Tuesday, December 20, 2011

My interview with Johannes Mueller, Swiss Bullion Dealer

Storefront where interview took place.
Interview with Johann Mueller, Summer 2008

By The Silver Squirrel

This interview is a few years old, but the content is timeless!

Johannes Mueller (website: http://www.einraeppler.ch/index.php?setlang=en) is a numismatist and bullion/jewelry dealer in Bern, Switzerland.  He has a calm and friendly demeanor and seems very comfortable in his chosen profession.  He mints his own silver bars with a family mint-mark – they are not for sale and he will not disclose how many he has ;) .  After talking for awhile about Ron Paul, the Liberty Dollar, and the world economy, he agreed to do an interview.  Mr. Mueller is author of “Geld – Schwiezer Munzen und Banknoten als unbestechliche Zeitzeugen”, a book about the history of Swiss coins and banknotes.  The interview was conducted during business hours, with interruptions from customers, and Mr. Mueller would seamlessly transition from doing business in German, French, and Italian to answering economic questions in English.  His simple and direct answers paint a clear picture of the situation in which honest citizens trying to preserve their wealth find themselves in today.

Q: How long have you been in this business?

A: 25 years in Bern

Q: Have you heard of Ron Paul?

A: Yes I have read his book.  It came out five days after the release date in America. Actually, my wife bought it for me.

Q: Where do you think gold and silver are going in the next one to five years?

A:  The correct question is "what is the future purchasing power of paper money?" My answer is, "not very much".  So of course gold will be “higher”, but only in nominal terms. There is no magic in gold – it never multiplies or disappears.  Interest rates are for idiots - smart people only think in terms of purchasing power, not nominal amounts.

The biggest problem is that when confidence in paper assets goes down, people will flee to real assets, such as land and commodities.  History shows that gold and silver are the best store of value in this category.  The global financial collapse will happen from a sell-off in bonds, which is where most of the world’s money is.  When people realize that bond yields are lower than inflation, they will sell and try to preserve their purchasing power by moving into real assets.

Q: Why is silver so low in relation to gold at the moment?

A:  This is because of “paper silver” – contracts of delivery from banks and other institutions. Most silver investors right now are in silver certificates, not real physical silver.  It’s a fractional system, just like the rest of the banking system, and it is not truly backed with hard assets.  This creates artificial supply which keeps the price low – there are more people with silver certificates than there is actual silver in the possession of the banks.  They are merely buying “calls” and investing in the price of silver, not the actual commodity silver itself.  What if, say, Bank of America cannot deliver on a large silver contract? People think its not possible, but we now see several American banks failing.


Q: Have you read Ted Butler’s take on short positions in the silver market? What do you think about that?

A: Yes, Ted is a smart man.  The problem is that these people’s (the bankers) friends will change the rules if that scenario comes to pass.  Everything Ted says is OK, but regulators could change the system.  That’s what they did with the Hunt Brothers.  The Hunt Brothers were right, but the government changed the rules.  That is the trick of criminals.  They have the power to make any rule they want.  They can suspend the laws of supply and demand. They could even make a rule making it illegal to go long on silver. Who knows?


Q: Do you have any optimism that we will ever have honest money?

A: I have to hope it.  Its like asking a prisoner if he wants to be free.  If you ask a man on death row, he will have to think he will be freed, even if he knows he probably will not.  I’m not naïve in this belief though, because nature and the natural order hate large constructions, monopolies, and unfair deals.  Honest money is what justice demands and it is the only way to have security.

If you play a game and the Fed is the game-master and if it changed the rules in the middle of the game, always in favor of the banks, this would create injustice.  In the long-term, this can only create either war or revolution.  The main problem is the Fed because they are not neutral like a game-master should be.  For instance, they only take credit from banks, not people, which is unfair.

Q: Is there any paper currency in the world that you think is well-managed for the time being? Swiss Franc? Australian Dollar?

A: None.  They are all derivatives of the U.S. system.  All of them have debt based money – it’s a joke.  The Fed and its banks can create money without work, while everyone else must work for money.  Lets say that you find 1% inflation to be low and acceptable.  Even just 1% inflation means that someone is stealing 1% of the wealth in society.


Q: What can regular people and people of average means do to protect themselves from the coming crisis?

A: A financial meltdown can happen any day – it doesn’t have to be five or ten years from now. When the bond sell-off begins, it (the system) will be over.  The government will start a war against the free market, which is, in reality, a war against free peoples.  You must pay off all debts and never go into debt again.

Also, you must not be fooled by nominal amounts.  Take the housing crisis in America.  Someone who bought a home in the year 2000 for $300,000 which is now worth $600,000 thinks they have doubled their money, but in fact they have lost a third.  They paid 1,000 ounces of gold for the house in 2000 and now it is only worth 650 ounces of gold.  Gold is the truest measure of purchasing power.

Q: Do you think that the silver to gold ratio will ever return to 20:1 or 15:1 again?

A: Yes, of course.

Q: Why?

A: Because long-term, the free-market will determine the real relationship between the metals.  This relation is 15:1, which has been the case through almost all of history.  Under the US gold standard it was 17:1.  However, the relationship could go even higher – 5:1 is possible.  Anything is possible.  Silver is needed for so many industrial uses, such as cleaning water, and there are many demographic pressures so anything is possible.

Another reason why the price is currently suppressed is psychological.  Silver is currently seen by big investors as too heavy.  You have to remember that big investors can be talking in terms of tons here.  Has anyone ever complained that gold was too heavy?  When silver goes up, say to $120, big investors will find it more appealing and will jump on board.  Then it could really take off.


Q: Why do you think only a few Americans are aware of these seemingly obvious facts?

A: They have forgotten that the start of the United States was one of liberty and freedom.  They won’t remember until they’ve completely lost it.  Then it’s too late.  It’s good that young people like you are listening.  The internet is a great place to learn about this subject so learn everything you can while there is still free speech.

