, and I actually think we could see another sell-off before things take off for good. Gold could dip to $1,000 and maybe even $950, with silver going to the $14-$15 range. But as clues like these begin to build up, we’ll know we’re getting closer. (And any drop to those ranges would clearly be a major buying opportunity.)

Everyone talks about gold, myself included, but a meaningful portion of one’s precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the ‘70s bull market gold advanced over 700%, but silver soared over 1,400%.

Don’t be a “poor man” by ignoring gold’s shiny cousin.


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Quote of the Day

" By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose."


--John Maynard Keynes

Father of Keynesian Economics

 

 


 

This Week's Video

 

Miner Bets on Silver
Dennis Wheeler, CEO of Coeur d'Alene Mines, explains why silver is a win regardless of the economic environment.

Ted Butler Weekly
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Fifty Years of Suppressing Silver by Jeff Nielson
June 19 , 2010  

Fifty Years of Suppressing Silver
By Jeff Nielson

July 16, 2010


Sophisticated precious metals investors are well-aware of the rampant manipulation of the gold and silver markets. They are also generally aware of the reason for such manipulation. A rapid rise in the price of gold and silver is like an economic "warning siren" - alerting savers that their wealth (i.e. the purchasing power of their currency) is being rapidly eroded by the monetary depravity of bankers.

In a world with a "gold standard", this isn't a problem. With currency which is redeemable in gold (or silver), the value of a currency (i.e. its purchasing power) is anchored by the gold and silver backing it. However, in a world of nothing but "fiat currencies" (i.e. money backed by nothing), a loss of public confidence in paper "money" is the worst nightmare of bankers.
This fear can be most easily illustrated by simply looking at the example of Alan Greenspan. In 1966, Greenspan was a respected academic, who wrote a famous essay extolling the virtues of a gold standard, where he simply stated the evils of "fiat money":

"In the absence of a gold standard there is no way to protect savings from confiscation through inflation."

I explained this concept of banker-stealing, in great detail, in a recent commentary - so any readers who are interested in a thorough discussion of this should refer to that piece. A quarter of a century later, after "Easy Al" had sold his soul to the bankers, and become Chairman of the Federal Reserve, he was asked directly what he would do if/when people lost confidence in their "fiat" U.S. dollars. His response to that question is even more famous:
"We stand ready to lease gold in ever-increasing amounts."

Several obvious, observations flow from this. Not only are fiat-currencies a tool which bankers use to directly steal our wealth, but this "tool" is, in fact, nothing but a scam by a bunch of con-men - and (like all scams) it collapses as soon as those being scammed "lose confidence" (i.e. understand that they are being 'conned').
What highlights the illegitimate (and ultimately illegal) nature of this scam is that the primary mechanism which the Chairman of the Federal Reserve would (and does) use to "restore confidence" to the world's "reserve currency" is to (illegally) manipulate the gold market. Put another way, because this is a scam, there is no way to directly "restore confidence" to paper currencies. Instead, all the bankers can try to do is to (temporarily) destroy confidence in gold - by suddenly dumping vast quantities onto the market, in order to cause the price to drop.

Manipulation of the gold market actually began (on a small scale) in the 1960's, while the U.S. (and the world) was still partially on a gold standard. The U.S. government was "cheating" with its accounting, to hide the obscene amounts of money it was borrowing (and squandering) in its doomed war-effort in Vietnam. Thus, this manipulation is a coordinated scheme by Western bankers which is now nearly 50 years old.

Like gold, the silver market has been manipulated for roughly the same amount of time. However, in keeping with silver's modern "identity" as an "industrial metal", the evolution of silver-manipulation, and the mechanisms used to manipulate the silver market are vastly different from the gold market. To begin with, back in the 1960's when we were officially said to be on a "gold standard", in fact, it was only silver money which was widely circulated in our economies, in the form of small-denomination coins. In other words, while our monetary systems were anchored by gold, it was silver which was used as money in an "industrial" sense - as an indispensable tool of basic commerce.

Indeed, at the same time that the bankers were trying to prop-up the U.S. dollar while on the gold standard (due to their reckless money-printing and debt-creation), these same bankers (and their allies in government) were making their first efforts to defuse a "silver supply crisis" - caused by pricing silver at only a fraction of its true worth.

In the 1960's, the U.S. government had kept the price of silver frozen at $1.29/oz. However, whenever an asset is under-priced, there will always be a group of investors who will identify such an under-priced asset - and then accumulate it. Thus, the U.S. (and other governments) were rapidly squandering their entire stockpiles of silver, as they had to dump ever-increasing amounts onto the market to maintain the artificially low price.

Ultimately, the bankers capitulated, and the U.S. government ceased its efforts to keep the price of silver frozen at $1.29. However, as is usually the case with any illegitimate scheme, every time the schemers take action to deal with one flaw in their plans, that produces unintended (and undesirable) consequences - which then require further acts of manipulation.

Once the price of silver was allowed to rise, very quickly the actual value of the silver contained in our small denomination coins (primarily the 10-cent and 25-cent pieces) greatly exceeded their face-value as legal tender. This created a huge incentive to melt-down these coins and make a very profitable arbitrage trade of "buying" these coins at their face value, and then selling them for their metal-content.

The U.S. government responded in two ways (and was quickly copied by the Canadian government). First, it changed the composition of all newly-issued coins - removing all their silver content. U.S. dimes had 90% silver-content up until 1964, while Canadian dimes contained just over 80% silver. The table below provides the evolution of the Canadian dime.

History of Composition

Meanwhile, the U.S.'s 1965 Coinage Act made it a crime to melt-down any legal tender coins (in order to profit on their metal-content), and a duplicate measure was passed in Canada. Consider the true dynamics of this measure.

First the bankers abolish the gold standard, to allow them to rapidly accelerate the speed at which they steal from us through currency-dilution. This, in turn, requires them to (illegally) manipulate the gold and silver markets - in order to hide the true value of these metals from being expressed in the bankers' diluted paper. The government then makes it a "crime" for its own citizens to make a profit on their own money. In the bankers' scam of money-dilution, only the bankers are allowed to profit on their crimes.

It was at this point in history that the bankers were able to largely forget about manipulating the silver market (for many years), and to focus their energies on gold-manipulation - because basic market fundamentals created conditions which depressed the price of silver, with only minimal "assistance" from the bankers (and their servants in government).

In this respect, I'm indebted to Adrian Douglas of GATA, for drawing my attention to the true significance of silver as a modern "industrial" metal first, and a monetary metal second. While many media talking-heads erroneously state that "silver is an industrial metal, not a monetary metal", in fact silver is both an industrial metal and a monetary metal - while gold is almost exclusively a monetary metal. Since few mainstream pundits understand what is "precious" about precious metals (i.e. it is the best money our species has ever devised), they don't understand the simple logic that silver's enormous industrial versatility and importance can't make it less "precious", but only more so. Indeed, it is Mr. Douglas' position that silver has become too important industrially (i.e. too "precious") to be widely used again as money.

Putting aside that separate issue, clearly the price of silver has been driven in recent decades mostly by its industrial demand. And it is this industrial demand which (with a little help from the bankers) kept the price of silver well below its true value for more than thirty years (until early in this decade).

How does industrial demand depress the price of silver? Ironically, it is due to how the brains of bankers functions. If a mining company went to a bank for a loan to build a new silver mine with the sales-pitch that silver was grossly undervalued, and they wanted to produce this valuable commodity in order to capitalize on this investment opportunity, the reaction of the banker is totally predictable.


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"I believe...that this [Constitution] is likely to be well administered for a course of years, and can only end in despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic government, being incapable of any other."


--The Writings of Benjamin Franklin, edited by Albert Henry Smyth


 

 


 

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Take Your Money Out of the Banks

From the Lew Rockwell Podcast:

Economist Joe Salerno explains that it is important to move your money from megabanks to less-unsound, smaller ones, and to stop using fractional banks at all, to the extent you can. As Joe explains, every time you take cash out of a bank, you hinder the bank-Fed-state combine, and perform a public service. Joe and Lew also discuss the problems of the current money and banking system, how shaky it is, and what a free market alternative would look like.


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The banker would burst into laughter, and (if he was polite) would warn the mining executives not to let the door hit them on their way out. While bankers see nothing wrong with taking our money which we deposit with them, and gambling it on any and every "investment" which tickles their fancy; these hypocrites would never dream of allowing ordinary people (i.e. non-bankers) to do the same thing with their money.

 Conversely, if this same mining company approached the bank for a loan, and provided them with statistics on the amount of silver being consumed in various industrial applications (old and new), the bankers would behave in a much different manner. Assuming that the mining company demonstrated that they could mine their silver at a cost below the current price, the banker would happily reach for his cheque-book.

This leads us to a fundamental "truth" in the precious metals sector: investment demand (i.e. "speculative" demand) does not stimulate mine production (except in a very belated manner - only after inventories have been exhausted), while industrial demand does stimulate higher levels of mine production, because the bankers will finance new mine-production based upon that level of industrial use. As an aside, it was because gold is not used to a great degree "industrially" that the bankers had to "persuade" the world's largest gold miners to enter into vast "hedging agreements" - which simulated the same market conditions for gold: maximizing production at the lowest, possible price.

In a true "equilibrium", this industrial production and demand would not cause silver to trade at a price well below its fair-market (equilibrium) value. However, the bankers ensured that the silver market could never reach such an equilibrium by continuing to dump their waning stockpiles of silver onto the market.

Here I am sure there are a few astute readers who will question my characterization of the "demand model" for silver. They will point out that most of the world's silver is still produced as "by-products" of other mining. In other words, it is a secondary product of mines which primarily extract gold or copper or lead/zinc. Thus, others will argue that industrial demand for silver could not directly stimulate silver mining, and therefore total silver production.

In fact, while that argument has theoretical merit, in practical terms it is incorrect. To begin with, if silver was properly priced, many of the mines where silver is currently produced as a "by-product" of other metals would instantly become "silver mines" - with the other metals becoming the "by-products".

