In his just-released annual report to shareholders, Warren Buffett had this comment on the federal government's actions to resolve the economic crisis: "This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone 'all in.' Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation."

He reemphasizes the inflation risk later in his report by commenting: "I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price." He also notes that "when the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary...Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long [because] cash is earning close to nothing and will surely find its purchasing power eroded over time."

Mr. Buffett stops far short of forecasting a hyperinflationary collapse, but his message is clear nonetheless. Inflation is a risk, to which I would add, hyperinflation is the real risk. In a world of fiat currencies, the only escape is the precious metals. So, now more than ever, own physical gold and physical silver.

What about the next five years? The facts suggest that silver will wildly outperform stocks and real estate again. This time, I think silver will also wildly outperform bonds and gold, as well. That doesn’t mean that stocks, real estate, bonds and gold will go down. I am not predicting that. It just means that silver will beat them all in relative investment terms.
Just as silver doubled and tripled over the past five and ten years, I think that will occur again. In fact, it is hard for me to see how silver can avoid tripling (or more) over the next five years, to at least $35 an oz. At the same time, I find it hard to imagine the stock market or real estate tripling over the next five years, given current economic conditions. I don’t see how it is possible for the fixed income market to triple in value in five, or even 50 years, given current interest rates. And if gold does triple, to close to $3000 an oz, silver will be a lot higher than $35 an oz. Its relative out-performance should remain intact.
For silver to triple, it would be no big deal, just as it was no big deal for it to have tripled in the past decade. In fact, the world would hardly notice. It would mean that all the silver bullion above ground (one billion ounces) would be worth $35 billion, instead of $12 billion. That would still be less than one percent of the current worth of stocks, bonds, real estate, and gold. For those assets to triple would be a very big deal. Adding trillions of dollars in value is no small feat. To add $20 billion or so of value to silver would be inconsequential. An exception is the net worth of the educated silver investors, who would be gleeful.
How is it possible for silver to replicate its performance of the past ten years, and outperform other investments? It has to do with education. To get a quality education on a subject, you need effective and dedicated teachers, a compelling curriculum, and a student hungry to learn. If any of these factors are missing, education quality will be compromised. It is my belief that one or more of these ingredients is usually missing in silver. This explains why so few caught the move over the past 5 and 10 years, and why so few are going to catch the coming move. – Ted Butler

11-05-09

Peter Bernholz (Professor Economics in Basel) studied the world’s 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

...on freedom - and the coming Copenhagen Treaty... http://snipurl.com/so81q


11-6-09

The coming hyperinflation... another man's view

So much potential new money is now impounded in the commercial banks’ holdings of excess reserves that it is difficult to see how the Fed will be able to stem the flood once the banks begin to transform those excess reserves into normal loans and investments. If the Fed attempts to sell enough government securities to soak up the growing money stock, it will drive down the prices of Treasury bonds and hence drive up their yield, increasing the government’s cost of borrowing to finance the huge budget deficits the government will be running because of its various bailout commitments and so-called stimulus programs. This scenario holds the potential for a complete monetary crackup. Since August, the amount of excess reserves has risen from $2 billion to $559 billion. A graph of this astonishing development shows an abrupt transition from a virtually horizontal line (approximately zero excess reserves for decades) to a virtually vertical line (a quick jump of $557 billion in three months).

Added: 11/20/2009

By Dr. Jeffrey Lewis
Nov 3 2009 4:59PM

www.silver-coin-investor.com

Growing your money is not the most important element of wealth. In fact, growth should come secondary to the preservation of wealth and purchasing power. Too often do investors get distracted with nominal changes in their personal wealth only to find that the thousands of dollars they have collected is worth considerably less than it was when the initial investment was made.

Purchasing Power 101

Purchasing power is a calculation of how much you could buy with X amount of money. Although prices seem stagnant in the short term, and are even depreciating for some products, general increases in consumer prices are only a natural response to inflation.

Purchasing power should be at the forefront of a proper investment plan. Does it really matter if your investments are on track to be worth $1 million in 20 years if a loaf of bread will cost $20 and a gallon of milk $50?

The Failures of Cash Investments

Many people falsely believe that by storing cash in an interest bearing savings account or certificate of deposit, they are hedging themselves against inflation. However, this is rarely the case. Because bid interest rates (those you receive for lending, or depositing, in a bank) often lag true inflation, the damage to purchasing power is done long before true inflation in prices arrives.