THANK YOU

The Sin of Usury

While most modern Christians do not object to earning interest and lending money, some people interpret the Bible's commands about usury to be more expansive than the currently prevailing view.  The Catholic Church used to be against all lending at interest, but changed their position over time as modern banking developed.  Today, there is a minority of fundamentalist Protestants who are rediscovering the Old Testament commands against lending for gain.  I haven't done enough research and self-examination to decide my exact position on this yet, but you may find this anti-usury sermon interesting:

MP3 LINK HERE: http://www.faithfulwordbaptist.org/101611p.mp3



"Silver" of the Month - December 2012


My room-mate found this interesting piece of metal in a building he was re-carpeting.  It is attracted to a magnet, but its color and weight suggest that it is not just steel, but rather some kind of lighter alloy.  I don't know how many other metals are in the alloy or what its purpose is, but he said there was other pieces lying around the site.  It looks just like the old fashioned pour bars of silver, so it might serve as good decoy to protect my hoard! :)

Banknote of Month - National Bank of Commerce, Chas. W.Va.

Monday, October 17, 2011

Quote of the Week, 10/17/2011

"For the institution of several property—that is, private property—has been a powerful instrument for teaching men and women responsibility, for providing motives to integrity, for supporting general culture, for raising mankind above the level of mere drudgery, for affording leisure to think and freedom to act."
-Russell Kirk

Wednesday, September 7, 2011

Ronald Reagan and the Gold Standard


He didn't get the gold standard, but he did save the US dollar with high interest rates.  Did Reagan do enough?  Was he truly a gold standard man, or was he just saying it?  We may never know the debates and power struggles that went on behind the scenes regarding gold in the 1980s.

Tuesday, September 6, 2011

Hugo Salinas Price: Bring Back the True 371.25 grain Dollar!


Dorothy's silver shoes or the re-monetization of the silver currency of the United States of America
By Hugo Salinas Price
Address presented at the GATA Gold Rush 2011.
London, England, August 6, 2011.

Why not re-monetize the silver dollar? Re-monetization could put the silver dollar and its subsidiary silver coinage into circulation in parallel with FRNs – “Federal Reserve Notes”.
There are several reasons that make this action possible, and only one that might be considered as an unimportant material obstacle.

In favor:

The silver dollar is the money that is still the Constitutional “coin of the realm”, defined by Act of Congress as 371.25 grains of pure silver. (The Troy ounce contains 480 grains.)

The silver dollar is familiar or at least known to almost all Americans.

A considerable quantity of these silver dollars is owned by Americans.

The silver dollar is a cherished symbol of a great past.

The monetized silver dollar would ignite a desire to save such as America has perhaps never seen before. The very first thing that must be done, to encourage people to save, is to give them something worth saving. As the US government gallops toward the abyss of bankruptcy by unlimited spending, the American people desperately require a refuge for their savings!

In this writer’s opinion, a large majority of the American people can see themselves as owners of silver money and, if a poll were taken, one can imagine that most Americans would express themselves in favor of silver money. Not so with gold, towards which the American people have little emotional attachment: gold is seen as the money of the élite. William Jennings Bryan exploited this fundamental attitude of the American people with his “Cross of Gold” speech. (Note: this should not be taken as disparaging gold; it is simply the statement of an opinion about the attitude of Americans regarding gold.)

Against:

The silver dollar bears a value stamped upon it: “One Dollar”.

***

The branch of government which the Constitution has designated as the agency “to coin money [and] regulate the value thereof” is the Treasury.

If the Treasury were to monetize the silver dollar coin by attributing to it a monetary value in terms of FRNs - “Federal Reserve Notes” - the public would very probably ignore the inscription of “One Dollar” upon the coin and accept it as legal tender money for the amount of the Treasury quote given to it. It would not be necessary to explain that twice, to anyone owning a silver dollar coin! In a short time, people would regard the term “One Dollar” as the name of a coin, rather than as a numeric indicator of legal tender value.

Determining the value of the silver dollar falls quite nicely into the Constitutional mandate to the Treasury: “To coin money [and] regulate the value thereof…

How would the Treasury go about determining a quote to regulate the value of the silver dollar? Let bureaucrats and lawyers write books about how it should be done; here it is in a few words:

Suppose the price of silver bullion is $35 per ounce.

The silver dollar contains 77.34166% of a Troy ounce.

$35 X .7734166 = $27.07, the value of the silver in the silver dollar.

The Treasury will quote the silver dollar’s value in FRNs, with a margin of 15%, and round the figure to the next highest multiple of four:

$27.07 X 1.15 = $31.13, rounded up to $32.

The silver dollar as a legal tender coin worth $32 FRNs. The American public would eagerly purchase these silver dollars, worth $32 FRN dollars, and which could be used for all transactions without any haggling. The silver dollar worth $32 FRNs could even be deposited for that value in banks, if anyone had a mind to do such a thing.

If the price of silver rose to $37.61, the margin of profit of the Treasury, or seigniorage as it is formally known, would be reduced to 10%; at that point, a new and higher quote would be issued, to restore the 15% profit of the Treasury:

$37.61 X .7734166 = $29.09 value of silver in the silver dollar X 1.15 = $33.45, rounded up to $36 FRNs - 36 being the next highest multiple of four.

Why “the next highest multiple of four”? Because by doing so, the result would be the re-monetization of the entire silver currency system of the United States as it existed up until the Sixties of the last century.

In the last example, the silver half-dollars would automatically be worth $18 FRNs, the quarter-dollars would be worth $9 FRNs, and the dimes would be worth one-tenth of the silver dollar: $3.60 FRNs.

As pointed out in many articles at www.plata.com.mx, in the section in English, the last quote of the Treasury would remain firm and not subject to reduction, just as if the value in FRNs had been re-stamped upon the coin. The Treasury quote would simply take the place of a stamped quote, which cannot be reduced. The Treasury quote would only be raised, to follow the rising price of silver. In this way, the silver dollar would be a coin that would remain in use permanently.

This program would return the silver dollar and its subsidiary silver coinage of half-dollars, quarters and dimes to the American people in such a way as never to disappear again: all rises in the price of silver would be matched with rises in the quoted monetary value of the silver dollar and by derivation, of its subsidiary coinage: the silver half-dollar, the quarter and the dime.