Regular readers know that the long-term gold/silver price ratio averages roughly 15:1 (over a period of nearly 5,000 years). Given that silver occurs in the Earth's crust at roughly a 17:1 ratio versus gold, there is obvious, objective validation for such a ratio. In addition, given that most of the world's stockpiles of silver have (literally) been consumed, any rational valuation of silver would have to be at a ratio of 15:1 or less.

With the price of gold currently at $1200/oz (and with that price being the result of market-manipulation), clearly the fair-market price for silver would have to be a minimum of $80/oz today. In addition, in mines where silver is currently produced as a "by-product", the industrial demand for silver (i.e. the silver "credits") is still fully considered in determining whether any particular mine will be financed to go into production - but with those decisions also being based upon demand for the other metals.

Given that the price of silver has been highly correlated with most of those other metals, my analysis still holds true. However, even in a world where the gross under-pricing of silver means that there are few (official) "primary" silver mines, there are still "mining companies" able to obtain financing only for silver, but based upon polymetallic mines, where silver is officially a by-product.

Silver Wheaton (SLW) is officially classified as a "silver mining company", however what it is really is a "silver marketing company". What Silver Wheaton does is to buy-up the future production-streams of silver from other miners (where silver is a mine byproduct), and then as that silver is produced, it sells this silver onto the market at the prevailing "spot" price. Apart from the ingenuity of this business model, what is relevant is that Silver Wheaton goes to a bank for financing, to buy-up the production-stream of a particular mine - and Silver Wheaton obtains that financing based upon industrial demand fundamentals for only silver.

Thus, even in a market which has been horribly distorted through manipulation, the principle which I articulated earlier is still applicable: the industrial demand for silver is an important factor in helping the bankers suppress the price of silver. Obviously, the limiting factor in the bankers' game of market-manipulation is the amount of bullion they have to dump onto the market.

As I have pointed out on many occasions, between 1990 and 2005, official silver inventories plummeted by approximately 90%. It is simple economics that any good which is grossly under-priced will be grossly over-consumed. Faced with the abrupt end to their silver-manipulation (which would make it much more difficult to continue to manipulate the gold market), the bankers fell back upon their oldest and most-favorite swindle: they sold paper to people, and pretended that the paper represented actual silver - and thus "SLV" was born.

This is such an obvious sham that I simply lack the space to go until all of the clearly fraudulent implications of this fund, so I will restrict myself to just a couple of facets. From 2005 to the end of 2008, after silver inventories plummeted by 90% in just 15 years (due to being grossly under-priced), we are supposed to believe that inventories suddenly 'made a U-turn' - and tripled over the course of just four years.

Regular readers will be familiar with the following chart, which shows the progression of "official" silver inventories - along with the small caveat attached to the graph. These official inventories include every ounce of ETF-silver, and SLV (by far the largest silver-ETF) was created at the beginning of 2006. As of the beginning of 2009, ETF-holdings represented roughly 2/3 of total "official inventories".

Anyone with even a slight understanding of markets should recognize the obvious sham here. An "inventory" is the amount of a particular good warehoused and ready-for-sale. Conversely, the units of SLV (and all other bullion-ETF's) represent privately-owned silver which has obviously been taken off the market. As a matter of elementary logic, it is impossible for even one ounce of silver to be both an "inventory" and an "ETF". It can be one (silver-for-sale) or the other (privately-owned) but not both.

Thus, at the end of 2008, two-thirds of official, global inventories of silver were nothing but an obvious paper-sham. Of even greater interest, I have been unable to find any more-recent statements of official inventories. Apparently the quasi-official "consultant" (none other than the infamous Jeffrey Christian and The CPM Group) who produced this data has decided that it's better to simply hide all inventory data - rather than to attempt more clumsy shams of this nature.

Making this massive fraud potentially much more egregious, the supposed "custodian" for most of this silver is JP Morgan, which holds the world's largest "short" position in silver, the most-concentrated position in the history of commodities markets. In what is obviously not a "coincidence" the total size of the global short position has stayed roughly equal to the (supposed) total holdings of "bullion-ETF's". However, those massive short positions are never audited, meaning that JP Morgan (and the other bullion-banks) have never been able to show they have more than half the silver necessary to cover both their short-positions and "custodian agreements" with the ETF's.

What this directly implies is that as of 2009, as much as 2/3 of total global inventories of "silver" was literally nothing but banker-paper - and we can only assume that their massive fraud has expanded in the time that has since elapsed. While industrial demand for silver helped the banksters in their nefarious (and illegal) schemes for many years, it is now industrial demand which is certain to destroy the bullion-banks.

While a gold-investor might be capable of being duped into buying banker-paper, and mistakenly believe that the banker-paper is "as good as gold", you can't use banker-paper to make silver bearings, or silver mirrors, or silver batteries, or silver solar cells, or silver anti-bacterial products. The bankers market-manipulation has progressed from merely dumping the silver which they held, to the much more fraudulent practice of passing off their worthless paper as "bullion".

In doing so, they have eliminated the possibility of the price of silver merely "correcting". What has become totally inevitable after 50 years of constant manipulation of the silver market is that this market is poised for the most spectacular default in the history of commodities markets - even more so than in the gold market. Companies which require silver to continue the existence of their businesses will be ready to bid-up the price of the commodity to multiples many times greater than an investor merely making a discretionary purchase.

We can only assume that when a silver default occurs that it will bankrupt JP Morgan. Keep in mind that while the nominal value of JP Morgan's silver, short position is in the billions of dollars, thanks to the testimony of Jeffrey Christian at the CFTC hearings we know that this short position has been leveraged by somewhere around 100:1. Furthermore, the potential loss on any/every short position is infinite - since there is no "maximum price" which silver could not (theoretically) surpass.

As the old saying goes, "For every winner in a trade there is a loser." There must be a few investors out there who would like to get on the "winning side" of a trade with JP Morgan?


 
 
 
Is Silver Money? by David Morgan
June 7 , 2010  

Is Silver Money?
By David Morgan

July 10, 2001

SGS Note: Bold and highlights are those of SGS

I took out my Black's Law Dictionary and looked up money. Interesting when will look at the legal aspects of things. I will admit I have an old version 1968 to be exact. The reason is bias on my part. It seems the definition of things keep changing as we move forward in time. To quote Blacks Law Dictionary, Money." In usual and ordinary acceptation it means gold, silver, or paper money used as circulating medium of exchange, and does not embrace notes, bonds, evidence of debt, or other personal or real estate. Lane v. Railey, 280 Ky.319,133 S.W. 2d 74, 79, 81."

Reading further we find:
In its strict technical sense "money" means coined metal, usually gold or silver, upon which the government stamp has been impressed to indicate its value. In its more popular sense, "money" means any currency, tokens, bank-notes, or other circulation medium in general use as the representative of value. Then under that several more sites are named.

Silver has the six aspects of money in a classical sense. It is divisible, durable, convenient, consistent, has utility value, and cannot be created by fiat. Silver is used as a medium of exchange and as a store of value.

Before we get into a big argument about whether silver is money or not, I need to point out a couple of details. First, it is a recorded fact that silver has been used in more places and for longer periods of time for money than gold. Secondly, I would like to quote Nobel Laureate Milton Friedman, who stated "The major monetary metal in history is silver, not gold."

Quoting from the Silver-Investor.com web site: It is impossible to write about silver without evoking emotions, although it is my goal to be as objective as possible. There are very strong views about this metal both positive and negative. One such area involves the silver as money issue. The facts are that precious metals are rare, fiat currencies can be printed at will, and have always been abused.

My projection for the ultimate price of silver would be meaningless, but the facts surrounding the value can be objectively studied. In the end we all have a vested interest in the monetary system holding together. Precious metals are a barometer of world financial health. If gold and silver start moving up in a manner similar to 1979-1980, then the paper money game is essentially finished . Will this happen? Objectively, I do not know! However, I do know, throughout all of recorded history when a country has adopted a monetary system founded on edict (fiat), the nation has had a financial collapse. As we enter the next Millennium, remember the gold window was closed in 1971 and for the first time in history, the reserve fiat currency is worldwide phenomena.

The price of silver is a function of the understanding of the market itself. When the market understands that money based on unsound principles cannot help but fail eventually, then the true value of silver will be determined. Until that time arrives it is prudent to prepare some savings in the form that best retains value.

It would be of tremendous importance to everyone if I were able to predict one event in the investment world that had a 100% certainty of being fulfilled. I cannot, however here is something to ponder. All fiat currencies have eventually reached their intrinsic value of zero. This implies that the dollar will reach zero as well. Now, we currently are under the influence of a "strong" dollar. We must ask ourselves; strong relative to what? If the Federal Reserve admits that today's dollar is worth the equivalent of five cents in 1913, we have lost 95% of the purchasing power. So I ask how strong is today's dollar? Is the dollar's strength based upon the restraint of the printing press, the rate of return ( interest rate), the productive capacity of the people, or faith?

Now, take the time to look at your "money" be it coin or currency. You will notice that all have the statement "In God We Trust". Are we to put our trust in Mr. Greenspan, the Fed, or any political affiliation? Or are we to trust the source? Before, I am accused of going religious on my readership, let me make my point. The source of all wealth is land. If you believe God created the Earth fine, if not fine, we all can agree we live in a physical universe and land composes part of the Earth's character. Let me repeat myself, the source of all wealth is land. That is an interesting concept is it not? Gold and silver are mined out of the earth, many foodstuffs are grown in soil, houses , apartments , and shopping centers are built on it. In fact most of the list of commodities are derived from the land in one way or another, from soybeans to cotton, from sugar to copper. However, there is one subset that trades on the commodities exchanges that are the sole creation of man- fiat currencies, bonds, notes, and bills. (Not money according to Black's).

The world has entered into a great economic shift from paper assets to hard assets. This cycle repeats itself and now is the time when investors should be or should have liquidated their stocks and bonds and begun to accumulate physical commodity type assets. This is the real thing, commodities cannot and will not go bankrupt, there is real tangible value and most commodities are required by mankind.

