Tag Archives: Silver

Big Signals from Gold and Silver, by Tom Luongo

Do the recent rises in the prices of gold and silver signal impending global chaos? From Tom Luongo at tomluongo.me:

After nearly eight years of torment, gold and silver are back.  The global political picture is spinning out of control quickly.  And the precious metals are here to tell us just how quickly.

Before I get to the charts, however, I think it’s important we review everything that happened this week just to get some context.

Last weekend two gruesome murder sprees were committed in El Paso, Texas and Dayton, Ohio.  Both shooters apparently radicalized by the current political climate. The usual suspects used these events to call for gun control, pre-crime prevention straight out of a Philip K. Dick novel while blaming them on the tyranny of white people and Donald Trump’s racism.

Then on Monday morning to the news India revoked Article 370 of their constitution, reorganizing Kashmir & Jammu and putting the entire area on a lockdown so complete many there don’t know what happened.

Protests in Hong Kong continued into their third week as the U.S. is caught openly working with protest organizers and castigates by China.

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Crossing Borders with Gold and Silver Coins, by Doug Casey

There are some very good reasons to own gold and silver coins. From Doug Casey at internationalman.com:

It’s well-known that you have to make a declaration if you physically transport $10,000 or more in cash or monetary instruments in or out of the US, or almost any other country; governments collude on these things, often informally.

Gold has always been in something of a twilight zone in that regard. It’s no longer officially considered money. So it’s usually regarded as just a commodity, like copper, lead, or zinc, for these purposes. The one-ounce Canadian Maple Leaf and US Eagle both say they’re worth $50 of currency.

But I’ve had some disturbing experiences over the past couple of years crossing borders with coins. Of course, crossing any national border is potentially disturbing at any time. You might find yourself interrogated, strip searched, or detained for any reason or no reason. But I suspect what happened to me crossing a few borders in recent times could be a straw in the wind.

I’ve gradually accumulated about a dozen one-ounce silver rounds in my briefcase, some souvenirs issued by mining companies, plus others from Canada, Australia, China, and the US. But when I left Chile not long ago, the person monitoring the X-ray machine stopped me and insisted I take them out and show them to her. This had never happened before, but I wrote it off to chance. Then, when I was leaving Argentina a few weeks later, the same thing happened. What was really unusual was that the inspector looked at them, took them back to his supervisor, and then asked if I had any gold coins. I didn’t, he smiled, and I went on.

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A Golden Renaissance – Precious Metals Supply & Demand, by Keith Weiner

Gold is honest money. As such, it’s discarded and denigrated by dishonest regimes of all stripes. From Keith Weiner at acting-man.com:

Battles for Civilization

A major theme of my work — and raison d’etre of Monetary Metals — is fighting to prevent collapse. Civilization is under assault on all fronts.

Battling the barbarians at the gate… [PT]

There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travelers to provide the password to their phones so the government can go through all your data, presumably including your gmail, Onedrive, Evernote, and WhatsApp.

China is now developing a “social credit” system, to centrally plan the economy and control citizen behavior. Canada has made it a crime to call someone by the wrong gender pronoun. Even in the US, whose First Amendment has (mostly) stood as a bulwark against censorship now has a president who threatens antitrust action against Amazon, because its CEO Jeff Bezos owns the Washington Post, which prints things he does not like.

On college campuses, professors are harassed if they say one thing that the professional sensitives are sensitive to. If a controversial speaker is invited, he risks an angry mob coming to disrupt his talk (or worse).

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The Last Hurrah Before the Dark Years, by Egon von Greyerz

He’s probably right. From Egon von Greyerz at goldswitzerland.com:

This is it! The autumn of 2018 will be momentous in the world economy, markets and politics.
We are now seeing the Last Hurrah for stocks, bonds, the dollar and most asset markets.

The world economy has been living on borrowed time since the 2006-9 crisis. The financial system should have collapsed at that time. But the massive life support that central banks orchestrated managed to keep the dying patient alive for another decade. Lowering interest rates to zero or negative and printing enough money to double global debt seem to have solved the problem. But rather than saving the world from an economic collapse, the growth of debt and asset bubbles has created a system with exponentially higher risk.

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Doug Casey on Why Gold Could Go “Hyperbolic”

Precious metals may be the only refuge from systemic risk. From Doug Casey at caseyresearch.com:

Justin’s note: Volatility has come storming back.

Just look at the CBOE Volatility Index (VIX), which measures how volatile investors expect the market to be over the next 30 days.

It’s up 89% since the start of the year. Last week, it hit the highest level since 2016.

Investors aren’t used to this. After all, last year was the least volatile year ever for U.S. stocks. That lulled many investors to sleep. It led them to take risks they would normally never take.

Now, those same people are wondering what to do. They aren’t sure if this is just a run-of-the-mill pullback…or the start of something much worse.

To help answer this question, I called up Doug Casey. I knew he would have an interesting take on this matter…

Justin: Doug, U.S. stocks took a beating recently. Where do you see things going from here?