This program would not cost the Federal Government – or the taxpayers that support it – one single cent! And yet, it would constitute the greatest gift to the American people that any US Congress could possibly invent, next only in importance to the return of the Gold Standard. The restoration of the silver currency of the United States to circulation, in parallel with the fiat FRN, can be considered the prelude to the revived Gold Standard.

By paying the Treasury a premium of 15% over the bullion price of silver, the American people would actually be subsidizing the Treasury’s work of monetization. This cost would be a one-time cost of obtaining real money of permanent value and utility, independent of the Fed and the banking system.

The re-monetization of the silver currency of the United States would create a new, vast market for physical silver and drive the price of silver very much higher. Those who might not be able to afford the purchase of monetized silver dollars could purchase half-dollars, quarters or dimes, which would provide the same security: they too, would rise with the rise in the price of silver. The rise in the price of silver would affect gold, which would also rise in price.

In order to facilitate larger transactions in silver, the Treasury could once again issue “Silver Certificates” attesting to the existence of silver held in its vaults.

With regard to the present faux-silver coinage in circulation, the American people are too intelligent to be deceived by it; this coinage may remain in circulation until the Treasury issues new coins for the purpose of making change in small transactions.

Though the restored silver currency may legally circulate, in practice it will be saved in its entirety and only be used in cases of emergency. Its “velocity of circulation” will be effectively close to zero.

***

Dorothy wore silver shoes, in L. Frank Baum’s classic book. Silver shoes on the yellow brick road! Dorothy symbolized then and still does today, the American people. Dorothy was unaware of the magic power of her silver shoes – and the American people are still equally unaware of the magic power of the re-monetized silver dollar: the power to recover America as the land of Hope and Opportunity!

What are the obstacles to regaining the silver dollar as money which can circulate in parallel with Federal Reserve Notes? The main obstacle will be the weapon of fear wielded by the entrenched interests of banking and the Federal Reserve, the intellectual centre of the banking cartel. These fiat money-mongers will rely on generating fear of the consequences of silver money so that they can maintain their huge fraud of fiat money FRNs; the Fed and the “Too Big to Fail” Banks are deathly afraid of the competition of silver. They know that the slightest crack in their monopoly of issuing fiat money will expose their scheme.

The Fed and the banking system will without doubt claim that “silver money is very costly”, but they will certainly not mention that the American people will fall over themselves to acquire it and even pay a premium of 15% to the Treasury, for the blessing of owning real money. Nor will the Fed and the banking system ever mention the gigantic costs that the depreciating FRNs have inflicted upon American savers; nor will they wish to recognize that the fiat FRN and the Fed are directly responsible for the present financial and economic destruction of the once great United States of America.

Another objection which will be put forward forcefully is that what the American economy requires is more spending on the part of the public. They will argue that more savings on the part of the American people spells doom for the economy: “More drink for the drunkard” is essential, according to the prevailing Keynesian thinking.

However, the humbug wizard has already been exposed and the Fed has lost its prestige forever. Toto has drawn the curtain! The State of Utah has already voiced its dissatisfaction with the present monetary system, by legislating in favor of gold and silver as legal tender money. If this project - monetizing the silver dollar by the Treasury’s giving it a numeric monetary value in FRNs, which immediately places it alongside the Federal Reserve Note as money – if this project comes to the notice of the several States of the Union, they together may force the issue.

The present policy is to “kick the can down the road” and postpone the final reckoning. But, the end of the road is already in sight! The condition is one of utter helplessness. The re-monetization of the silver dollar is the first step toward regaining health for the economy of America. Paper, fiat money will probably remain in use for some time, but the presence of the monetized silver dollar will force the Federal Reserve, the banking system and the US Government itself, to a more prudent financial course. It will be possible to regain financial health, because an alternative is available. Savings, the foundation of prosperity, will bloom as Americans opt for massive voluntary austerity by saving monetized silver dollars, half-dollars, quarters and dimes.

The banking system in the United States will be anxious to receive the massive savings in silver of the American people as deposits, but this will only be possible when the price of silver bullion has stabilized. Thus, the American people will have the upper hand; they will bend the banking system to their will by refusing to deposit their silver in the banks and thus force the banking system to reform itself to prudent monetary practice and desist from inflating by expanding credit out of nothing. After a stabilization of the banking system, the way would be open to a resumption of the Gold Standard.

Americans are today caught in a financial calamity with no parallel in history. They are being told this every day by every medium of communication. But they watch their crumbling economy in utter paralysis, because there is no alternative to which they may turn. The whole world is a mirror of their plight.

The restoration of the silver currency of the United States of America by the very simple procedure outlined here can provide the life-saving alternative. There is, at present, no other practical proposal for a viable action in the field of money. Perhaps there can be no other practical proposal? Perhaps a return to silver money is the only path out of the present crisis of civilization?

Let us hope that a political leader in the United States understands this message. The popular appeal of silver is universal; “silver shoes” will take that leader far – and the American people will follow him on that road!

Friday, September 2, 2011

SAVINGS ARE THE KEY TO GROWTH


This interview re-enforces the fundamental theory of this blog.  Thank you James Turk for everything you do! :)

Silver quote of the Week

And he that hath lyberte ought to kepe hit wel
For nothyng is better than lyberte
For lyberte shold not be wel sold for alle the gold and syluer of all the world.

 

-Aesop's Fables, Caxton's edition, 1484






Wednesday, August 31, 2011

Banknote of the Month, September 2011 - Special shout out to Max Keiser & Stacy Herbert

Greetings fellow silver-enthusiasts and opponents of endless monetary abuses by central banks.  I have taken the liberty of producing my very own limited edition Greek Drachma series (consisting of all of two notes), in artistic protest of JP Morgan's silver price suppression scheme, as well as the EU's attack on Greece's national sovereignty.   They are two old 100 Drachma Greek notes, over-stamped with "Crash JP Morgan - Buy Silver", the meme that Max Keiser began a few months ago.