Now we have some insight into where we are in the economic cycle between paper assets and physical assets. What takes place at the end of great inflations? What does history teach us? Actually, at the end of the inflation two interesting things happen. First, real money as defined above begins to appear in the market for everyday transactions. Almost anyone on the internet is aware gold can and is used for transactions through e-gold, GoldMoney and a few others. Once a person or business has enrolled with an internet gold holding company transactions over the internet can be made using gold. There are also some actual warehouse receipts being used by NORFED and Millennium Money. These warehouse receipt are exchangeable by the bearer on demand for actual silver or gold. The receipts themselves can also be used to purchase everyday items.

The second issue is that man made instruments are exchanged for real wealth at an accelerating rate.Those that have saved U.S. "dollars" decide to buy something with them. The problem is that once this transfer begins there is not many places to find safety. Because money represents something that can be use presently or stored for future use this shift becomes very intriguing. Although the major shift is into commodities, which of the commodities are able to fulfill the ability to be spend presently or store value for future use?

Yes, land and real estate can and will be used, but land is not very liquid. The only real places to transfer the financial asset class is into the metals.

What would happen if one of our foreign exchange partners running a balance of trade surplus decided to use some US dollars ( bond holdings) to buy real wealth? It would have to funnel money into the area slowly because too big a buy at one time would move the market a great deal. Once this shift was seen by the market the tendency is for others to follow.

Mexico is considering using its silver as a financial store of value. Some banks actually offer their customers money as defined above. This is a noble and valiant act. Some economists in Mexico have argued that the Mexican people have imported about as much U. S. paper as ever need and it might be wise to recycle this paper.

Grupo Elektra, quoted on the NYSE under symbol EKT, and Banco de Mexico, Mexico's Central Bank, have signed a contract authorizing Grupo Elektra as a distributor of Banco de Mexico's "Libertad" one ounce silver .999 coin, which has no face value and is legal tender under certain circumstances.

Grupo Elektra operates 550 stores throughout Mexico. It will initiate operations in silver sales and repurchases from the public at five stores in the Cuernavaca area, for the purpose of gathering experience in this field, which is new to the company. National expansion will follow shortly thereafter.

An interesting question to ask yourself is "When or under what circumstances would silver ( or gold) be the most valuable? This question poses some interesting aspects because it tests your own belief system. Do you trust the government or the source? The most important time may be when the man made asset class loses value and is shunned in favor of something real. Since there are too many paper claims outstanding versus the amount of silver or gold available not everyone will be able to shift into a financial asset that has stood the test of five millennia.

Sooner or later, nearly everyone everywhere will catch on to the fact that the currency game is drawing to a close, that all fiat currencies are doomed. Action in the marketplace, suggests this recognition is spreading; using gold back internet currencies, and the potential for a major silver producer (Mexico) to encourage its people to obtain value based money. A flight from all national currencies into real values is developing and will gain momentum. Ultimately people not government determine what money is and what money is not.
 

 

Other Articles of Interest

Peter Schiff
STILL JUST A BABY BULL


David Morgan
THE SIGNIFICANCE
AND SANITY
OF SILVER AS MONEY


Aubie Baltin
HOPE VS. REALITY


Ruth Emory
COULD SILVER CATCH UP WITH GOLD?



 


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Quote of the Day

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: 'Account overdrawn."?


Ayn Rand in 'Atlas Shrugged'

 


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A Silver Shortage?
Money manager predicts the price of silver to skyrocket on industrial growth.


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Gold and Silver Price Manipulation Efforts Failed This Week by Patrick Heller
June 2 , 2010  

Gold and Silver Price Manipulation Efforts Failed This Week
By Patrick Heller

Again I remind you that the price of gold is actually a report card on the value of the US dollar, and the American government and economy. A rising gold price indicates growing mistrust in the safety and stability of the dollar, falling confidence in the competence of the US government, and heightened fears about the strength of the private financial sector.

Such concerns were certainly not allayed when it was recently widely reported that, for the first time in history, the majority of Americans now depend on payments from government as their "income" rather than obtaining their sustenance from the private sector.

Because of this inverse relationship between the price of gold and public confidence in the value of the dollar, the US government can derive huge benefits if gold's price is suppressed. Among the benefits are lower interest costs paid on Treasury debt and lower payments on entitlement programs tied to the official inflation rate.

As federal government documents have been declassified and released to the public, it has been confirmed that the US government has intervened to manipulate gold prices starting as early as the end of World War I. In a letter to the Gold Anti-Trust Action Committee, Inc. (GATA) dated September 17, 2009, Federal Reserve Bank governor Kevin M. Warsh confirmed that the Fed has gold swap arrangements in place with other central banks, one of the means by which gold prices can be manipulated.

The tactics used to suppress gold prices have long become so blatant that professionals in the gold commodity trading pits can easily identify the times when prices are being manipulated.
One event where gold prices are regularly suppressed is at the monthly expiration of gold and silver option contracts. There are two different expiration dates each month. Normally, the COMEX options expire on a Tuesday followed the next day by the expiration of Over The Counter (OTC) options contracts. The larger options market is on the COMEX, though there are ten to fifteen banks and brokerages in New York, London, and Zurich that make markets in the OTC contracts.

Up until they expire, call options give the owners the right to demand delivery of the gold or silver at the contract's strike price. Should the price of gold rise above that level (referred to as being "in the money"), owners of call options can pay the strike price and other expenses and demand delivery of the physical gold from the party who sold them the contracts. Should this occur, that would squeeze gold supplies as the gold inventories on the COMEX are only sufficient to cover a small percentage of outstanding contracts. A supply squeeze likely would have the impact of pushing up prices.

The COMEX options expired this week on Tuesday. As I had predicted last week, the prices of gold and silver were suppressed below the strike prices where there were the largest number of call options-gold at $1,200 and silver at $18.00.
The pattern for the past several months has been for gold and silver prices to be suppressed until after the OTC options expired upon the close of the COMEX the next day. Once the monthly options have expired, the pattern has been for a quick recovery in both gold and silver prices.

That is not what happened this week. The first part of the manipulation to keep gold below $1,200 and silver under $18 through Tuesday's COMEX close was successful. However, almost as soon as the COMEX closed, gold and silver prices climbed above those levels.

On Wednesday, it looks like the US government, which largely acts through its US and foreign trading partners, was unable to push down gold and silver prices below the critical $1,200 and $18 at the COMEX close! Where this manipulation tactic has worked for many months in a row, this time the surge in demand for physical gold and silver overcame the resistance.
The failure this week of these manipulation efforts is a huge signal that we are closer to the day when the floodgates will give way and we see gold and silver prices surging more quickly and by greater percentages than we have seen in decades. Once again, I recommend that you not wait to protect your assets with some physical gold and silver. Most forms of bullion-priced physical gold and silver are still readily available at attractive premiums. I don't know how long I will be able to keep saying so.

Crimex Supply Update
by Greg Maurer
June 2, 2010


Harvey Organ's - The Daily Gold (see link in side column) released updated June Gold delivery numbers today. The Gold warehouses at the CRIMEX may be in far worse shape than suggested in my post yesterday:

There were 665 delivery notices issued in the JUN gold contract. The JUN gold delivery notice total for the month is 18,230 notices or 1,8230,000 ozs. (The Comex report on Friday apparently was not a typo there is truly a massive amount of OI standing for delivery!). Deutsche Bank issued none and stopped 46, JPM issued 66 and stopped 297, Barclays issued 408 and stopped none, while BNS issued 0 and stopped 17.

Now Ladies and Gentlemen, I can put the puzzle together for you.

On Friday, the OI announced at the conclusion of trading was 1.3 million oz of gold standing. The only thing left out was options exercised. These extremely smart players receive a futures contract and then they make a decision as to stand or roll to a future contract. Generally if you exercise an option you stand for delivery.

Also, you will recall that gold OI dropped by a massive 24,000 contracts. Most commentators thought it was massive liquidation. I did not buy this as demand for gold is going through the roof.

So why would intelligent traders cash in the newfound gains in gold. I thought that maybe the longs were offered a premium and roll to the next big month of August.

However the volume was just not there.
I had a lot of trouble figuring out the data.
Now I know what happened:
The big drop in OI in June was due to the massive standing of longs for physical gold:


1. The Friday OI of 13,000 contracts or 1.3 million
2. The exercise of options by gold holders. They were not fooled by the lowering of the gold price by the cartel banks...and then the subsequent loss of 24000 OI gold contracts due to the fact that these guys stood for and received their delivery slips. Only the almighty will know if these delivery slips have real gold in them or they are just a piece of paper with no gold behind them.
Thus so far, 18,230 contracts of gold have been served upon. If this is not a typo then this is a massive amount and my bet is that this will surely bust the Comex.

Other Articles of Interest

Harvey Organ The Daily Gold

Greg McCoach
Gold & The US Dollar

"Ownership of gold and silver - along with the quality precious metals mining shares - will become one of the hottest investments on the planet."


SHTF Blog
Gold and Budget Deficit

"America's Founding Fathers were great men. They put America on a gold standard and made her rich. But the leaders of the early-to-mid-20 th century were liars and frauds. They are a group of counterfeiters who rob from the poor to give to the rich. Are you going to listen to them or their minions telling you to buy stocks? Or are you going to listen to me and my fellow gold bugs telling you to buy gold?


Gerald Celente
No Time To Gamble Now

"The only safety you will find over the course of the next 5 years will be in hard, tangible assets like precious metals, energy and food."


Lew Rockwell
Guarding Your Money from Government Onslaughts


"Hey! Maybe that Horse's Butt Mogambo (HBM) was right about that buying gold thing that he was always yammering on about! And it looks like he may be right about silver and oil, too!"


 


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Quote of the Day

"If, from the more wretched parts of the old world, we look at those which are in an advanced stage of improvement, we still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised, to furnish new pretenses for revenues and taxation. It watches prosperity as its prey and permits none to escape without tribute."


Thomas Paine-Rights of Man

 


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Clarke and Dawes ask the million dollar questions ABC News Australian Broadcasting Corporation



 

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This is not all the story:

There are 6497 contracts still remaining to be served or 650,000 oz of gold:

The open interest in JUN gold is 6,497 contracts or 0.65 Mozs.

Thus total amt of gold standing for June is 650,000 oz (left to be served) + 1.823 million oz (already served) + 204,000 oz from options exercised in May = 2,677,000 oz of gold.