Doug: Well, I hate to make a firm prediction of timing. The fact that things have held together, against all odds, since 2009, has underlined the old saying about just because something is inevitable doesn’t mean it’s imminent. Predictions of disaster, and all these things unwinding, have been wrong over the last half a decade. And the smart bet is always for muddling through, in the direction of progress. But it seems that we’ve finally reached a peak, a major turning point.

Justin: So, what have you done to protect your wealth?

Doug: At the beginning of the year, I took all my original capital out of cryptos, plus 150% profits. I also took profits on crypto stocks. I got in late, and out a bit late. But it was a happy experience.

They were bubbly. Every company that could possibly do so has gotten into this game. Now XYZ ice cream company is XYZ blockchain company. That was one tipoff.

To continue reading: Doug Casey on Why Gold Could Go “Hyperbolic”

This 4,000-year old financial indicator says that a major crisis is looming, by Simon Black

From Simon Black, on a guest post at theburningplatform.com:

Over 4,000 years ago during Sargon the Great’s reign of the Akkadian Empire, it took 8 units of silver to buy one unit of gold.

This was a time long before coins. It would be thousands of years before the Lydians in modern day Turkey would invent gold coins as a form of money.

Back in the Akkadian Empire, gold and silver were still used as a medium of exchange.

But the prices of goods and services were based on the weight of metal, and typically denominated in a unit called a ‘shekel’, about 8.33 grams.

For example, you could have bought 100 quarts of grain in ancient Mesopotamia for about 2 shekels of silver, a weight close to half an ounce in our modern units.

Both gold and silver were used in trade. And at the time the ‘exchange rate’ between the two metals was fixed at 8:1.

Throughout ancient times, the gold/silver ratio kept pretty close to that figure.

During the time of Hamurabbi in ancient Babylon, the ratio was roughly 6:1.

In ancient Egypt, it varied wildly, from 13:1 all the way to 2:1.

In Rome, around 12:1 (though Roman emperors routinely manipulated the ratio to suit their needs).

In the United States, the ratio between silver and gold was fixed at 15:1 in 1792. And throughout the 20th century it averaged about 50:1.

But given that gold is still traditionally seen as a safe haven, the ratio tends to rise dramatically in times of crisis, panic, and economic slowdown.

Just prior to World War II as Hitler rolled into Poland, the gold/silver ratio hit 98:1.

In January 1991 as the first Gulf War kicked off, the ratio once again reached 100:1, twice its normal level.

In nearly every single major recession and panic of the last century, there was a sharp rise in the gold/silver ratio.

The crash of 1987. The Dot-Com bust in the late 1990s. The 2008 financial crisis.

These panics invariably led to a gold/silver ratio in the 70s or higher.

In 2008, in fact, the gold/silver ratio surged from below 50 to a high of roughly 84 in just two months.

We’re seeing another major increase once again. Right now as I write this, the gold/silver ratio is 81.7, nearly as high as the peak of the 2008 financial crisis.

This isn’t normal.

To continue reading: This 4,000-year old financial indicator says that a major crisis is looming

Real Money, by Robert Gore

Here’s a definition of money that will be rejected by conventional economists of all persuasions, but will clear up analytical confusion for those outside the dismal science. Money is that which serves as a medium of exchange, a store of value, and a unit of account, has intrinsic value, and which is not a liability of an individual or entity, including that of a government. The immediate objection to this definition is that it does not describe anything that currently functions as a medium of exchange. Something must be wrong with a definition of money that excludes everything that people now think of as money.

Perhaps it’s not the definition of money that’s flawed, but present monetary arrangements. Everything that now serves as a medium of exchange, a store of value, and a unit of account has minimal or no intrinsic value and is somebody’s liability. Even the US currency is a note, or debt instrument, of the Federal Reserve. These notes pay no interest and have no maturity date, and they can only be redeemed at the Fed for more notes, but they are liabilities on the Fed’s books. Precious metals, on the other hand, which have served as money, or have been the basis of fully convertible paper currencies, are not liabilities.

Behind the curtain of present institutional arrangements, the US government issues IOUs, which are payable in IOUs issued by the central bank, which themselves are only redeemable for more central bank IOUs. The law mandates that these central bank IOUs are “Legal Tender” for settlement of all debts, public and private. While the debt ceiling limits the amount of IOUs the government can issue (although it is invariably raised), there is no limit on the IOUs the Federal Reserve can create. These IOUs are either Federal Reserve Notes or member bank deposits with the Fed (just as a customer deposit with a bank is a bank IOU, a member bank deposit with the Fed is a Fed IOU).

So why not just call these government and central bank IOUs what they are: debt? And why not call precious metals money? They are not debt and they also have the intrinsic value embedded in the resources necessary to find, mine, smelt, and refine them, their use in various industrial and consumer goods, and they’re indestructibility, divisibility, portability, measurability, and beauty. If used as a medium of exchange, store of value, and unit of account, they satisfy the conventional definition of money, although they are not currently being used as such.

These bright-line distinctions have the virtue of being definitionally accurate. They also remove the definition of money from being a social convention: that is, if people use something as money, it’s money. People today use debt as money, but that doesn’t make it money under the proposed definition, anymore than a social convention to think of cats as dogs and call them dogs will make them bark or slobber with joy when called by their masters (cats don’t have masters). Most importantly, calling things what they are allows intellectual clarity about their role in economics.