Bank of Montreal Offers Foreign Banknotes in new ATM

Dear Readers,
You may have heard about gold ATMs in Vegas and Bahrain, but now there is a foreign banknote ATM in Vancouver - very interesting!  Its a new evolution in getting physical banknotes into the hands of people outside the national boundaries of the issuing country.  To understand the real significance of this event, I advise everyone to read Friedrich von Hayek's classic essay "Choice in Currency - A Way to Stop Inflation."  It may be downloaded at the IEA website here: http://www.iea.org.uk/publications/research/choice-in-currency-a-way-to-stop-inflation

My Hong Kong Dollar collection:



Source of Article: http://finance.cincinnati.com/gannett.theenquirer/news/read?GUID=19340131

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/29/11 -- BMO Bank of Montreal today announced BMO's new Oakridge Center branch in Vancouver, B.C. will be the first bank branch in Canada to offer a Foreign Exchange Currency (FX) ATM. The new service offers customers instant access to U.S. Dollars, British Pounds, Euros and Mexican Pesos.

"Among Canadians, British Columbians are frequent travellers abroad," said Jennifer Muench, Vice President, Vancouver District, BMO Bank of Montreal. "Partnering with Thomas Cook to offer this FX service will provide local residents this added banking convenience when planning a trip."

The newly relocated branch, now at 103 - 650 West 41st Avenue in the Oakridge Center, represents a $1 million investment into the community and offers customers a wide range of innovative banking tools and financial services. In addition to the FX ATM, the branch also features the "Virtual Advisor," a webcam video conferencing service that offers immediate access to additional BMO financial experts such as mortgage specialists and financial planners, and the 'Discovery Centre', a computer kiosk used to access Online Banking, financial tools and calculators, and view a demonstration of BMO MoneyLogic, an intuitive online tool designed to help consumers budget and save money.

"These innovative technologies are designed to make our customers' financial transactions easier and more convenient," said Terry Tan, Oakridge Branch Manager, BMO Bank of Montreal. "The new branch, located in one of Vancouver's most prestigious malls, includes a team of financial experts, cutting-edge service technology and extended banking hours that will provide this vibrant and diverse community with a great customer experience."
The state-of-the-art facility also offers two ATMs, access to commercial account and deposit services, a complimentary coin counter, and a Safestore Automated Vault which offers safety deposit boxes.

"To celebrate the opening of our new branch, we encourage new customers to open a Youth Account between August 29th and October 31st and receive a matching $25 deposit, courtesy of BMO," added Mr. Tan.

Media Contact:
Laurie Grant
604-665-7596


Friday, August 12, 2011

Ron Paul: The Dollar was 370 grains of silver and that's still the definition

Technically, it was 371.25 grains, but please watch this INCREDIBLE interview regarding the US Dollar with Texas Congressman and Republican presidential candidate, Dr. Ron Paul.  He is right on the money, so to speak.

He has been researching these issues since 1970 and was on Reagan's gold commission in the 1980s.  It was for that commission that Dr. Edwin Vieira Jr, of Harvard, wrote his famous two volume magnum opus, "Pieces of Eight",  which Constitutionally, historically, and legally proves the true definition of a united States "dollar", as mentioned in the Constitution, is 371.25 grains of fine silver (per the Coinage Act of 1792 and many other documents, court cases, and sources - 1,722 pages worth).  Dr. Paul wrote the forward to that book, which has recently been re-published with updated information by the Gold Money Foundation.  OK, enough chatter, on to the amazing interview about rapidly unfolding events:


Money has to come out of the market as Ludwig von Mises taught: www.mises.org

Thursday, August 11, 2011

Daniel Hannan on The Global Economy

I think Mr. Hannan's analysis is spot-on, though we must recognize that he is essentially calling for a deflationary depression when he calls for less money-printing and higher interest rates.  This would possibly save the system and is the right thing to do under Austrian economic theory, but it would cause great turmoil (not that the current path is not). If you have ever read Bix Weir, he has theory on why we have not yet done what Mr. Hannan is so logically suggesting, but that is a story for another post.  Now on to his article:


'I beseech you in the bowels of Christ, think it possible you may be mistaken' 


Let’s review what brought us to the present economic catastrophe. Interest rates were kept too low for too long. Banks were encouraged – in some cases obliged – to lend money less discerningly than they wanted. Public and private debts were too large. State spending was rising, squeezing the productive bit of the economy in order to engorge the unproductive bit. Perhaps worst of all, a crony-capitalist nexus had grown up, in which the distinction between governments and large corporations was blurred.

When the crisis hit, there was no slack to cushion the impact. Yet governments responded, not by re-examining their assumptions, but by doling out more of the medicine that had sickened the patient. Interest rates were lowered even further. Banks were told to lend even more recklessly. First financial institutions and then entire countries were bailed out by taxpayers. Inflation was deliberately stoked. Spending and borrowing rose to undreamed-of levels. Large corporations and, indeed, entire EU member states began to conduct their affairs – logically enough, I suppose – on the assumption of a taxpayer-funded guarantee.

These policies have, utterly predictably, failed. The countries which decreed the biggest bailouts have generally suffered the worst downturns. Far from averting recession, their governments have burdened generations yet unborn and unbegot with debt.

I don’t say write these things for the sake of saying “I told you so”; I’ve been in politics long enough to know that no one likes a smart-aleck. I’m writing them, rather, because many of the world’s leaders are still, incredibly, pursuing the same policies that got us into this mess. Interest rates are still being kept artificially low, at least in Britain. Inflation is rising as the economy slows. Larger and larger bailouts are being decreed in order to keep the euro intact. Spending is higher now than it was when Gordon Brown left office, and 2011 will be the third year in a row in which the state has accounted for more than 50 per cent of our GDP.

Three years after the collapse, it is surely time to change course. We need to stop printing money and start raising interest rates, to cut taxes and scrap regulations, to rebalance the economy toward the private sector. Are these ideas really so radical?