Adrian Douglas comments on the deliveries with respect to gold:

The open interest in JUN gold is 6,497 contracts or 0.65 Mozs. With the delivery notices issued the total gold standing for delivery could be 2.5 Mozs. BINGO! This is 77% of the dealer inventory of gold! We have never seen anything like this before. This is stunning. I don't see how the dealers are going to handle this demand. They will be left with almost nothing. This could be the breaking point for the Comex. Watch this space.


Cheers,
Adrian

This is about as serious as it gets now for the bullion banks. The potential for a MAJOR short squeeze in Gold may be looming. With the potential now to wipe out 3/4 of the CRIMEX Gold, it will be impossible for the CRIMEX goons to keep up the charade they call a Gold market. It's bad enough that they have been allowed by government regulators to continually sell Gold they do not own under the pretext that less than 1% of the contract holders stand for delivery. With virtually no Gold in the CRIMEX warehouses, even the appearance of a legitimate market in Gold will be impossible. Let the countdown begin!

 
 
 
The Future of Money by Jon Rappaport

By Jon Rappaport
Author of the LOGIC AND ANALYSIS COURSE


In this piece, I'd like to focus on one factor. When governments spend more than they have, they become debt-based governments.

This is like saying, if the river rises over its banks there will be a flood. It's so obvious, why bother to mention it all?
Well, because many people don't really understand what debt means. It means, among other things, that you can't keep borrowing indefinitely to pay off what you owe.

In other words, at some point, the lenders are going to dry up. They're going to run screaming into the night and they won't leave a forwarding address for you. You owe too much. They don't want to have anything to do with you. If they were bookies, you would have already had your knees cracked with a baseball bat.

Governments, however, have some kind of misplaced faith that, if they keep funding programs "the people want," the day of reckoning will never come. They can allot money for this and that and this and that, and because this and that are deemed to be worthwhile, it doesn't matter.

If you try to figure out where this attitude came from, you won't find it in the Constitution. You'll find clues in the notion that politicians get elected by promising goodies, though.

A close analysis indicates that "freedom," which is delineated in the Constitution, is not the same as "free stuff."

We now see that governments all over the world are realizing they can't live forever as debt-based entities.

So what's next?

I believe we will observe a growing Voice that asks for a global currency. One currency for all nations. This is no revelation. It's been coming for a long time. However, it helps to have a debt crisis that seems to require the one-currency-fits-all answer.

And in the process of shifting to a single planetary currency, there will be "debt eradication." This will be folded into the plan-because somehow the insupportable financial obligations of governments have to be dealt with.

Such a plan will have to involve corporations. Why? Because companies like Goldman Sachs presently underwrite government debt. Meaning? These companies guarantee that the bonds which governments float, in order to keep borrowing, are, well, OK. The bonds are "good." The bonds are safe. The bonds can be bought without an unacceptable risk.

And what on earth gives Goldman Sachs the idea that such bonds deserve to be guaranteed? I asked several "experts" that very question. The answer I got was this: Governments tax the people; the taxes keep rolling in; governments have a reliable income stream.

That's it? That's the answer? It didn't add up to me, because, despite raking in money by taxing citizens, governments are spending far more than they should. In fact, that's why they have to keep issuing those bonds.

It seems to me this is yet another one of those crazy schemes, like selling mortgage-backed derivatives, that lasts as long as people don't ask too many questions. It's a rain-soaked cliff waiting to collapse, and people are still spreading out blankets and having picnics on the cliff, and developers are building condos and roads there.

The shift to a single world currency would be a complex affair, and banks, investment houses, national treasuries, governments, and tons of lawyers would have to work it all out.

Something would have to be done to accommodate the global currency-trading markets, too, where presently gargantuan sums are flowing every day, as gamblers speculate on the value of the dollar versus the pound, the yen versus the dollar, and so on. That whole market would be destroyed if these national currencies disappeared.

No doubt the one-global-currency scheme has been on the drawing board for some time. Major players have been working on how it would be accomplished, and who would get what payoffs.

Insupportable government debt and the inability to provide the panoply of government services would be one reason given for The Great Money Revolution.

It's a little like this. You're out on a field where you play baseball on a regular basis. Your team is losing every game, on and on. So one day, in the fifth inning of a game, you take your bat and your ball, and you say, "This is a bad thing. Baseball is bad. We have to make a change. We're not going to keep score the same way anymore. We're going to have a new game…"

A few people call you a bad loser. And you say, "You're wrong. I just want to make things more fair, more equal."

We already have a model for debt eradication. The IMF, the International Monetary Fund. It tends to go into Third World countries and relieve a bit of pressure on their monstrous government debts-with conditions attached. These governments will basically have to sell off many of their functions, like water and electric utilities, to outside corporate interests. Privatization. In the process, rates are hiked. Government budgets are downsized.
It's possible that a new world currency would entail some of the same "austerity measures," from Nome to Tierra del Fuego. A general lowering of the standard of living. An ever-widening gulf between the rich and the poor.

And of course, with the institution of one global currency, money would become much easier to track and tax. Money would become much more "public." Or to put it another way, only favored individuals and groups would be able to fly under the radar and transfer and launder billions and trillions.

I make all these points to illustrate how far such a plan would bring us from the notion of Constitutional government laid out at the beginning of the American Republic.

That long road has been paved and constructed with debt. Debt becomes the reason why the road to a Brave New World has to end up with an overall global management system that is both economic and political.

Therefore, as many have pointed out, those men who long for exactly such a global management system would conclude: Any strategy to pile insupportable debt on governments is a good strategy.

Under the rubric of "more free services for more people," debt is easy to create. Along with war, it's a slam dunk.

You may have noticed that, in America, more and more people are talking about limited government these days. People are realizing that the Framers of the Constitution weren't just whistling in the dark.

Other Articles of Interest

The Keynesian Race to Bankruptcy
By Gary North

Confidence in the euro is falling because it is becoming clear that the region's commercial bankers have made the same sorts of bad decisions that American commercial bankers made after 2000. They loaned money to debtors in Eastern Europe who will not be able to repay. These loans were collateralized by real estate, which rose. Real estate prices in Eastern Europe are now falling. The bubble has popped…. Read more


A Brief History of Money
by Jason Hommel

In all of history, wherever paper money has been issued, its value has eventually gone to zero. Its intrinsic value is nothing, and the dollar is no exception. The value of silver and gold is timeless, and cannot go to zero. They are metals that will always be precious and will hold value… Read More


Deficit Financing" and Inflation
Ludwig Von Mises


I assume that you know how the banking system developed and how the banks could improve the services rendered by gold, by transferring assets from one individual to another individual in the books of the banks. When you study the development of the history of money you will discover that there were countries in which there were systems in which all the payments were made by transactions in the books of a bank, or of several banks. The individuals acquired an account by paying gold into this bank….Read More

 


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Quote of the Day

"As a very important source of strength and security, cherish public credit. One method of preserving it is to use it as sparingly as possible, avoiding occasions of expense by cultivating peace, but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it; avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon our posterity the burden which we ourselves ought to bear."


-George Washington
Farewell Address

 

 


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Gary DeMar response to Congressman Anthony Weiner accusation of Glenn Beck and other conservatives of fear mongering to get people to invest in gold.


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The people who are now defending limited government are, in fact, willing to discuss these First Principles. But the other side is doing everything it can to avoid that discussion.

Why? Because a fundamental debate would open up the, yes, underlying philosophy by which these Big Government advocates operate. The debate would expose the various levels of transference-in which freedom becomes free stuff. And free stuff becomes un-payable debt. And un-payable debt becomes the familiar face of friendly fascism.

I mention this because governments invest money they drag in from taxing the citizenry. Through pension funds, for example, they are major investors in the stock market. Do we know how well such investments have been performing? Is it possible that some state governments are swimming in cash and are falsely crying poor? If that turned out to be the case, then the notion of "insupportable government debt" becoming the lever for a new currency would take on additional meaning. It's an issue that shouldn't be ignored, and I don't see governments releasing comprehensive financial reports that any citizen can read and understand.

Jon Rappoport is the author of LOGIC AND ANALYSIS, a course for high school students and adults. He has been working as an investigative reporter for 25 years. Nominated for a Pulitzer Prize early in his career, he has published articles in LA Weekly, Spin Magazine, Stern, CBS Healthwatch, and other newspapers and magazines in the US and Europe. At Amherst College, where he graduated with a BA in philosophy, he studied formal logic under Joseph Epstein, a revered professor of philosophy. Mr. Rappoport can be reached at qjrconsulting@gmail.com His websites are www.nomorefakenews.com and www.insolutions.info

 
 
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Gold and Procrastination by Dr. Gary North

Gold And Procrastination
By Gary North


Beginning in late 2001, I began recommending that my readers buy gold. I have continued to make this recommendation every year since then. When I first made it, gold was selling for under $300 per ounce. Today, it is above $1,200 per ounce.

I wonder what percentage of my readers have taken my advice and put a minimum of $10,000 in gold coins. I would like to think 80%. I hope it is at least 4%.

Some people have bought IOU's to gold issued by some firm that promises to pay investors fiat currencies. The payment will be made in digital money, not gold.

The commodity futures market is a system of IOUs. Overall, about 1% of these contracts result in actual delivery of physical commodities. Gold is no different. People who buy IOUs to gold are buying promises to pay fiat money, not gold. Read the contract. See if the company is allowed to substitute fiat money for gold.

There are a few thousand local coin companies in the United States. Most of them deal mainly in stamps and baseball cards, not gold bullion coins. Collectors are their main clients. There are usually people with interests in specific coins, not gold coins as such.

The few American companies that specialize in selling bullion gold coins have a few thousand clients each. This, in a nation of 100 million households.

In a crisis so severe that (say) 10% of these households decide to buy a single one-ounce gold coin, there is no way that they will be able to do this. There will not be enough telephone lines and salesmen to take their orders. There are not enough salesmen to take orders from a million homes.

In other words, there is no way that a gold coin standard could come into existence fast enough to solve the problems created by mass inflation, let alone hyperinflation. When the crisis hits, it will be too late.