CPI is Not an Inflation Measurement

Many banks and institutions sell “inflation-protected” debt instruments that are tied to the inflation rate. Usually, these investments pay a certain percentage per year with a bonus added to rival the inflation rate, thus guaranteeing that investors always earn more than the rate of inflation.

This couldn't be more intellectually dishonest, as the Consumer Price Index fails to take into consideration the change of the money supply, but rather the change of prices of consumer goods. The CPI is calculated by finding the prices for a “basket” of consumer goods and charting the average change in price over a period of time. Much of the “basket” is centered on consumer staples like groceries, gasoline, etc., as they make up the most basic elements of modern life.

Where the CPI Fails

One of the failures of the CPI index is that it only reflects the changes in the sticker price – and not the changes in the amount of the consumer goods. If you visited a grocery store in the past ten years, you have likely noticed that the sticker price of many goods has not changed, but the weight of the product has. For example, bags of sugar (one part of the CPI) were almost universally sold at $1 per 5 lb bag until five years ago. Today, you'd be hard-pressed to find a single 5-lb bag of sugar, as most companies have begun to sell 4 lb bags, but at the same price of $1 per bag.

Although the price did not change, the quantity did by 20%. However, this change went unnoticed by the CPI calculation.

How to Track True Inflation

The only way to track the true inflation rate, and thus protect your spending power, is to invest in hard assets (commodities, physical metals, etc.) that rise in value as the value of the dollar drops.

Gold and silver especially track the change in the money supply with accuracy, as the amount of gold and silver at the surface of the earth proportional to the number of people remains consistent. In contrast, inflation increases the amount of dollars in circulation. When you have more paper money while the supply of precious metals stays consistent, this only leads to an increase in the value of the precious metals themselves.

The only way to preserve your spending power and your wealth is to meet or exceed the true rate of inflation, not the rate of inflation as calculated by complicated (and often corrupted) economic models.

Dr. Jeff Lewis

ADDED: 1/5/2010

Now that 2009 has come to a close, investors are looking forward to the happenings of 2010. One of the most important events is the issuance of nearly $2.2 trillion in Treasury bonds to fund government spending. Although $2.2 trillion seems relatively small compared to a federal debt just over $12 trillion, the size is magnified when you consider its impact on the markets.
2009 Treasury Sales

The 2009 Treasury issuance was relatively tiny due to the amount of quantitative easing enacted by the Federal Reserve. To help ease the credit markets, namely the Treasury markets which allow the government to spend money, the Federal Reserve printed over a trillion dollars and purchased several hundred billion dollars of US Treasuries, as well as nearly $1 trillion of “agency debt” or mortgage-backed securities.

After the Fed’s buying spree, there was only $200 billion in fixed income remaining, creating a net issuance in 2009 of $200 billion. Of course, $200 billion is virtually nothing when it comes to the world economy and the amount of money in existence, and thus, $200 billion was consumed relatively easily, with no real impact on the marketplace.
The Situation in 2010

Fixed income issues are set to increase from $1.75 trillion to $2.25 trillion next year, with the difference mostly comprised of heavier borrowing by the Federal Government via the Treasury markets.

Unfortunately, the Federal Reserve has only $200 billion remaining in its quantitative easing fund to buy agency debt and US Treasuries, and the funds will only last until March under the program enacted early last year. This leaves a total of $2.05 trillion unfunded that must be borrowed to keep government programs in the black – at least with capital and not actual earnings.
Therefore, in the next year, the US Treasury will need to borrow more than $2 trillion without the help of the Federal Reserve. China has already said it is limiting its purchases of US Treasuries, and the government is proving its resolve by redeeming long-dated bonds and rolling them into short term debt. Other purchasers, such as Japan, have their own financial problems. The remaining countries, institutions, and other investors aren't too keen on earning low rates on what is quickly becoming riskier debt.

What is the solution? The Fed will simply need to print more money.
The Fed Will Have to Step in with its Printer

Remember, this recession was triggered due to a shortage of credit. To aid in both creating credit, as well as providing short term loans to businesses and government, the Federal Reserve began to create money to ease the burden. As a result, the Fed bought more debt than anyone else by a factor of 10.
Moving into next year, with the same credit problems and net issuance of $2.25 trillion, the Fed will have to further its quantitative easing (inflation) programs to keep the Treasury markets liquid. Should the Federal Reserve continue to print money to gap a shortfall in Treasury sales, the creation of $2 trillion would create inflation of 25% overnight. Obviously, as in all markets, inflation will not come out of the woodwork for a period of months and possibly up to two years, but it will eventually reach the market. Subsequently, in 2010, investors of all types need to be incredibly prudent with their money and protect their assets with precious metals.