-Daniel Hannan, writing in The Telegraph, August 10th, 2011

Tuesday, August 9, 2011

Bond of the Month, August 2011 - USA Postal Savings


From 1911 to 1967, the Post Office of the United States (not to be confused with the current USPS, which is a quasi-private entity, complete with a "dot-com" address), sold certificates of deposit that payed 2% annual interest and were backed by the faith and credit of the United States government.  As you can see, they are similar to US Savings Bonds, in that they have an individual's name on them, a denomination, the issuing location, and the date they were issued (non-negotiable, non-transferable).  The USA is not the only country to do this; the idea began in Britain and is also very popular to this day in Japan.

The purpose they served was to give people with small amounts of money - or people who lived in rural areas - an opportunity to safely save money without needing access to a private bank account (keep in mind, 1911 was many years before the FDIC, so private banks were not widely trusted, especially small-town and rural banks).  It was both safer and more profitable than putting green-backs under the mattress, without requiring the capital needed to buy a $10,000 Treasury bond.  

There was a main depository in each state, though they could be bought or cashed at any branch, so far as I know.  It was also a cheap way to finance the government debt.  In my opinion, it was an excellent system, but it fell out of favor due to the FDIC, which gave private banks the same government guarantee of safety that Postal Savings enjoyed.

I plan to write more about these later, and how they might tie in with a reinstatement of Glas-Steagel, the re-nationalization of the Postal Service, the US Treasury market, and other issues.  For now, just look at the nice pictures! :)

Monday, August 8, 2011

Resource Nationalism - The biggest risk to miners

I have thought this to be the case for some time, and now there is an article to back it up.  A little "confirmation bias" on my part perhaps, but if you think about it, governments in unstable countries often seize natural resources like oil and mines.  If you invest in mining shares, consider all the risks, which include hostile action by the government where the mining operation is located.  



  ----------------------------------------------------------------------------------------

LONDON (Reuters) - Resource nationalism is the biggest threat facing the mining sector this year and next as governments seek to take advantage of higher commodity prices to try to restore fragile finances, advisory and accountancy firm Ernst & Young (E&Y) said on Sunday.

"Because the mining and metals sector rebounded quickly from the global financial crisis, it became an early target to help restore treasury conditions," the firm said.

E&Y said it had identified at least 25 countries in 2010/11 that had increased, or announced plans to increase, their government take via taxes or royalties. Governments have also been looking to lift local participation in projects, a trend E&Y thinks will only increase.

Global miners Anglo American and Xstrata criticised resource nationalism in recent result's statements as concern grows over the topic.

Australia has announced a controversial plan to tax carbon pollution , Peru and Tanzania are both considering windfall taxes, while South Africa's new royalty regime came into effect in March, E&Y noted.

The lack of skilled staff remained the second-biggest threat to the industry with Australia alone needing an additional 86,000 workers by 2020, it said, citing the Minerals Council of Australia.

A shortage of skilled labour is also a factor behind the highest new entry in the top 10 list, with capital project execution coming in at number five at a time when some companies are spending as much as $100 billion on expansion plans.

Other new entries include supply interruptions - mainly due to the number of natural and environmental disasters over the past year - and fraud and corruption as miners have moved into riskier countries at a time of tighter regulations.


Thursday, July 14, 2011

Silver of the Week VII

Front
 
Reverse

10 gram Pamp S.A. Suisse "CertiCard" assayed .999 fine silver bullion.  A beautiful enclosed piece of silver bullion from Switzerland, long known as some of the world's most trusted bullion dealers and assayers.  These type of pieces are some of the most liquid bullion bars in the world due to their clear markings and security features and they sell for a premium over the spot price.  As you can see, this particular bar has a loop on the top for putting a chain through.

Wednesday, July 13, 2011

Banknote(s) of the Month, July 2011 - The "Blue Dollar"

A few years ago, there was a word of mouth and internet conspiracy theory that the US Government and/or Federal Reserve was planning a new US Dollar as a way to stem what some speculated was a coming hyper-inflation.  There was even a term on Wall Street that I heard used on one of the financial news stations called "the Blue Dollar trade" - ie, buying anything of tangible value like copper, gold, silver, oil, etc in anticipation of a major currency event and the devaluation of the US Dollar.  I also heard that the re-valuation would be one Blue Dollar for every 3 old Federal Reserve Note.  These theories were shown incorrect with the passage of time and furthermore, the images of the two different designs were simply fictional contest entries in a dollar re-design project that was unrelated to the US government.  They are very interesting graphics, so even though they aren't real notes, I wanted to share them with my readers. 

Sunday, July 3, 2011

Silver of the Week, VI

The silver of the week for July 3 - July 9 is the A&M Fine Metals 1 gram silver bullion bar.  They are hand-made in Indiana, USA by an acquaintance of mine.  He mints them periodically and puts them up for sale in various ways, including through E-Bay and the online metal retailer "Copper Cave".  They are .999 silver and have a great classic look to them!

Silver quote of the Month, July 2011

"I think in the case of silver, which of course had a huge catch-up move with gold and then had a shakeout after that because it moved far too fast, the low of that correction period is in and I think we’re within days of the correct moment to be buying back into silver again."
-Robin Griffiths, King World News interview, June 29 2011 

Link to full interview: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/29_Robin_Griffiths.html

Sunday, June 5, 2011

Banknote of the Month - June 2011

Country: Northern Ireland (UK)
Issuer: Bank of Ireland, Belfast
Denomination: 100 Pounds Sterling
Date: March 1st, 2005
Type of Note: Private banknote, "payable to bearer on demand", backed by UK/British Pounds on deposit.


This week I have yet another note from Northern Ireland - I am really on a kick with these because there are so many different varieties.  This particular note is a fairly recent 100 Pounds from the Bank of Ireland, Belfast.  It is a private bank which has an arrangement with the Bank of England to emit its own banknotes, backed by Pound Sterling.  The reason I think it is so attractive is that it incorporates a colorful and vibrant design with traditional and officious appearance.  Modernity and tradition do not have to be mutually exclusive.  The six crests/shields near the top are a great touch and in general I think its a very tasteful banknote (even if it is still just un-backed fiat paper, haha).