There would be no way for the United States Mint to produce enough gold coins to meet demand. Whenever there is a big move in gold's price, the Mint stops delivery of coins to dealers. The Mint says that it does not have enough blanks to produce enough coins to meet demand. This is marginal demand, not a million people trying to buy one coin.

The Mint has no incentive to buy new presses and new blanks -- planchets -- for the coins. The Mint does not pay its employees a commission for coin sales. Most people's jobs there are protected by Civil Service. What if demand is short-term? What happens then to the career of some senior officer who ordered the new presses? In contrast, nothing negative will happen to anyone's career for not buying new equipment.

Think of Europe, Australia, and the Chinese middle class. What if 10% of them wanted to buy just a single one-ounce coin? The same problem exists in every nation. There is no distribution channel large enough to handle what I would call marginal demand. Such demand is marginal in terms of the net worth of buyers. It is marginal in terms of the number of investors in all asset classes. But it is not marginal in terms of the number of new buyers of gold coins. It would short-circuit the distribution system.

I am a believer in owning gold coins. That is to say, I do not trust the IOUs except as speculative vehicles to make fiat money. These IOU's are not IOU's for gold. They are IOU's for digital money. There are vastly more IOU's written for gold than there is gold ready to deliver: probably 100 times more. Here, I am speaking of gold bullion bars. As for bullion gold coins, there might as well be none, as far as the average guy would be concerned in a currency crisis.

If an outfit has a bonded warehouse with segregated gold accounts, fine. But will the firm deliver physical gold? Find out.

This is why procrastination is unwise. The person who procrastinates thinks, "I can always buy some coins." He will not be able to. He thinks, "I can beat the rush." He can't. He will get the urge to buy gold when millions of other people do, too. The panic will hit far more people than there are coins available.

Anyone who knows the gold coin market can tell you this. I have watched it since 1965. I see the same retail sellers today as then . . . and not many more.

Camino Coins in Burlingame, California has been around since about 1960. Investment Rarities in Minneapolis began in the early 1970's, as did Monex. Franklin Sanders (the Moneychanger) began in 1980. Don McAlvany has been selling coins for over 30 years. Then who are the new kids on the block? There aren't many. Of those who sell coins and deliver them, there aren't any. (I am not speaking of companies that say they buy coins and store them for a fee.)

This is a cottage industry. It's not like Wall Street, where hedge funds come and go. This is what we would call a mature industry. "Geriatric" is closer to it.

If there were widespread interest in buying gold coins, there would by now be a developed supply chain. As gold has risen from $257 in 2000 to today's price, companies would have come into existence to meet demand. There has been no increased demand. Gold goes higher and higher. People read about it, but they do not take action.
An American waits to buy gold until his brother-in-law buys gold. Few people are early buyers in any market. But, in the case of gold, almost no one ever becomes an early buyer. To buy gold is to short the dollar. To buy gold is to conclude that Congress will eventually ruin the currency. This means that the promises of Congress are not reliable. Very few Americans can bring themselves to believe this. So, they remain on the sidelines.

NO EMOTIONAL RESPONSE
The amazing fact is that tens of millions of Americans know about gold. They have seen the price rise, and they have sat on the sidelines. They have not connected the rising price of gold with a profit opportunity. They have not thought, "I really ought to get in on this." Higher and higher gold's price goes, but emotionally, this fact does not register.

This is equally true in Great Britain. A decade ago, as Great Britain was selling half of its gold hoard at under $300, gold got a lot of attention. It was the end for gold in the world's monetary system, the experts said. The Chancellor of the Exchequer, Gordon Brown, issued the order to sell. This was big financial news. Brown's decision has cost the Bank of England something in the range of $10 billion, but nobody in Great Britain has cared. The issue is not on anyone's radar screen, despite the fact that the British electorate goes to the polls this week to decide Brown's political future. His recorded comment about some woman's supposed bigotry has cost him millions of votes. But his liquidation of half of the nation's gold is a non-starter, and has been for a decade.

Here is a unique situation. An investment asset keeps rising, but investors pay no attention.
What is the problem? There is a war on gold, and the government and central banks are behind it. They tell people that gold is a loser's investment, that there is no shortage of gold at yesterday's price, that gold will soon fall. Worst of all, it doesn't pay interest -- rather like excess reserves at the Federal Reserve these days. But that has not kept commercial banks from piling up $1.2 trillion of excess reserves.

People do not mentally connect their lives with gold's price. If they had bought gold in 2000, they would be buying more today. Why? Because they would understand that gold's price is important for their future. But they did not buy gold in 2000, so its price is a kind of curiosity for most people. People do not invest in curiosities.

In India, gold is not a curiosity. It is an integral part of the culture. Gold jewelry serves as a dowry gift. Fathers begin saving money to buy their daughters gold from the time the daughters are born. This makes the price of gold a topic of intense personal interest in India. The price of gold impacts millions of families' net worth. It does so far more than the price of stocks impacts American families' net worth.

An Indian in a village may not be literate, but he knows about gold. He may not have any idea how the futures market works, but he knows how the gold market works. He does not accept an IOU for gold as a substitute for gold. He does not provide his daughter with an Exchange Traded Fund (ETF) certificate for gold on her wedding day. He could not be fooled into thinking that an ETF in gold is the same as gold. He would regard such an assumption as ludicrous -- something that Americans might believe in, but not anyone with common sense. What is common sense in India? "He gets my money when I get the gold."
The poor villager did not attend Harvard Business School. He does not work for Goldman Sachs. He imagines that businessmen might write IOU's for gold when they don't own any gold. Then they might take the money obtained from the IOU and use it to buy something else. When presented with the IOU, the debtor might plead poverty. He might declare bankruptcy. He might disappear. He might pull a Lehman Brothers routine. The villager, not being a sophisticated man, is not taken in by Harvard Business School grads, with their computer models.

So, the villager is protected by centuries of tradition. He learned from his father what stupid people do with their money. His wife still has her dowry, unless the family had to sell it in an emergency. There is no FDIC in India. There is no line of fiat money credit to India's non-existent FDIC from Congress. The Indian understands that a dowry in gold, not an IOU from a bank, is reliable in good times and bad.

The Indian has an emotional commitment to gold. So did his father. So did his grandfather. The American does not.

The American trusts the promises of the Federal government. He is emotionally committed to the Federal government. He is convinced that a political promise from Congress is better than gold. He believes in his heart of hearts that the Federal government would never break its word. Social Security will be there in his old age. So will Medicare.

The Indian peasant has no comparable faith in civil government. He has seen it in action for too long. He does not trust the Indian currency. The currency is useful for buying gold.

An Indian father makes his purchases when he can. He pays attention to price. He may think, "I will buy gold when the price falls." Then he does exactly that. The American thinks, "I will buy gold when the price falls." He thinks this again and again. He never buys any gold.

THE TEA PARTY MOVEMENT
The Tea Party movement is not yet serious. How do I know this? Because most of the members of the Tea Party movement refuse to buy gold coins. How do I know this? Because I can call a coin store and get through. I can order coins. If the Tea Party people were buying coins, the coins would sell for a big premium over the bullion price.

Anyone who says he is a member of the Tea Party movement who does not have at least a one-ounce gold coin is not serious about the threat of Congress to his future. He believes that Congress will come to its senses. He believes that politics will roll back Federal spending. But the killer Federal expenditures are Medicare and Social Security. They, all by themselves, will bankrupt the U.S. government. The Tea Party movement has not demanded the abolition of Medicare and Social Security. Thus, it is still living in fantasy land, deficit-wise.

Tea Party members think their efforts will be successful in rolling back government spending, yet Medicare and Social Security are sacred cows, to use a concept imported from India. Tea Party members are supposedly at least 10% of the voting population, with another 15% sympathetic to it.
Until these people finally realize that Congress will not change, that the Federal deficit will escalate, that this Federal debt will absorb more of the nation's capital, they will not call a coin dealer and order gold or silver coins.

They have faith in the political system. But the size of the deficit testifies against such faith. Until these people face reality and buy some coins, they will remain sheep to be sheared.

They will wake up at some point. When they do, they will try to contact a coin dealer. Unless it is a local dealer that makes its money selling baseball cards, they will get busy signals.

The Mint will declare a holiday. The coin premiums above spot (billion) price will go to 30% or higher.
There is no way that every member of the Tea Party movement can buy just one one-ounce gold coin.

The coins are not there.

In a panic run-up of the gold coin premium, existing holders will be buying more. They will call a dealer. The dealer will get back to them . . . maybe. Who do you think a dealer will call back? A new buyer who may only want one coin, or an old client who is ready to buy 10 coins, 20 coins, or more?

The newcomers will want in, and they will not be able to get in. What effect will this have? Mania.

It's when people are told, "You cannot buy" that they get frantic.For as long as they can buy, they don't buy.

Then, when they are told they cannot buy, they will pay anything. That is when you do not want to buy. Only you will.

You must prepare yourself for this. The only self- defense strategy I know of is to buy when you can and sit tight (or even sell) when you can't buy.

From the S&GS Mailbox

There are some inquiries that we receive repeatedly from our customers. We respond to these questions individually, but we felt that some of the answers might be informative for everyone.

Investment Paradigms
One of the first hurdles you will encounter as an investor in physical precious metals is that of trying to decide 'which product should I buy?'

To decide this question, you need to answer the question, "Why am I investing in precious metals?"

Some common answers:
1) To preserve my wealth
2) To grow my investment
3) To collect as a hobby
4) To have an alternative 'currency' in the event of economic disaster
5) To hedge against inflation
There are no 'wrong' answers, but your objective will determine what product(s) you select.

Precious Metals as a Store of Wealth & Hedge against Inflation

Generally speaking, all precious metals, regardless of size, shape, form, etc. have been a traditional store of wealth throughout history. Gold, silver, palladium, etc. all have high intrinsic worth. Silver, more than gold, has high industrial value, which has grown exponentially in recent years due to the application in clothing, technology, medicine, and other uses. (see Many Uses of Silver) Also, during period of fiat currency devaluation and inflation, precious metals provide a 'safe haven' against the volatility of paper money.