Dr. Jeffrey Lewis

Feb 4 2010 10:05AM

As gold prices near new highs, some are calling gold's skyrocket success a bubble.  However, informed investors are seeing it differently; gold is not much more expensive than its 1980 levels, even despite runaway growth in the money supply over the past 30 years.
Gold’s High and Silver’s Ratio
As we well know, gold and silver often trade within a reasonable ratio to each other, ranging anywhere from 15:1 to 70:1.  Currently, the ratio is near its highs at 66:1 and is now more than four times higher than its historical low.  While gold may have traveled too high too quickly, silver looks even better as time progresses.
Other Ratios
There are plenty of other ratios that come into play than just the gold to silver ratio.  One popular ratio is the Dow:gold ratio, as well as the oil:gold ratio. 
Recently, the oil to gold ratio has become more mainstream, mostly due to economic issues that have largely thrown the Dow:gold ratio off its course.  The gold to oil ratio is very important for silver investors, as well as gold and oil investors, because it helps establish a baseline for what current prices should be, allowing silver investors to extrapolate their own numbers.
Oil to Gold Ratio
The oil to gold ratio is more volatile than others, mostly due to the fact that they tend to rise and fall in tandem in the long term; however, short term divergence in price changes has a lasting impact on the ratio.  For instance, although gold and oil are both inflationary plays, gold was as high as $870 an ounce and rising at the start of 2009, while oil prices were coming off their lows in the $40 per barrel range.  This short term fluctuation pushed the ratio well off its course, despite the fact that both should trend in the same general direction. 
Regardless, gold and oil often retain a healthy ratio of anywhere between 8 barrels to 30 barrels of oil per 1 ounce of gold.  Currently, the ratio resides at an extremely healthy 15:1, right in line with historical averages, showing that neither gold nor oil is bubbling.  In fact, they are about as average in price as history has allowed.
Silver: The Common Denominator
Having already established that neither gold nor oil is in a bubble, it is now time to add silver into our mathematical mix.  Although gold appears expensive when compared with the historical average of silver prices, it is not that gold is overpriced.  Rather, silver is easily underpriced compared to both gold and oil and should be well poised for a rally. 
It is commonly understood by investors that gold, silver and oil are all inflation hedges; thus, for institutional investors, each is interchangeable.  However, profits generated from each are not always proportional, as often times the prices of one can diverge from each other, creating better profit potential in one commodity as opposed to another.  In the present case, silver remains the best anti-inflationary investment, being undervalued both to gold and silver – all while maintaining the same positive fundamentals.

Dr. Jeff Lewis

Added: 3-25-2010

Manipulation Standard Needs to Change - CFTC Commissioner Chilton tells Kitco News 23 March 2010, 5:00 p.m. EST
By Daniela Cambone
Of Kitco News