Saturday, June 4, 2011

Mystery Symbol on my $100 FRN

Can anyone help identify this character and its purpose?  I found it on the back of a $100 US Federal Reserve Note.  It would appear to be either Chinese or Japanese, though I suppose Korean is also a possibility but probably less likely.  There are no barriers to the comment section (haven't had any spammers, yet *fingers crossed*) 

UPDATE: I have received the following responses from various people on silver and coin forums:

#1 "The character is either Chinese or Japanese kanji (which is based on the Chinese language).  In China or Hong Kong, the way its stamped in red and enclosed within a circle implies its a business brand or mark.  The character itself appears to be a family name 'Wen/Wing', but is oddly proportioned and cannot be easily identified.  Stamps like that are associated with old family businesses owned over a number of generations."

#2 "Looks like the Chinese character for vegetable or dish but some strokes are too straight for a 100% identification. This note must have passed through a Chinese restaurant."

#3 "Federal Agents have been known to use these symbols when tracing money laundering. The Chinese symbol is less likely to raise suspicion."

#4 "What you have there is a modern day "Chop mark".  The Chinese use to put chop marks on old silver coinage, like the Spanish pillar dollar etc."

#5 "My partner is Chinese she said it means "Glory". It's a Chinese character."

#6 "(T)hat is simplified Chinese, so it must be someone from mainland China stamped on it. HongKong and Taiwan use 榮 vs. 荣  My guess is somebody just stamped his/her family name on the note."

And my personal favorite, although it is a joke:

#7 "The symbol means 'property of the PRC'." HAHAHAHA

Thursday, May 26, 2011

Bernake vs God

You shall do no injustice in judgment, in measurement of length, weight, or volume. You shall have just balances, just weights, a just ephah, and a just hin: I am the Lord your God, who brought you out of the land of Egypt. 
(Leviticus 19:35–36)

 

 

 

 

But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
-
Benjamin Shalom Bernake, Chairman of the Board of Governors of the Federal Reserve


 

 

Without self-discipline under God’s revealed laws, there can be no freedom. False weights and measures lead to unrighteousness. People who sell items to the public must be sure that they avoid giving less than what is expected—revealed on the scales—through tampering with the physical standards. In short, tampering with society’s physical standards is a sign that men have already tampered with the society’s moral standards.
-Dr. Gary North, "Honest Money"

Wednesday, May 25, 2011

Silver of the Week, V - Lydian Mint 1/4 oz. .999

This week I am featuring two one-quarter ounce .999 silver pieces which I picked up a few weeks ago in my local area.  They are dated "600BC - 2009AD", a reference to the ancient Greek coinage that was made in Lydia, an area in western Asia Minor (now Turkey).  The wikipedia entry on Lydia states:

        "According to Herodotus, the Lydians were the first people to introduce the use of gold and silver coin and the first to establish retail shops in permanent locations.[9] It's not clear, however, whether Herodotus meant that the Lydians were the first to introduce coins of pure gold and pure silver or the first precious metal coins in general. Despite this ambiguity, this statement of Herodotus is one of the pieces of evidence often cited in behalf of the argument that Lydians invented coinage, at least in the West, even though the first coins were neither gold nor silver but an alloy of the two.[10]
        The dating of these first stamped coins is one of the most frequently debated topics in ancient numismatics,[11] with dates ranging from 700 BC to 550 BC, but the most commonly held view is that they were minted at or near the beginning of the reign of King Alyattes (sometimes incorrectly referred to as Alyattes II), who ruled Lydia c. 610-550 BC.[12]"



 
 

These are interesting little bullion pieces, but I wouldn't pay much over spot for them so personally I wouldn't pay their retail price of about $4/oz over spot (.99 cents per coin, when you buy 100), but if I find more on the secondary market I might grab them.  If it sounds like a deal to you, though, here is the website: http://www.lydianmint.com/index.html

Thanks for reading the Silver Squirrel!  I've seen a big spike in traffic lately now that I am posting on a regular basis, so let me know if you like it by commenting so I have motivation to keep going!

Monday, May 23, 2011

Breaking News - Belarus Devalues Currency Overnight

 From Kommersant.ru :

"The National Bank of Belarus (NBB) is sharply devaluing the official rate of Belarusian ruble. The exchange rate as of May 24 was set at 4,930 rubles per dollar. a decrease of 56% from the 23 May.  The National Bank of Belarus has officially confirmed a sharp depreciation of the currency."

Funny enough, I use a Belarus banknote in the "About" section of this blog because it pictures a squirrel!



I hope none of my readers are in possession of any Belarus Ruble banknotes or bonds!

"When it comes to currency warfare, one can be polite and gentlemanly about it, like Brazil for instance, which every day, and sometimes on several occasions during the day, will proceed to buy dollars in an attempt to keep one's own currency lower. Or one can do what the Belarus central bank just did, and officially devalue one's currency, in this case the Belarus ruble, by 56% overnight, against every currency out there."
http://www.zerohedge.com/article/belarus-just-devalued-its-currency-56
  
Wall Street Journal is running a correction that is was actually 36%, not 56%. 
http://online.wsj.com/article/BT-CO-20110523-707809.html

Belarus was under pressure from Russia to sell state assets in order to get a credit line and bailout from Moscow, but instead they just devalued their debt!  WOW!  Anyone in Belarus with silver instead of fiat is doing fine, but all the fiat savers have been robbed!

Again from Kommersant.ru:

Meanwhile, representatives of Belarusian banks have criticized the mechanism of devaluation. "The problem is not in the specific value of the exchange rate and in the mechanism. The question is: under whose speculative decisions did the National Bank make this choice?" - Said the agency "Interfax-West" management representative of a bank with Russian capital. In this case, the representative of a state bank believes that "this decision should be viewed as an interim measure." According to him, "the trend is obvious: the official exchange rate will move in the direction of the OTC exchange rate, rather than vice versa."