Products - all types suitable, driven only by investor preference, and price points.

Precious Metals as an Investment

Depending upon the market at any given time, they have not always been a means of growing an investment. We are currently experiencing a bull market in precious metals, however; one whose end no one can predict with 100% accuracy. Most experts agree, however, the likelihood of it continuing for several years.
With the ongoing printing of excessive amounts of paper money, many economists believe this will cause currency devaluation and hyper-inflation, both of which will cause investors to lose money in one way or another. During these periods, silver and gold increase in value - which is really only a reflection of the devaluation of paper fiat currency.

For example, if an ounce of gold is worth $1000 in fiat currency today, and tomorrow the value of fiat currency decreases, the value of gold must rise just to maintain its value in relation to the fiat currency. This is, essentially, what happens during inflation. It's the paper fiat currency that is fluctuating in value, NOT the precious metal. This is also why governments are anxious to suppress the price of precious metals; because they are a canary in the coal mine reflecting the truth of what is happening with fiat currencies and the confidence of investors.

Products - all types suitable, driven only by investor preference, and price points.

Precious Metals for Collectors

Those who collect coins as a hobby do so with the anticipation that their value will rise due to the various market factors that are involved. This is known as 'numismatic' value and is driven by year of minting and how many coins were produced, condition, quality (proof or burnished), popularity and other factors. Numismatics is the study or collection of currencies… So this type of investor would prefer legal tender as opposed to bullion. These coins carry higher price points than bullion; and in an economic crisis could be used, like bullion, for barter. Their 'numismatic' value, however, in such a situation may become a moot point, and the investor will have paid more up-front to obtain them.

Products - Silver and Gold American Eagles, Canadian Maples, African Krugerrands, French and Swiss Francs, etc. according to investor preference.

Precious Metals as Alternate Currency

Depending upon the circumstances and situations, most precious metals can be used in barter. Larger denominations are just more difficult to use due to their higher value and challenges making 'change'. They are also heavier to carry around. Some rounds or bars are more recognizable due to their popularity, some are more popular due to their attractive design work. All reputable pieces should carry the assay value and denomination (e.g. 1 troy oz, .999 fine silver)

Products - 1 troy oz & fractional pieces, divisible bars & rounds will do best.

PRODUCT PROS & CONS

Ingots

Pros: Varying Sizes from 5 oz - 1000+ oz bars.Lower cost

Cons: Less attractive, harder to liquidate or use in barter situations. Can be made into coin/bars by a mint, but subject to minimums.

Minted Bars

Pros: Varying sizes from 1 oz - 1000+ oz. More attractive, more usable in barter due to recognizability. Divisible designs more usable in barter.
Cons: Not as commonly used or as recognizable for currency as rounds. Slightly higher cost over ingots.

Minted Rounds

Pros: Varying sizes from 1/10-5 oz. More attractive, more usable in barter due to recognizability. Fractional pieces & divisible rounds good for barter. Prices are competitive in the marketplace. Lower priced than Legal Tender Rounds. Many designs available for investor preferences. Most common, recognizable.
Cons: Slightly higher priced than ingots. Fractional pieces higher cost due to strike fees

Strike Fees

Denominations of less than 1 oz are known as 'fractional' pieces. When a mint makes a coin or round, they strike a blank round of silver or gold with a die. Mints generally charge a fee per strike to make a coin. If they are making 1/2 or 1/4 or 1/10 rounds, they are striking 2, 4, & 10 blanks (respectively) per ounce instead of 1 blank per ounce. Therefore, the cost of production of fractional pieces is higher.


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A government which robs Peter to pay Paul can always depend on the support of Paul.


George Bernard Shaw (1856-1950)

 


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CONCLUSION
I am preaching to the choir. What I have found over the years is that the choir pays less attention to the sermon than the walk-in does.

The walk-in has a reason for walking in. He has a problem he is grappling with. He wants a solution. He walks in to hear if the pastor has a solution.

The choir has heard it all. "Nothing new here!" The choir is content. Things are going great for the choir.

Then disaster hits. The choir thinks, "I had better go to the pastor to talk about my problem." At that point, there are no openings. People have to schedule an appointment.
Being in the choir lets people find out about problems. It does not usually lead them to begin to solve these problems. "I've heard that before" is the great producer of procrastination, until the day the crisis hits. Then it is the great motivator. "I knew! I knew!"

Too late . . . at 2% above spot price, anyway.

 
 
 
Why Are People Buying Silver And Gold? by Jason Hommel

Why Are People Buying Silver And Gold?
By Jason Hommel

Many people today are cashing out their CD's to buy silver and gold. Why?

The obvious.

The CD's pay next to zero interest, and gold and silver continue to head up by 20-30% per year.

Most of our gold and silver buying customers have completely lost faith in the government's ability to "run" the economy, but more than that, there is a real fear of the government today, that it will turn dramatically totalitarian and that we will lose nearly all of our freedom.

The best time to own gold is when the government starts taking more of your money. Silver and gold ownership prevents government from confiscating your wealth through inflation, and more and more people see the inflationary threat of massive $2+ trillion deficits, which are being met by printing more money.

A typical first time customer comes into our coin shop at the JH MINT, and says, "Hey this place looks really nice!" We designed it to look a bit upscale, with plenty of room to hang out, with nice couches to be able to sit down to talk.

They typically say, I've been doing a bit of research online about silver and gold, but I really know nothing about silver and gold, so what can you tell me?

To answer in person, I must get to the point quickly, as other customers will soon come in next.

So I like to show them, and let them hold a gold coin, and let them compare the heft and weight compared with a silver coin. Gold is twice as dense as silver, and the difference is easily discerned when you hold them. A 1 oz. gold coin is just a tad thicker than a half ounce silver coin, which is a bit thinner, and much, much lighter. Since silver is 1/2 the weight, a similar sized silver coin, gold plated, would be about 1/4 of the weight of a gold coin!

Thus, the brass or copper core, gold plated, "authentic replicas" as sold on TV make a beautiful comparison to show how difficult it is to counterfeit gold.

So when they hold gold, they know it's something real, and real special.

People continue to ask, "Which is better, silver, or gold?"

I tell people, we like silver best, because it's a much smaller market.

World annual silver mining is about $10 billion, but world annual gold mining is about $80 billion.

But most of the silver market is consumed by industry, as silver is used in all sorts of electrical contacts and devices. In fact, industry consumes more silver than world annual mine supply, and the gap is being met by recycling.

So the amount of silver left over for investors is shockingly small, perhaps only $2 billion.

The silver story is surprisingly simple. The entire world once used silver as money, but today, no nation on earth has silver circulating as currency. This reduced monetary demand has created a very low price.

But silver remains a better store of wealth than ever, due to the increased scarcity, and the growing awareness of silver ownership as a way to make money.

Money is more than a currency or medium of exchange, it's also a store of value. As demand for silver, as a store of value, increases, so will the price, and this demand will continue as a positive feedback loop that will eventually destroy paper money.

But the real shocking fact of the silver market is that 99% of silver investors are getting scammed by paper silver, that is basically all fraud.

The proof of this is the BIS report, from the Bank of International Settlements, here:
http://www.bis.org/statistics/otcder/dt21c22a.pdf

The proof is in the numbers. The BIS keeps track of the derivatives of the banks worldwide. It shows that the notional value of "other precious metals" over the counter derivatives, which are mostly all silver, increased from $100 billion to over $200 billion in six months.

When the entire annual physical silver investment market is only $2 billion, and when the paper silver investment market increased by $100 billion in six months, there is only one way that can happen. The paper must be all fraud.

I asked several bullion dealing managers why people are buying precious metals:

Matt, at our coin shop says,

"Now more than ever, it seems that people are becoming increasingly aware of the growing instability of the dollar. With the national debt climbing, and the future of our nation's currency looking less bright every day, people are looking for ways to protect their wealth against inflation and the ever-crumbling banking system. After doing some research, most of them come to realize that purchasing precious metals like silver and gold is the most reliable method for storing their wealth in a way that will ensure that their hard-earned capital will retain its spending power and viability despite an economy with a future that is shoddy, at best."

Jim, at the coin shop, says:

"When most people think of precious metals, they think "gold." So when they consider purchasing precious metals, gold is the first thing on their minds, because they automatically associate it with something valuable. It's a cultural phenomenon that is ingrained into our everyday lives. Gold Record for recording artists. Gold Medals for Olympic champions. Everyday phrases like, "That guy is as good as gold," or "this is a golden opportunity." It's human nature."

K, at the Mint says:

"Most of our customers are buying gold or silver because they all know the government is going down the tidy bowl! Most of them choose to buy from us because of our growing reputation, they read me online, or they hear about us from family or friends, and they are hearing all of the horror stories about other bullion dealers on the internet not being able to deliver, or just taking forever. "

Dave, also at the Mint says:

"People are just cashing in their CD's because they know they will get a better return in silver and gold."


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In lieu of a quote this week, I'm going to provide you with two greatly esteemed resources.

Wealth of Nations -
Adam Smith

Complete searchable text online

Ayn Rand Lexicon Online
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So those are the basics, it's really simple.

I had an insight this week that I wanted to share with my readers, since you, like me, try to convince others to own precious metals, and we usually are ignored, scoffed at, or slandered. A common slander is that we are fear mongers.

Will the real fear mongers please stand up?

We live in an age dominated by banking. Bankers own the Fed, the Fed funds the government, and the government funds the schools. So who ultimately writes the schoolbooks? Bankers. A typical college textbook on economics is merely apologetics for central banking fraud. Thus, there is no need to overtly command propaganda to the media, when the media is trained correctly in college, they think silver and gold investors are "backwards", "fear mongers", etc. It is actually harder to convince a college educated investor to buy silver and gold than a person who has not paid to be brainwashed in college, where the kids are sleep deprived by final exam pressures and distracted by college parties.

So, we are called fear mongers. A "monger" is simply a salesman. It is said that we prey on people's fears, scaring them with visions of an economic meltdown that supposedly never comes.