Montreal (Kitco News) -- The Commodity Futures Trading Commission wants Congress to impose hard-cap position limits on metals as well as oversight in over-the-counter trading, CFTC Commissioner Bart Chilton told Kitco News in an exclusive interview. “We currently only have limits on the amount of contracts you can have; position limits in the spot month when the futures are being sold," said Chilton. "There are no limits other than that. People are concerned and I am concerned about excessive concentrations of positions that could lead to manipulation of the metals market." Chilton said there needs to be "a change to our manipulation standard; we have only been able to successfully prosecute one manipulation case in 35 years. Clearly, that needs to change.” While he did not state what an appropriate position limit level would be for metals markets, Chilton said he liked the benchmark of 10 percent of open interest used in the energy proposal. He said, “I have called Congress to amend our statute to give us the tools we need to deter, detect, and prosecute behavior that harms the pricing functionality of markets.” However, proving manipulation in the metals market is exceedingly hard to do. Even harder, might be garnering support from his fellow commissioners to approve the move to curb speculation for metals contracts. Speaking earlier to metal market investors in Washington, Chilton said, “"For the record, it's been my position that we should have included metals in the proposal that is currently out for comment on energy position limits. Frankly, there was not enough support for that at the time, and there may not even be today." Chilton added, " Many say that there is clear ‘manipulation' in metals and that we at the CFTC should merely ‘stop it.'  Well, in order for the agency to prove manipulation in court we have to demonstrate, among other things, that there was a specific intent to manipulate the market.” The solution for Chilton is value regulation.  “We need to have a law that provides us with the professional grade regulatory tools to do our job and put folks in jail who try to rig and contort these markets.” Secondly, Chilton wants Congress to allow the CFTC oversight on over-the-counter (OTC) markets. “We have no regulation over OTC markets because they are dark markets . They can have an impact on regulated markets which is what prices are based on. Everything from gold to silver, to a gallon of gasoline, the regulated markets are what set those prices and when these OTC markets impact them, and we can't see, we need to change that,” said Chilton. “I hope that we learned something from the global economic calamity that we are all witnessing – we need an enhanced handle on what is going on in the markets. Secondly, we need profressional grade regulatory tools. Third, I would like us to implement position limits, we can do this without a legislative change; we just need the will to do it.” The Commodity Futures Trading Commission is holding a public meeting Thursday to discuss futures and options trading in metal markets. Click here for list of participants.  Noticeably absent from the list are the larger banks. Stay informed with Kitco News live coverage from the CFTC meeting Thursday. --By Daniela Cambone of Kitco News, dcambone@kitco.com

Editor's Note: Drew Mason is a graduate of the Wharton School and worked on Wall Street for 15 years. He's a member of Miles Franklin, a boutique precious metals house that has focused exclusively on trading, market making, and delivery of physical metals to institutional and retail clients for over 20 years. His views do not necessarily represent those of the firm.

The Bureau of Labor Statistics tells us we have over 1.5 million Americans working in financial services. With such unprecedented levels of financial guidance, you may expect your mother’s portfolio has been well taken care of, but admit it: Your mother has bought into the greatest lie ever told in finance. She actually believes that her savings in the bank, her CDs, and her money markets are rock solid! You should be irate!

Even after the pain of the Internet and financial crashes, Americans are still following the drumbeat of politicians and financial advisors to “stay the course...everything will be fine." If you remove the blinders and look beyond your mother’s monthly statement, the real question is not if her dollars are still in the bank, but if it makes any sense for your mother to hold 100% of her life’s savings in that currency. You have surely seen the stats: The dollar has lost 95% of its value in the last century. Even worse, the dollar has lost 80% of its purchasing power since the 1970s.

Ask yourself: If an asset lost 80% of its value, is that really safe? Yet your mother sits there, not questioning the sanity of having 100% of her “safe money” in that asset.

Can you imagine a foreign exchange desk on Wall Street that was 100% tied to one currency’s success? The desk would be shut down or the manager replaced for excessive risk. But that's exactly what your mother is doing right now. For her preservation, recognize your mother is really acting like a closet FX trader who's “all in” and long the US dollar.
.

So what's safe? Gold and silver can make a unique claim on safety -- their longevity dates to the book of Genesis and an ounce of gold still buys you today what it bought you in ancient Rome. What other currency has preserved its owner’s wealth in such a fashion? The answer is none.

Consider this: If instead of choosing to save her money in US dollars when the Fed was created less than a century ago, suppose your mother had saved her earnings in the gold currency (remember, at the time, the two currencies -- gold and dollars -- were interchangeable just as four quarters are for a dollar bill today). The $100 she set aside in gold currency would buy what $2,000 buys today, whereas $100 saved in dollar currency would buy $3 of products today. How different would America’s future be today if we had chosen to adhere to the wisdom of our forefathers and saved in gold currency instead of dollar currency?

If anyone ever tries to tell you that gold isn't a currency then alarm bells should go off in your mind about that person’s grasp of money and history. Recognizing that gold is a currency is the first step in understanding how to protect your family! If you don’t believe me, look no further than the constitution of the United States, which mandated that American currency must be one of precious metals! The Coinage Act of 1792 actually called for the death penalty on anyone found debasing the American currency in the manner it's being debased today. Why? Because our forefathers saw from history that to treat a currency as we are today inevitably leads to financial implosion.