Max Keiser sums up our situation

This is basically the entire concept of The Silver Squirrel wrapped up into a 2 minute sound bite.  The savers are being robbed! 


And unsurprisingly, Max is a huge proponent of physical silver buying.

Cognac, Yogurt, and Gold? PIMCO's stock fund strategy

Pimco, the world's largest bond fund, headed by Bill Gross, is now moving into equities.  According to the May 23rd issue of Fortune (pg 57-58), "Money-management powerhouse Pimco has long been renowned for its experience in bonds.  Equities, not so much.  So when the firm announced in late 2009 that it was moving into stock picking, it scoured the globe for talent.  Its first draft choices were Anne Gudefin, a veteran value investor, and Charles Lahr, partners who jointly ran the $16 billion Mutual Global Discovery mutual fund."

The story also ran on CNN money website and Yahoo Finance.  Anne is now bullish on gold, yogurt, and cognac!  This somewhat unorthodox strategy can be read about in detail here: http://money.cnn.com/2011/05/11/pf/anne_gudefin_pimco.fortune/

I am posting this because from an intellectual standpoint, I can respect "value investing."  However, if Anne had been a silver squirrel over the last five years her annual returns would have been more like 25% than the 7% she made for MGD fund! 

Sunday, May 22, 2011

James Turk - What's been going on with the silver price?

James Turk of Goldmoney.com has interviewed "renowned Wall Street trader and financial commentator" Victor Sperandeo. Here is a youtube video from "GoldMoneyNews" which shows the portion of the interview that relates to silver:



Some highlights:
-Silver has been roughly twice as volatile as the S&P 500 over the last ten years.
-Silver trading algorithms lose money, except very long-term ones. This is because silver is very volatile month to month, but it is ultimately drive by long-term fundamentals.
-The retracement from $49 to $35 is fundamentally healthy and bullish.
-65% of silver mined is used for industrial production, 35% is for investment/money. Compare to 10% of gold used for industry and 90% available for other uses.
-There is very little silver relative to gold in terms of what is physically available for investment.
-India has been a net seller of silver in the recent past but this is reversing.
-As long as governments keep "stealing from savers" with borrowing and inflation, you must stay long precious metals.

"The Devil's Metal" Part II

A silver shekel from Jerusalem around 68 A.D. :

In my last post, I began the discussionon why silver is an honest money, why Federal Reserve Notes are not, why Jesus reacted the way he did to the money-changers, and what the Bible says about silver. These are big topics that might be continued in the future. I asked a very Biblically-literate Presbyterian pastor what he though of my post and here is his response for your consideration:

"Thanks for asking me this Bill. I see no glaring errors. One additional observation about the temple clearings has to do with racism and Jewish patriotic fervor. The comment, "my house shall be a house of prayer for all nations" picks up on the fact that the money changers/marketplace was set up in the court of the Gentiles, thereby hindering the worship of God by foreign believers. The temple clearings are not only a critique of the economic oppression and idolatry symbolized by the money changers, but they also critique the Jews' tendency to exclude the nations from the redemptive plan of God, symbolized by where they had set up shop.

Let me know if I can be of further help. Thanks again
-Nathan"

This is not a religious blog per se, but its hard to avoid the moral questions that arise when discussing silver, fiat money, interest, poverty, banking, etc. Savers and investors should at least be aware of all sides before making their own decisions.

Friday, May 20, 2011

Silver in the Bible - The "Devil's Metal"?



Recently we see lots of mention in American and Canadian media about how silver is the "devil's metal" (so-called because many fortunes have been lost trading it). In reality, the theft from the poor that occurs due to fiat money and inflation is the true evil. Every day they lose a little of their savings to inflation and pay higher prices for food, as Ben Bernake runs the printing presses. It is a vain effort to preserve the status quo of endless debt and deficits. Silver, on the other hand, is an "honest weight and measure" like the Bible/Torah commands and was the metal that was acceptable for giving to God's temple in Jerusalem in the Old Testament. 

When Jesus overturned the money-changers tables, he was not angry at the concept of money or profit, he was angry at them for charging people a high premium for the special silver coin that was needed in order to make temple offerings. Essentially the money-changers were running an extortionist/monopolistic cartel; other Jews were required by their religion to visit the temple and there was no where else to get the coins (of course he was most angry about them defiling a house of God by turning it into a marketplace, but the monopoly made it worse). This is similar to today where the government requires everyone to do business and pay tribute in their monopoly-cartel pieces of paper and these papers are constantly losing value. Anyway, more discussion of this some other post, but here are a few mentions of silver in the King James Bible (I provide some context instead of single verses, but for full context you should go to the chapters):
 
For the oppression of the poor, for the sighing of the needy, now will I arise, saith the LORD: I will set him in safety from him that puffeth at him. The words of the LORD are pure words: as silver tried in a furnace of earth, purified seven times.
-Psalm 12:5-6


Happy is the man that findeth wisdom, and the man that getteth understanding. For the merchandise of it is better than the merchandise of silver, and the gain thereof than fine gold. She is more precious than rubies: and all the things thou canst desire are not to be compared unto her.
-Proverbs 3:13-17

A good name is rather to be chosen than great riches, and loving favour rather than silver and gold. The rich and the poor meet together: the LORD is the maker of them all. A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.
-Proverbs 22:1-3

And I will shake the nations, and the desire of all nations shall come: and I will fill this house with glory, saith the LORD of hosts. The silver is mine, and the gold is mine, saith the LORD of hosts.
-Haggai 2:7-8

The Bible repeatedly warns in these and other verses that A) virtue/wisdom is superior to wealth and B) Ultimately, God owns everything. But, there is nothing inherently evil in gold and silver, only in how some people go about getting them. What the Bible truly abhors is cheating the poor, widows, and orphans by moving property stones, extracting usury, requiring harsh taxes, lying, using incorrect weights and measure, and of course outright theft. This is exactly what the Federal Reserve and US Government do every single day.