But in truth, bankers are the fear mongers. Bankers play on people's fears. What does a banker do? He holds your money for you, primarily for two reasons. First, it's because you are supposedly not responsible enough to invest it wisely, that's the banker's job, so they just give you a small percentage in interest. Second, your money might be stolen if you keep it at home, which is supposedly not a very safe place, even though it's safe enough for you to sleep there in peace at night.

In truth, I have to convince my customers to be brave. I have to convince them that they are intelligent enough to wisely invest their money. I have to convince them that the safest place for their money is at home, in a vault that they can easily buy with a tiny portion of their own money.

The objection is always raised, "What if someone comes to my home and threatens me like in the movies?" I have to reply, that usually happens only in the movies!

Today, 20% inflation rates would be as if thieves robbed 100% of all the assets of every 5th home on the street, and got all their financial accounts, too, every year. Nobody should put up with that. Common robbery is far less common than that. Homes are mostly a safe place!

The most common robbery, therefore, is the inflation of the paper money in your wallet!

I have to convince them that the silver and gold of 10,000 different investors, in 10,000 different vaults in 10,000 different homes, all owned by gun owners, who live in a nation that has 80 million gun owners, is far, far safer than pooling 10,000 different investors money into one place, guarded by just a handful of low-paid security guards. It's an easy sell, because the point is irrefutable.

Furthermore, if the government ever does make silver and gold illegal to own, it's those places that "hold" it for you, that will have to give it up to the government, or who will be let out of their obligations to pay you anything, because they don't have any silver or gold to pay you to begin with.

But note, I'm not the fear monger. I sell courage in the face of fear.

The bankers fear silver. The bankers fear their own bankruptcy. That's why they created the Federal Reserve in the first place, to bail them out in case of their own failures, so they would be able to continue their scams, even after they failed, rather than be shut down and be out of business after a real bankruptcy!

So, it's amazing that bankers and banker trained media slander precious metals advocates as fear mongers, when the bankers are the real fear mongers. Also, I'm amazed that it's taken me 10 years in this business to see this insight. How dumb am I? But then again, the bankers have been at this business for thousands of years. I've had to relearn and discover most of the timeless truths about precious metals by reading the Bible, or by thinking deeply about these things, or by reading what is available out there on the internet.

I treasure such insights, and I always appreciate hearing from my readers, even if I don't always have time to respond to everyone. "

 
 
 
'Rule of 72' Proves It Doesn't Pay to Save in America by Jim Traficant

'Rule of 72' Proves It Doesn't Pay to Save in America
By By Jim Traficant

American citizens are the most creative and industrious people in the world. When confronted with a problem, the American people seem to find a resolve that shapes a direct and intended response of successful action.

That takes me to America's current crises: Bankruptcy. Busted. Broke. You get the message. Forget all the hype of the mainstream media. There is no more free press in America. It's not necessarily a "controlled press," it's more of an "aligned press," joined at the hip with our central, federal government.

It's getting so apparent that I predict government subsidies to the mainstream print media to "insure a free press." Right. Who's kidding whom? The federal government needs this so-called "free press" to continue feeding America with self-serving propaganda.

Propaganda? Absolutely. You've read it right here in my column. I'll be direct: There is more government propaganda in America than any other so-called "free country" in this world. It's that bad, and it will get worse.

Having said that, let's return to our subject of last week. The national retail sales tax and the recommendations of two great Americans: Mr. John W. Osier and Mr. Ed Waggoner Sr.

Both of their views were painted in detail and worthy of your scrutiny and interpretation. I'm sure that most of you agree with most of their views, suggestions and ideas. I, too, agree with most of their positions.

I now present Mr. Waggoner's brilliant "Rule of 72." I present it to you exactly as Mr. Waggoner presented it to me in support of my proposed national retail sales tax.

Mr. Waggoner writes; "I've been an advocate of a national retail sales tax for nearly 40 years. I've enclosed my ideas that may be of use to you in your efforts to convince others of the efficacy of replacing the income tax with a national sales tax."

I presented most of Mr. Waggoner's ideas in my last column. However, I saved the Rule of 72 for your review and consideration.

Just what is Mr.Waggoner's Rule of 72?

The Rule of 72 is a simple mathematical theorem used to calculate the effect of interest or inflation on money. For example: you might wonder how long it would take for a $50 deposit in a savings account to double at a 3 percent annual percentage rate of return.

Divide 72 by 3. The answer is 24. It would take 24 years for a $50 deposit to double at a 3 percent rate of return. Again: How long would it take for the purchasing power of a $50 deposit in a savings account to be reduced by half? Let's say the annual percentage rate of return on the savings account is 3 percent and that the inflation rate is 10 percent. That means -10 percent plus 3 percent equals -7 percent.

The purchasing power of your savings account is being reduced by 7 percent every year. Now, divide 72 by seven. The answer is 10 years and three months. If you leave your money in the bank, in 10 years and three months, your savings will have one-half (50 percent) of its original purchasing power. This theft will be actually accelerated, of course, by whatever income taxes you are required-it's not voluntary-to pay on the meager, negative interest your savings may have earned.

Mr. Waggoner makes you think. Under our current system, it doesn't pay to save. As a result, savings have never been so scarce; thus the shortage of consumer loan activity necessary to drive a "capitalist" system. Now you may be able to figure out why America has become an absolute socialist economy.

Labor, folks, is the No. 1 ingredient of any successful and productive enterprise. Human labor can be mental or physical. Without a laborer, no production is possible.

The capitalist investor is also essential. The capitalist invests in the plants, factories and machinery necessary for the laborer to produce.

The capitalist and the laborers are partners in the economic economic struggle to form a system of free enterprise.

Under the Marxist system, the laborers and capitalists are adversaries, pitted one against the other.

Thus, to ensure the marriage of our laborers and investor capitalists, we should not tax neither. We should reward both.

There is only one way to accomplish that goal-the profit-oriented, economic system that has built America pursuant to the brilliance of our founders: tax consumption only.


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"I have unwittingly ruined my country. A great industrial nation is [now]
controlled by its system of credit. . . . The growth of the nation, therefore, and all activities, are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world."

Former President, Woodrow Wilson, commenting years later on his approval of the Federal Reserve Act
 


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Taxing consumption will encourage thrift and savings, as well as promoting recycling and conservation. The sales tax will discourage unwise spending, thus reducing waste of our natural resources.

In simple terms of economic logic, to tax production through personal and corporate income taxes discourages the very things we should encourage.

You see folks, the Marxist, "progressive" income tax on labor and investors has turned America into a Marxist, socialist economic colony. We've become a colony by adopting a system that has failed in every society where it has been applied. "

Cut the Bankers Out of Money-Making
from The AmericanFreePress.net

Like a drug dealer who just cut off one of his best addicts because he's broke, Wall Street recently announced that Greece's debt rating has been lowered to junk status. This means that if the Greek government wants to borrow more money from international bankers, taxpayers there will now have to pay a lot more, assuming they will be able to even get a loan.

Of course, it was Wall Street that enabled the Greek government to borrow so much in the first place. Then it helped Greece's leaders to hide their liabilities from everyone.

Why is this issue important to the United States? As AMERICAN FREE PRESS has reported in recent issues, this country is not that far behind Greece based on projected federal deficits and the U.S. national debt. According to some estimates, each American taxpayer is on the hook for $113,000 to cover the principal on all of Washington's commitments, including Medicare, Social Security and the wars in Afghanistan and Iraq-and that doesn't even include the interest that will have to be paid to international bankers for years to come.

The talk right now in Europe is for Greece to leave the European Union so it can lick its wounds as it tries to pay down its debt, which has miracu-lously grown from $40 billion when the crisis first hit last month to $158 billion right now-and growing. That debt will still have to be borne by Greek taxpayers- the very people who have been victimized and deceived by their own government and Wall Street.

As we see it, the only real solution to the problem is to rip up that paper debt and run Wall Street out of the country, a move Americans should also make before the bankers lay even more claim to the land our forefathers fought and died to free.
But how will Greece and the United States be able to pay their bills if they can no longer borrow money?

Whatever you may think of President Abraham Lincoln's conduct during the War of Northern Aggression, he had the right idea when it came to paying his war bills. Greece and the United States-really, any government in any country around the world-have the power to issue their own interest-free currency. How will the people avoid trading corrupt bankers for corrupt bureaucrats? The treasury can simply issue an amount of currency commensurate with that country's gross domestic product. No more, no less.
Would you rather have crooked bankers issuing interest-bearing money or politicians you can replace at the ballot box issuing interest-free money? "

Even Bankers Fear Rising World Debt
By Christopher J. Petherick

Last month, the bankers to the world's central banks issued a dire warning that official debt is threatening to topple economies around the globe. It's a shocking study that concludes U.S. and European governments are ready to collapse as did the nation of Greece recently…

Sovereign debt-the fancy term for direct loans, bonds and other financing accrued by governments around the world-is out of control in industrialized countries, says the Bank of International Settlements (BIS) in a new report. The situation is so bad, claims the global financial institution that is the "bank for the central banks," in the years to come the United States and Europe could be facing the same disaster that befell Greece two months ago.

In a study, "The Future of Public Debt," BIS's chief economist Stephen Cecchetti writes: "The aftermath of the financial crisis is poised to bring a simmering fiscal problem in industrial economies to the boiling point."

For the past several months, the focus has been on the sovereign debt of the so-called "PIGS" countries- Portugal, Ireland, Greece and Spain. But, according to BIS, trouble is brewing for the largest economies in the world, namely the United States, Japan, England and all of Western Europe. According to BIS calculations, by the end of 2011, sovereign debt for these countries is expected to rise above 100 percent of their GDPs.

In the years following World War II, total U.S. debt actually exceeded GDP, thanks to the frenzied borrowing spree carried out by President Franklin D. Roosevelt to "stimulate" the economy and wage war in Europe. It was only the unprecedented productivity on the part of middle-class Americans in the 1950s that outpaced U.S. debt and brought it back under control.

As AFP has reported on numerous occasions, this is impossible today, given that the global plutocracy has gutted America's working class, replacing the highly skilled productive jobs once commonplace in America with low-skilled service sector work or no job at all.