Interestingly, the inverse is playing out in China. For decades the communist Chinese forbade their citizens from owning precious metals -- after all, they were communists and didn’t want wealthy citizens. Just hold the paper currency, the communists said. Recently the Chinese government did a rare about-face. The Chinese Central Bank admitted that it had nearly doubled its gold reserves while its holdings of dollars declined, and the Chinese government began encouraging its citizens to save in precious metals. Why? The Chinese government sees that in the future, gold and silver will be the measuring sticks for wealth. The Chinese are also converting their “paper gold” (ETFs
, etc.) into physical gold. Again, a good question is “Why?”… What I do know for sure as it relates to that question is that their central bank knows a lot more than I do, and if they're concerned about the value of paper gold’s promises to pay, then I feel it prudent to be concerned, too. Like the Chinese, other central banks are starting to say that they don’t want those paper gold promises, so again, you probably don’t want to hang your hat on paper gold, either. Editor’s Note: Remember, the Chinese plan for the future using a100 year template!

US Debt Reaches Tipping Point
By Dr. Jeffrey Lewis   
Mar 26 2010 3:20PM

Even the most statist economists can understand that a country’s debt has reached its saturation point once the change in Gross Domestic Product is less than the change in the federal debt. However, now the metrics of the American economy look even worse than the picture painted above. For each new dollar in federal debt, with productivity as measured by an increase or decrease in the GDP, 45 cents of wealth is destroyed.
Calculating the Loss

Economists would argue that the United States has long been on the road to wealth destruction. In 1966, each dollar in debt added just $.90 in productivity, with the remaining $.10 lost in translation. By the 1980s and throughout the period of Reaganomics, the United States generated just $.30 in productivity for each $1 in new debt as the ratio became worse for the American tax payer.

If you fast forward just 30 years, today each $1 in debt results in negative growth for the American economy at a loss of 45 cents on the dollar. Much of the loss has to do with the cost of borrowing and the fact that the US economy is already overleveraged.
What the Debt Means in Real Terms.

To put the numbers into context, stimulus and other government measures meant to improve economic conditions actually do exactly the opposite. While we may have generated some return on government debt in the 1960s, losing only a dime for each dollar, today we lose $1.45 in GDP for each $1 in debt. 

The government can no longer spend itself out of recession, no matter how hard it tries. In fact, as we continue to spend more and more, we push the federal government even closer to default, with the weaknesses in the economy draining more money from the system than is originally added.
The Spotlight is on Precious Metals.

With the economy now treading water as the swimming pool is spiraling into the drain, the only seemingly positive part of the news (for precious metal investors, at least) is that commodities are sure to rise in price.

As wealth is destroyed while deficits and debt climb, the value of silver will grow, as it retains its wealth, regardless of the greater changes in the US economy. Truly, there is no better time to own gold and silver as a hedge against government spending, debt and inflation, as well as to realize the full benefit of a commodity that has intrinsic value. Unlike the dollar, the government and the unproductive elements of the economy, silver will never be worth nothing.

Cashing In
Even though our debt reached its saturation point more than 40 years ago, it is certain that government will continue these failed policies for years to come. If they weren't productive then and the government was still willing to continue, why would the government now stop, even when spending is not only bankrupting the economy, but providing negative returns? In moving forward, the government will do what is has been doing since the beginning of time: spending and inflating. Gold and silver will continue its historical trend as well, providing a fail-safe against the plague of debt.

Silver’s Role in a Barter Economy
Make no mistake about it: silver is an investment for trying times. As one the most beautifully shiny metals, silver's true economic beauty shines through in a world ruined by rampant inflation and growing debt.

The Barter Economy
A barter economy is one of the most primitive economic models, wherein goods and services are traded, with each party believing it received the better end of the bargain. An example would be that of a plumber and an electrician. The plumber can fix pipes, install a toilet and improve the general condition of a variety of plumbing, but likely could not rewire the light switch. The electrician, on the other hand, can install wiring, fix blown fuses, and attach a generator to the main electrical system of a home. Luckily, the plumber needs some electrical work done and the electrical needs a new toilet installed, and each needs roughly the same value of labor. They strike the deal, work for each other and each leaves happy with the arrangement.

