We recently published “Weimar: First DEFLATION Then INFLATION.” That is exactly what is underway — in slow motion and on a much bigger scale. The Japanese yen has plummeted and the Russian ruble lost almost 1/2 its value. Dominoes from the crash in oil are falling. Based on the volatility in the USA index, we believe we are in the middle of some sort of derivatives meltdown. The Euro has crashed to a level not seen since 2006.
While their currencies lost value, the Europeans, Russians and Japanese who held their savings in actual gold coins and bars lost NOTHING. In fact, the price of gold has gone up in those currencies. That is why prudent investors have always kept 5% to 10% of their wealth in physical precious metals.
QE4 / ZIRP Zero% Interest Rate Policy
The dollar is backed by nothing but confidence and debt. The dollar seems strong because the yen and the Euro are weakening FASTER; but the true value of the dollar is declining. Do not wait for the high-flying dollar to hit an “air pocket” when the Federal Reserve finds an excuse to announce QE4. Fear can replace confidence when people realize artificially low interest rates are here to stay.
On Jan. 6, 2015, multi-billion dollar fund manager Bill Gross said: “When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.”
Mr. Gross is now telling investors to batten down the hatches and protect their capital.
To us that means converting some of your “paper investments” to physical coins – for liquidity with no third-party risk. Gold has been the safest safe-haven for 6,000 years. During the coming economic upheaval, gold and silver will perform as “monetary metals” and the world’s only real money.
The Dow Jones has been gyrating all over the place. Since October 2014, trading halts have become more and more regular. In August 2015, we saw signs of systemic liquidity distress. This is not normal… Dow futures moved over 4,500 points intraday today!!!
Deterioration in the global economy is accelerating. When the tipping-point is reached for global debt, fundamentals will take over all markets. Gold is firmly re-established among financial elites and nation-states as the safest, most liquid asset. Overnight, gold and silver coins will be extremely hard to find.
Buy PHYSICAL gold coins — (ETFs have counter-party risk, unlike actual coins and bars in your possession.) It is prudent to have 10% – 20% of your net worth in physical gold, silver and platinum. Diversification is critical.
Gold and silver are in short supply. I have not seen precious metals shortages like this in forty-four years. I shop dealers all over the country for bars and coins. All the dealers are experiencing the same thing… supplies of gold and silver are drying up.
(2) SILVER IS TRADABLE. Throughout history, silver has performed the function of money. Silver is called “the poor man’s gold” because it is the best form of money for small transactions. Silver coins are ideal for barter:
To trade for necessities such as water, gas, or a loaf of bread, you would want old 90% U.S. silver coins (U.S. dimes, quarters, halves, dollars) or 1-oz silver rounds and bars. PHYSICAL silver serves as portfolio insurance. No matter what happens, actual silver will give you liquidity (with no third-party risk) and tradability.
THE FARMER WAS KING. In 1923, a loaf of bread cost 200 billion marks when the German currency collapsed. But bread was about the same price in Germany as it was in America when measured in ounces of silver. The price of bread remained steady for those who paid with silver coins (marks).
(3) SILVER DOLLARS ARE BETTER THAN PAPER DOLLARS. Silver money preserves purchasing-power because silver coins cannot be printed. Silver stores value (over millennia) because the supply of silver is extremely limited. On the other hand, there are no limits to dollars that are backed by nothing (called “fiat” money).
At first, money-printing seems to ‘work’ and inflation is gradual; but prices take off overnight. Printing-press-money always ends up in the ash heap (no exceptions).The German mark (ℳ) is a famous example of how fiat currency goes up in flames. Germany financed war and national healthcare with money-printing. Yet, the purchasing-power of the currency remained steady as long as people had faith in the mark.
In 1919, 16 German marks were equivalent to 1 U.S. silver dollar left. The value of the mark eroded slowly and gradually. Suddenly, people lost confidence in the currency. In 1923,1 U.S. silver dollar was equivalent to 4.2 trillion marks. Silver soared as currency value inflated away.
(4) SILVER IS UNDER-PRICED COMPARED TO GOLD. The historical norm for the relationship of gold to silver – over the centuries – was a ratio of 15 to 1. By this we mean that fifteen (sometimes 16) ounces of silver equaled the value of one ounce of gold. This changed in the late 1800s, and from 1900 to 1979 the ratio was typically 30 to 1. When gold and silver peaked in 1980 at $850 and $48, the ratio was briefly 18 to 1. But for the last 40 years, the ratio has stayed above 40 to 1. And now…one ounce of gold is now about 85 times more valuable than one ounce of silver! This gold-to-silver ratio is seriously out of whack! Our view is that when the precious metals make their next major moves, the ratio will narrow (silver will rise faster, percentage-wise). For example, if the gold to silver ratio returns to 30 to 1, and gold goes to $2,500, silver would rise to more than $83 per ounce. If the G/S ratio returned to the the level it was for centuries, silver would go to more than $150 per ounce!
When silver moves, the rare metal moves like a freight train. In 2011, silver climbed 160% in 9 months; supplies dried up overnight; and world mints had no silver to deliver for months.
(5) AMERICA’S NATIONAL DEFENSE SILVER STOCKPILE IS GONE! It is estimated the U.S. stockpiled 6 billion oz of silver 100 years ago. In 1942, the silver stockpile was 2 billion oz. Today, there is no stockpile at all. The U.S. Mint must now purchase silver on the open market to mint American Silver Eagle coins (the new U.S. 1-oz silver dollar below).