Thursday, May 19, 2011

Breaking News - NYSE lowest volume of year

As reported by Tyler Durden of ZeroHedge:


"With just 45 minutes of trading left, NYSE volume will once again need to come up with an appropriate adjective to describe just how bad it is. The 2.6 billion shares traded so far are 56% of the YTD average and just under two-thirds of the Q2 average. Also explains why the levitation algo is hard at work to close the market well into the green on a day when the US economy virtually jumped the shark into contractionary mode. At this point we would once again go so far as to predict that flow and even prop-based revenue for the major hedge funds, also known as primary dealers, will come in materially below expectations...."



Is the 2 year rally in stocks finally coming to a close? I don't know, but I am not sticking around to find out! Nothing good can come from low volume, bad economic news, and the supposed end of QE2. Not to mention that even if the Fed does not raise rates, other countries are feeling the pain from inflation and will raise their own rates. I have also noticed that dividend yields on US stocks are very low by historical standards, suggesting over-valuation, regardless of the P/E ratio (since companies can always tweak "earnings" to the upside through accounting tricks, but they can't make dividend cash magically appear).

Wednesday, May 18, 2011

Silver of the Week, IV

I am completely thrilled with my purchase of a Monarch Precious Metals one ounce .999 silver ingot. These pieces are simple and sophisticated, imperfect yet beautiful. There is something very old-fashioned about them, like they just came off a Spanish treasure ship in the 1600s or something. As you can see, I have placed mine over-top of an old US One Dollar Silver Certificate, which, prior to 1965, could be redeemed at the US Treasury for either a silver dollar coin, or 371.25 grains of fine silver shot. Those were the days!



JP Morgan Moving into Afghanistan!

Afghanistan is apparently very wealthy in minerals, including gold. Is this the new imperialism?

From "CNN Money" website:

http://management.fortune.cnn.com/2011/05/11/jp-morgan-hunt-afghan-gold/

Tuesday, May 17, 2011

On the Ground Report, 5/17/11

I went out today looking for some silver to buy, only to be told by the largest dealer in my city that not only was he out, but that all their other locations were too. It seems the price drop from $48-49 to $33-34 has brought out a great deal of physical demand. The market is repeatedly demonstrating that the COMEX paper silver games are just that, games. The real market is in the physical and one day the COMEX will be overwhelmed by reality.

Eric Sprott has some good insight:

"Here we are in a situation where the price is 40:1, but the dollars going in to it (gold/silver) are almost dead equal, so I can't see the price ratio staying in this range."

Saturday, May 14, 2011

Latest from Doug Casey and Discussion of small coins

You may find this article from Doug Casey on The Daily Reckoning interesting:

http://dailyreckoning.com/keeping-capital-in-a-depression/


Here is an excerpt:

"In the days when gold and silver were money, “saving” was actually identical with “hoarding.” The only difference was the connotation of the words. Today you can’t even hoard nickel and copper coins anymore because (unbeknownst to Boobus americanus) there’s very little of those metals left in either nickels or pennies – both of which will soon disappear from circulation anyway."

        The only problem with this statement is that it is incorrect when it comes to nickels. US five-cent coins are the same composition of 75% copper and 25% Nickel that they have always been, other than the "war nickels" made during World War 2 which contained 35% silver.  US nickels are perhaps the best form of fiat cash to hoard, since they are presently worth about 7 cents in metal value.  
          As for one cent coins - "pennies"- (technically the US Mint has never called a coin a "penny" - it is left-over language from the British coins), ones minted prior to 1982 are 95% copper and worth almosty 3 times their face value.  Some 1982s are copper as well, but some are zinc, it was the cross-over year.  If you search currently circulating pennies, you will generally find that about 20-25% of them are pre-82 coppers.  It is very prudent to set these aside and save them.  Even though it is currently illegal to melt them, nothing lasts forever.  And even with the melt ban, pre-82 pennies sell on E-bay and Realcent.org at a multiple of roughly 1.5x of their face value.  More to come on tips regarding base metal coinage.

Friday, May 13, 2011

Great Pic from Max Keiser's Blog

Who says the price of gasoline has gone up? It hasn't for silver squirrels!


Wednesday, May 11, 2011

10-year Treasury still strong despite monetary inflation

(Click the graph to see it larger)

It seems that every time the metals and crude heat up and the fear of inflation goes mainstream, some event(s) happens in politics or the markets which cause a "risk-off" and keep the 10-year Treasury bond price stubbornly high, with a yield of only about 3.2%. If you believe official CPI numbers this is not horrible, especially considering the measly return on bank CDs and the only marginally higher return on municipals and highly-rated corporate bonds. Every time the 35-year bull market in bonds seems ready to finally turn the other way, it finds a way to stay intact. Perhaps the ending of QE2 in June will be the turning point, but supposing it causes a pull-back in stock and metals, the bond market might STILL stay strong. Its frustrating for silver squirrels, but it gives us more time to save our silver nuts!

Banknote of the Month - May 2011


Here is a beautiful gem from Northern Ireland! It was issued by Allied Irish Bank in Belfast. Several Northern Irish and Scottish banks have a special arrangement with the Bank of England which allows them to issue their own banknotes, backed by British Pound Sterling. Because they are naturally more rare than Bank of England notes, they are sought after by collectors.

Friday, February 4, 2011

Banknote of the Month, February 2011

A "Merchants Daily Savings Club" check apparently backed by the "Calmer Savings Bank - or - Wiinesheik County Bank" in Calmar, Iowa. The stated value on the check is five mills, or one half of one cent. This was given as a reward on a 25-cent purchase. This is essentially the old-school equivalent of a 2% "cash back bonus" on credit cards. Five mills may seem trivial, but if you look at real purchasing power, it is more like 20 cents today. I came to this number by dividing $35 (one dollar in gold) by $0.005 (five mills) and got 7,000. I then divided the current price of gold ($1,350) by 7,000 and got $0.1928, or about 20 cents.

Quote of the Week 2/4/2011

"Inflation is a wealth transfer from helpless poor to rich who can hedge. But in a globalized world, the poorest of the poor pay the most."

-James G. Rickards





The riots in Egypt are partly due to surging food costs caused by global QE.