Where the Barter Economy Fails
In the example above, the plumber and the electrician needed roughly the same amount of labor performed, thus striking a deal that was a mutually beneficial trade.  But what if the electrician needed a drain unplugged while the plumber wanted electrical wire installed throughout an entire pole barn? The electrician would need just a few minutes of labor, while the plumber would need several hours. It is certain that the electrician wouldn't be willing to trade hours for minutes, and even more unlikely he would want to accept the promise of more work from the plumber in the future. The promise, no matter how honest or genuine, pays no immediate benefits or any advantage for the cost of time.

The Barter Economy in History
The barter economy may have been a mainstay when people lived in caves and ate rats, but it's hardly liquid enough for the rapid changes of today's society. Despite being outdated and relatively unworkable in modern times, the barter economy always experienced a resurgence after a change in economic order. For example, after a natural disaster, the two people above may agree on a deal, needing the service done at any cost.
In perfectly peaceful and prosperous times, the above arrangement appears ridiculous. To work, the barter economy needs a middle man: a medium of exchange.

Precious Metals and Silver
A medium of exchange is paramount to the success of any economy. It allows the plumber who needs 15 hours of labor to strike a deal with the electrician who needs 15 minutes of labor without promises or guarantees. The plumber, for instance, may strike a deal with the electrician with the above specified amount of labor and offer an additional 16 ounces of silver to make up the differential. The electrician, knowing the value of silver on the marketplace, can use the metal to provide his family with other needs, and he would accept the deal, gaining employment, wealth, and capital.

An Example of History
Though the full example above is a bit of a simplistic stretch on the workings of the economy, the value of a medium of exchange is not overrated. Precious metals have more value in bad times than in good, and gold and silver always appear first as a proper medium of exchange. 
You can't fake gold or silver, you can't dilute them, nor can you create more of them – thus making precious metals the perfect currency. In addition, since silver is relatively inexpensive compared to gold or platinum, it is easier to make change and conduct other functions of ordinary business. 
Precious metals have been and will be important as an immediate of exchange in the future. There is no better time than now to secure that medium of exchange before the next inevitable economic depression arrives full-tilt.

Dr. Jeff Lewis

Why Are Silver Sales Soaring?
By Jeff Clark
Apr 9 2010 3:41PM

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.
While buying silver is a must, it’s the silver stocks that will truly soar in a mania.

-Jeff Clark

The big news in the economy last week was new home sales jumped 27% in March. It was the best monthly increase percentage wise since John F. Kennedy was in office. What the mainstream media did not tell you was new housing starts jumped up from a very low level– like the lowest level in history!  This chart from shadowstats.com illustrates the point:
This is one of the many reasons why shadowstats.com founder, John Williams, says the economy is “bottom bouncing.”  That is exactly what the chart shows.  In early 2006, housing starts were more than 2 million–now they are just over a half million. Housing starts are down around 75% from the peak. Does this look like a big turnaround to you?  Please do not get fooled into thinking we are on the brink of a real recovery. Williams says, “The U.S. economy remains in an economic depression, which is about to intensify anew. . .”  
On the inflation front, the Producer Price Index was also out last week. The increase was dramatic. According to the latest shadowstats.com report, “Year-to-year, March’s annual PPI inflation rose to 6.0%, up from the 4.4% annual inflation reported for February.” I talked to Williams, and he told me this jump in PPI was, “close to 1970’s price increases.” The 70’s gave America some of the biggest inflation of the last century. 
All the bailouts and money printing that has been going on the last couple of years will be inflationary. Already, “real inflation” is running at 9.5% according to shadowstats.com. We are going to see a repeat of the 70’s, but this time around, inflation in the U.S. will be on steroids. Eventually, we will see hyperinflation. So, a good place to store some of your wealth will be gold and silver.  Williams says, “The prices of precious metals, particularly gold and silver, also tend to lead broad consumer inflation, reflecting inflationary expectations in addition to acting as safe-havens against political and financial market uncertainties.”   
If you are going to be a buyer in this market, physical gold or silver coins should be your core investment.You can expect big price volatility, but long term, both of these metals will go up substantially. Which is better to invest in? Famed investor Jim Sinclair likes gold. After all, central banks vault gold for themselves. But Mike Maloney of goldsilver.com likes silver better. Maloney is forecasting silver prices will jump much higher in the coming years (on a percentage basis) than the yellow metal. In a recent Bloomberg interview, Maloney said, “For the first time in human history, silver is more rare than gold.” You can waqtch the complete Bloomberg interview with Mr. Maloney below:
Please do not get fooled into thinking we are on the brink of a real recovery. Williams says, “The U.S. economy remains in an economic depression, which is about to intensify anew. . .”
Greg Hunter