Where did all the silver go? INDUSTRY. The amazing properties of silver have led to new, high-tech applications every year. Much of the silver used in industry is not recovered (silver is difficult to recycle because it is applied in such small, per-unit amounts.)
(6) SILVER IS INDISPENSABLE. Silver is required increasingly in industry because of its unique properties (at least 10,000 uses). Silver is not harmful to people; it works as a biocide, eliminating mold, mildew, bacteria, and odors in textiles, shoes, socks, and sports equipment.
As the best conductor of electricity, silver is used in switches, automobiles, batteries, photography, cameras, jet engines, plastics, insulation, air conditioning, solar cells, appliances (practically every device in your kitchen has silver in it), water purification, antifreeze, all types of computers, mobile phone glass, weaponry, medical devices, hand-held computers, tablets, and high-tech everything!
(7) WORLDWIDE INDUSTRIAL DEMAND OUTSTRIPS MINE PRODUCTION. All known stored silver is estimated to be only 350 million oz. After subtracting the silver needed by industry, the amount of silver left for investors is only a few hundered million oz — only about $3 billion of physical silver is left for investors (with silver at $15 per oz).
The silver market is tiny when compared to paper money that is being printed. When global debt-dominoes start falling, TRILLIONS of newly created dollars will be chasing only $3 billion of PHYSICAL silver!
(8) CHINA & INDIA WANT MORE. China is the world’s largest investor in silver/ copper mining operations. The Chinese government – besides acquiring silver for the central bank– is encouraging citizens to buy silver. That means significant, new demand for limited supplies. London metals traders report China and India are vacuuming up available silver GOOD DELIVERY BARS (approx. 1,000 oz, .999 fine).
(9) THE SILVER PRICE DOES NOT REFLECT PHYSICAL SCARCITY. Why is silver so cheap? Brokers are trading paper contracts representing millions of ounces of actual silver on commodities exchanges in London and New York (Exchange Traded Funds and futures contracts). Bullion Banks are short the physical silver needed to cover “delivery orders.” According to our research, physical silver bars in storage facilities have been “rehypothecated.” In other words, the exchanges are selling the same physical ounce of silver over and over – 100s of times!
The spot price is “managed” with a trading technique called “naked” short-selling. When silver breaks to the upside, the spot price is brought down by massive, concentrated sales of derivatives (PAPER silver). Contracts are dumped simultaneously on exchanges.Things You Probably Didn’t Learn in School About Gold & Silver-pdf(includes articles on NAKED SILVER SHORTING).
(10) WALL STREET REGULATIONS ARE UPON US. The new 2,300-page Dodd/ Frank bill includes rules that allow the government to violate consumer privacy and monitor all transactions. The new law allows government to use personal financial data to regulate consumer choices. Do not wait for all aspects of the law to go into effect. Also, the war on cash is heating up – with more controls in place at banks. Governments are notorious for adopting restrictions on the movement of capital when currencies falter.
Congress has tossed around the idea of imposing a Financial Transaction Tax and a Value Added Tax on purchases of precious metals. VATS around the world are used to collect up to 20% additional taxes on purchases. As the financial mess worsens, politicians will desperately seek new ways to tax.
I recently published a new book that includes practical suggestions on how to invest in silver and gold. Click on this link to learn more about “RHYNE’S GUIDE TO FINANCIAL PREPAREDNESS:”https://rhynesguide.com
Since the global credit-collapse in 2007 and the market crash in 2008, the Federal Reserve has been directly monetizing U.S. debt (by the $trillions).
As the Fed continues to create mind-boggling amounts of credit (debt financed by debt), savvy investors will run to silver. All attempts to circumvent economic laws end in financial chaos. The Laws of Money always prevail:
“Every other attempt of the same kind in human history… show the existence of financial laws as real in their operation as those which hold the planets in their courses.” Andrew Dickson White, Fiat Money Inflation in France, p. 63, Paris, France, 1896.
WHAT TO BUY? Own the actual silver (physical coins in your possession).
PHYSICAL silver was hard to find in 2007, 20008, 2011, and after. Deliveries were delayed as much as two months. Every time a few mega buyers “took delivery” of PHYSICAL silver, dealers experienced supply-chain disruptions. Don’t wait until something spooks the markets; there won’t be enough actual silver to go around.
Take delivery of American Silver Eagles. The new U.S. silver dollars contain exactly 1 Troy oz of pure silver. Washington Gold Exchange sells any quantity from 100 American Silver Eagles (coins come in tubes of 20). It is convenient to purchase500 coins in a U.S. Mint “Monster Box” right.
When you buy PAPER silver, you have a paper certificate. When you take delivery of PHYSICAL silver coins and bars, you have real liquidity (you are not dependent on a third party).
A full bag is $1,000 face value: 10,000 dimes, or 4,000 quarters, or 2,000 half dollars (circulated, pre-1965 90% silver coins). These “junk silver” coins are delivered in canvas bags of one denomination. One full bag contains approximately 715 Troy oz of pure silver. The gross weight of a full bag is 55 lbs. Full bags are delivered in ½ bags for convenience. Smaller bags are available: 1/10 bag = $100 face; 1/4 bag= $250 face value; 1/2 bag= $500 face value.
2011 estimates of derivatives exposure: JPMorgan $70 Trillion; Bank of America $50 Trillion; Citibank $50 Trillion; Goldman Sachs $40 Trillion; HSBC $4 Trillion; Wells Fargo $3 Trillion; Bank of New York Mellon $1 Trillion; Morgan Stanley $1 Trillion; State Street Financial $1 Trillion.