In its study, BIS specifically looked at bond markets. In February, investors around the world had a "come to Jesus" moment when it was revealed that Goldman Sachs had concealed a huge amount of Greek debt through complicated financial derivatives called interest- rate swaps. They responded by shunning Greek debt, forcing a crisis that required European nations to step in with a multibillion-dollar bailout. As a result, investors have become highly suspicious of governmental accounting.

Cecchetti writes that these suspicions are expected to start showing up in bond markets. "The question is when markets will start putting pressure on governments, not if," writes Cecchetti. "When will investors start demanding a much higher compensation for holding increasingly large amounts of public debt?"

Making matters worse, when Wall Street collapsed, pension funds took a huge hit. Governments now have to chip in even more to cover the promises that have been made to retired bureaucrats and other civil servants. With dwindling tax revenues and high unemployment, debt is the only way governments can fund liabilities.

"Rapidly aging populations present a number of countries with the prospect of enormous future costs that are not wholly recognized in current budget projections," writes Cecchetti. "The size of these future obligations is anybody's guess."

 
 
 
Avoiding the Lions and the Crocs by Gary North
   

Avoiding the Lions and the Crocs
By Gary North

Have you ever seen a documentary where the herd of zebras is at the river's edge? The lions are behind them. The crocodiles are in front of them. What's a wise zebra to do?

Most of them wait. Then, without visible warning, they either run like mad or else plunge into the river.
Sometimes the lions win. Sometimes the crocs win. Most of the zebras survive: the ones in the middle of the pack.

This phenomenon is also known as regression to the mean.

It is easier to move forward than backward. Monitoring the lions at your rear is important mainly to know when to take your chances with the crocs.

What you should be looking for is a place in the river where there is a shallow land bridge. You can get across faster, and the crocs will have a harder time grabbing you.

The trouble is, you can't get onto the submerged land bridge fast enough if you're in the middle of the herd.

INFLATION OR DEFLATION?

You need to investigate the logic of price inflation, which rests on the logic - mostly political - of monetary inflation.

Those who predict price deflation argue that the politics of monetary inflation will be overcome by the size of the debt. The debt will become so gargantuan that the central banks will not be able to prevent massive bankruptcies, default, and bank runs. There will be a rush for liquidity. Prices will fall.

I do not think this argument is correct. I have offered my reasons elsewhere. But the logic of deflation rests on an assumption: the triumph of free market leverage over central bank monetary inflation and the monetization of debt. Deflationists do not argue that central banks will adopt a policy of deflation.

Inflationists argue that central bankers will adopt policies of monetary inflation, and these policies will be successful in preventing the collapse of banking and money.

I am in the camp of the inflationists. I regard today's stable consumer prices as the joint product of central bank monetary inflation to save Fannie Mae and Freddie Mac and thereby save the largest banks, coupled with the individual, uncoordinated decisions of commercial bankers to deposit their banks' excess money with the Federal Reserve, thereby sterilizing the more than doubled monetary base.

If you cannot make up your mind, do nothing.
Why do I say this? Because whenever you make a decision to buy anything as misunderstood as gold, you should do so based on your understanding of why gold rises or does not rise under inflation or deflation.
You must then decide which scenario is more logical: inflation or deflation.

Then you must decide which form of gold to hold, and why.

Then you must persuade your wife.

This is not easy. Yet it is mandatory for anyone who wants to act responsibly. You can never possess exhaustive knowledge, but you can possess accurate knowledge. It takes time. It does not take much money.

Is price inflation associated with the crocs or the lions? Find out. That is your #1 assignment.

I think inflation is the lions. There are more of them. They are easier to see. The crocs are limited to the river. They are difficult to see. I think you should pay attention to what is more common.

When inflation starts moving up, you can make your move. Right now, consumer prices are flat. We are caught between the lions and the crocs.

Gold will help you fend off lions. Long-term U.S. bonds will help you fend off crocs.

CONFLICTING STRATEGIES

"Inflation is inevitable. Buy gold."
"Deflation is inevitable. Buy gold."
"Inflation is behind us. Buy stocks."
"Inflation is behind us. Buy bonds."

If I wanted to spend a couple of hours, I could provide you with links to articles proclaiming all of these positions. You would not read most of them, so I have decided to save a couple of hours. Why should you buy gold if deflation is inevitable? The argument is convoluted because it's wrong. I won't bore you with it here. I have dealt with it elsewhere here and here.

My point here is more limited. There are hundreds of thousands of people out there who have bought gold on the assumption that one of these arguments is correct.

These arguments cannot both be correct.

Some percentage of these people cannot make up their minds about which argument for holding gold is correct. They bought some gold. Then they write to me. "Will it be deflation or inflation?" I always send the same answer:

"Please post all of your questions on my website. Thanks."

Why do I do this? First, it's a polite way of saying, "I am tired of providing free lunches to cheap people like you, who want me to tell them what to do with their life savings, free of charge." Second, out of 1,000 letters, as many as three people will actually join my website. So, I'll make a few bucks. Then there are the other people. They really cannot decide which it will be, inflation or deflation. They don't know whether to buy gold or not. They send me an email asking me what I think. They get the same response.


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It is all over the Web what I think. I think there will be price inflation . . . for a time. I think there will be mass inflation . . . for a time. I do not think there will be hyperinflation and currency collapse. But, if there is, I will be in far better shape than most people. That is because I have adopted Ludwig von Mises's investment strategy. When asked what inflation hedge he had, he replied: "Age." This is the one hedge that works equally well in both inflation and deflation.

People buy investments for lots of reasons, but careful logic is not the main one. They feel the drive to buy. It may be gold. It may be an annuity. It doesn't matter. People have heard about it, and they want it. They go looking for reasons.

The same is true of people who have decided not to buy.

Some people are action-oriented: early adopters. Others wait a long time to act. They are the people who make early adopters rich . . . the early adopters who really did see coming what in fact came.

Most people are late adopters. They sit on the sidelines. They wait to see what their peers do. Their peers do the same thing.

For these people, arguments are wasted. They are not looking for arguments. They are waiting for the herd to start running. They want to be at the center of the herd. That is the safest location to avoid predators.

THE CENTER OF THE HERD

The center of the herd is safe most of the time.
What threatens the zebras in the center is this: The zebras at the front of the herd get the better grass.
We are in an economic drought. It is neither price inflationary nor price deflationary. It is a slow-growth economy in which unemployment remains high. Promotions are few and far between. Raises are rare. Income is slowly falling. Income in the private sector is falling even faster.

I recommend that people concentrate their efforts on their careers.

People are hypnotized by their IRA or 401(k) plans. These plans are down since 2000. An entire decade is gone. The experts who advised buy-and-hold, no-load stock funds have proven themselves utterly wrong. They do not change their advice.

I recommended getting out of stocks, especially dot-com stocks, in March of 2000. That was the week of the top for the NASDAQ. I recommended getting into gold in October 2001 - close to the bottom: under $300.

Did people do it? I doubt it.

Did they stick with their stock portfolios? Yes.

They are still alive. They are not poor. But they have not made gains. If they borrowed on their homes, they have lost their original loan's non-recourse protection. They are liable for all of their mortgages, even if they sell. They must make up the difference. They are trapped.

Nobody warned them, except fringe e-letter writers. They did not read the loan contracts. They did not ask their CPAs, if they had CPAs.

Now they look around them and find that being in the center of the herd gave them protection from the crocs and lions, but the grass is depleted.

The economic drought is going to get worse. If you think I am wrong, read what David Stockman writes. He was Reagan's first budget director. He warned about the huge deficits that would come if Reagan did not cut Federal spending to match his proposed tax cuts. He resigned. He saw what was coming. Now it has arrived. He now warns against the enormous Federal deficits and their anti-growth effects on the economy.
There comes a time to move to the front of the herd. This is especially true when the lions seem distant, and the crocs do not seem close to the water's edge.

Most people do not want to be at the front of the herd. This is just as well, because they could not get there even if they wanted to.

I suggest that you spend your time working on your career before you worry about gold, price inflation, or price deflation. Your main problem is that the grass is getting sparse.

STRATEGIC INACTION

About four decades ago, conservative sociologist Robert Nisbet offered this bit of advice to the Federal government:

"Don't just do something. Sit there!"

This was a variation on the more traditional advice, "Don't just sit there. Do something!" His is far better advice.

The case for doing nothing new is a strong one. As a conservative, he understood this. Most of our lives are routine. We do things today pretty much the way we did them yesterday. This is how we keep our sanity. If we had to re-think everything every day, we would go mad. We would wind up paralyzed.

By assuming that things tomorrow will be pretty much the way they are today, we will probably be right tomorrow. We will not lose time, sleep, or money planning for events that do not take place.

Yet there is always change. Most things do not change rapidly, but some do. Nine-eleven came along, and Bush's Executive was there with Clinton's Homeland Security legislation ready to be implemented. The bureaucrats had planned ahead.

"Never let a crisis go to waste," Obama's Chief of Staff Rahm Emanual has said. This is the radical politician's view of social change. "Be prepared!" Voters are far more ready to surrender their liberties than to fight politically to get old liberties back.

This, too, is the philosophy of conservatism. "Stick to the devil you know." That was Rudyard Kipling's advice in one of the greatest poems ever written: "The Gods of the Copybook Headings."

http://bit.ly/copybook

So, most of the time, don't just do something. Sit there.

Your goal is not to stay seated. It is to give yourself time to read, then think. You need to know what you are facing. This takes time and concentration.

But until you have a sense of what you are facing, it is best to take no action other than reconnaissance.

CONCLUSION

People prefer inaction to action. This is wise most of the time. But sometimes it is unwise. I think we are in such a time.

Pay attention to your career and your job. Concentrate on these if they are not the same.

Think: "How will my career or job do under conditions of mass inflation? Depression? In between?" Think about these effects on your job, not your portfolio.

People get sidetracked. They think that buying this or that investment asset will save them. What will save them is their ability to stay ahead of the lions and out of leaping distance by the crocs.

It is not your investment portfolio that matters most. It is your career. There are no one-shot answers for your career. You can't write a check and solve the problem.

Gary North is the author of Mises on Money.
He is also the author of a free 20-volume series,
An Economic Commentary on the Bible

 
 
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