Debt imposes obligations; it must be repaid, even if it is only rolled over or paid with more debt, and in the interim the debtor pays interest to the creditor. Interest and debt repayment are the costs of debt, which can fund investment, speculation, or consumption. For a rational investor or speculator, their expected return on investment or speculation will exceed the cost of the debt used to fund it. Markets arbitrage such opportunities, borrowing to fund investment and speculation. The increasing demand to borrow pushes up the interest rate; the increasing investment and speculation reduces the expected return. A point is reached where, for the economy as a whole, the expected return on investment and speculation equals the prevailing interest rate. (Consumption yields no return on investment, Thus, borrowing to fund consumption, because of debt’s interest and repayment burden, is economically counterproductive.)

Debt, as someone’s liability, is someone else’s asset. As an asset, it can be exchanged for goods, services, investments, or speculative instruments. It can also serve as collateral against debt incurred by the asset-holder. That creditor can in turn use that debt, the creditor’s asset, as collateral for debt, as so on. In this way, debt serves as the basis for further expansion of debt. Central banks’ debt to member banks often has this multiplier effect, as the banks use their deposits with the central bank (in excess of required reserves) to fund lending and new debt that pyramids as it is progressively deposited and lent out in the banking system.

Central bank fiat debt creation increases the amount of debt above what it would be in a free-market, real-money economy and lowers its price, the interest rate. This leads to excessive investment—malinvestment—overproduction, and more speculation and consumption than would prevail without a central bank. However, it does not change the diminishing returns inherent in increasing debt. Even if interest rates were zero and debt was free for everyone, at some point the expected return on investment and speculation goes to zero, and the debt used to fund consumption has to be repaid. People are emotional and prone to crowd psychology. In the throes of a debt boom they are invariably too optimistic, misjudging returns on investment and speculation and their ability to repay debt. The actual return on additional debt then goes negative.

At the peak, debt begins to contract through both debt repayment and debt repudiation. Debtors will sell assets to raise funds to satisfy debts, but if those funds are insufficient, they will repudiate some or all of their debt. Because debts are creditors’ assets, repudiation imposes losses on creditors, reducing their investment, speculation, consumption, or using assets as collateral for more borrowing. Debt contraction begets economic contraction and deflation, but because of the distortions introduced into the economy by central bank fiat credit during the expansion, they are worse than they would have been in a free market, real money economy. The inward force of debt contraction, when aggregate debt has—through debt’s multiplicative properties—been expanded to its fullest extent, far outweighs central bank’s capacity to stop it through the creation of still more debt, which is at this point counterproductive.

Central banking and fiat debt are but new wrinkles—facilitators—of an age-old and pernicious practice: governments issuing as much debt as credit markets will allow before they impose ruinous interest rates. One of the leitmotifs of history, a recurring phenomenon, has been governments bankrupting their countries. The qualities of real money—that it has intrinsic value requiring resources to produce, and is not a liability—tether the amount of debt to the real economy and hinder governmental borrowing, slowing, and perhaps preventing, the oft-repeated march towards bankruptcy. Yet people posing as sophisticates praise central banking and fiat credit, enablers of government indebtedness, as “innovations,” while denigrating real money—precious metals—as “barbarous relics.”

This intellectual depredation is so complete that virtually everyone thinks of value in terms of central bank fiat debt, not real money, which is ass-backwards. Real money will always have value, and thus will always be exchangeable for real goods and services. Fiat debt comes and goes. Shouldn’t our notions of value be tied to the enduring, not the ephemeral? We say: “An ounce of gold is worth 1100 dollars,” but shouldn’t we say: “A dollar is worth 1/1100 of an ounce of gold”?

At this juncture, with massive debt and economic contraction, deflation, and social chaos looming, many people ponder the purchase of precious metals solely in terms of whether such metals will be worth more or less fiat debt in the future. Precious metals should instead be evaluated in terms of their exchangeability for real goods and services, come hell or high water. Here the barbarous relics’ record is quite good, far better than that of fiat debt. There are fluctuations in real money prices due to fluctuations in the supply and demand for it, but those are driven by organic developments in a market economy, not the whim of government officials and central bankers.

Over time real money retains, and actually increases, its purchasing power for real goods and services. An old adage holds that through the centuries, an ounce of gold has bought a good mens suit. Now, if one knows where to shop, an ounce of gold will buy at least two good mens suits. This is to be expected with real money. As an economy becomes more productive, everything else being equal, a given quantity of real money will have more purchasing power. This is what happened under the gold-exchange standard during the latter part of the 19th and early part of the 20th centuries, before the adoption of central banking and fiat debt. A given quantity of gold or silver buys more goods and services than it did in 1913, while a given quantity of the Fed’s fiat debt buys less. Barbarous relics indeed! For those determined to survive hell or high water, think in terms of real money and what it will buy, not fiat debt, which sooner or later will be what it’s destined to be: worthless.