http://www.megoldandsilver.com/Coins_and_Bullion.html

The Two-Tier System

During the 1960s, as U.S. commitments abroad drew gold reserves from the nation, confidence in the dollar weakened, leading some dollar-holding countries and speculators to seek exchange of their dollars for gold. (France among the largest)
A severe drain on U.S. gold reserves developed and, in order to correct the situation, the so-called two-tier system was created in 1968. In the official tier, consisting of central bank gold traders, the value of gold was set at $35 an ounce, and gold payments to noncentral bankers were prohibited. In the free-market tier, consisting of all nongovernmental gold traders, gold was completely demonetized, with its price set by supply and demand.

Gold and the U.S. dollar remained the major reserve assets for the world's central banks, although Special Drawing Rights were created in the late 1960s as a new reserve currency. Despite such measures, the drain on U.S. gold reserves continued into the 1970s, and in 1971 the United States was forced to abandon gold convertibility, leaving the world without a single, unified international monetary system.

Floating Exchange Rates and Recent Developments

Widespread inflation after the United States abandoned gold convertibility forced the IMF to agree (1976) on a system of floating exchange rates, by which the gold standard became obsolete and the values of various currencies were to be determined by the market. In the late 20th century, the Japanese yen and the German Deutschmark strengthened and became increasingly important in international financial markets, while the U.S. dollar, although still the most important national currency, weakened with respect to them and diminished in importance.

The euro was introduced in financial markets in 1999 as replacement for the currencies (including the Deutschmark) of 11 countries belonging to the European Union; it would begin circulating in 2002. The euro replaced the European Currency Unit, which had become the second most commonly used currency after the dollar in the primary international bond market.
Many large companies use the euro rather than the dollar in bond trading, with the goal of receiving a better exchange rate.

May 31, 2010

Featured is the weekly silver chart.  The pattern is a very bullish Advancing Right Angled Triangle formation.  It predicts a coming breakout, possibly at 20.00 and almost for sure at 21.00.  Once price breaks out above 21.00 we'll see some daily moves of +1.00.  Ideally this breakout would wait till late summer, as it would then coincide with the annual ‘Christmas rally', but it could occur almost any time.

“The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.”
Alexis de Tocqueville.

Summary:

More and more people (worldwide) are becoming aware of the fact that ‘all is not well' with the financial system.  Fraud and corruption are evident in government and the banking industry.  Gold will be seen as a beacon of safety.  Recently in Greece people were willing to convert paper money for gold sovereigns at $399.00 ea, (the equivalent of $1,700.00 US dollars per ounce). 

The bull market in gold is barely underway and will move higher for many years!

Peter Degraaf

June 11, 2010
Gold Confiscation worries, and IRS required reporting…
Editor note:
The following discussions about cash reporting, IRS Form 8300, and bank reporting are for editorial purposes only and should not be relied on as definitive and final. Persons involved in cash transactions should consult their attorney or accountant.

Investors wanting to buy gold should go with the popular bullion coins: Krugerrands or American Gold Eagles. These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No "expert" has to look at them.

As explained under "Reportable Purchases," no precious metals purchases are reported unless cash reporting thresholds are exceeded. Investors wanting to avoid reportable sales should buy American Eagles.
Read more: http://www.cmi-gold-silver.com/gold-confiscation-1933.html#ixzz0qZdmCbhU
Some gold and silver dealers foster the circulation of many myths, misunderstandings, and outright lies about the purchase and sale of gold and silver. Generally, these misconceptions and falsehoods promote the notion that the government may again call in gold as it did in 1933 and that "reportable" transactions are preludes to confiscation. By cultivating such fears in investors, unscrupulous firms can sell high-priced (and often overpriced) coins with greater margins of profit.
Investors who believe these stories invariably pay too much or buy the wrong coins. After reading this, no investor need be taken advantage of.

Avoiding Gold Confiscation
The most frequently used technique to promote high-priced coins is to raise the issue of confiscation. Many telemarketers tell investors that old U.S. gold coins are not "subject to confiscation," leaving the impression that modern gold bullion coins are. Consequently, many investors buy old U.S. gold coins at prices significantly higher than the value of their gold content. The idea of buying "non-confiscateable'' gold sounds like a powerful argument but wilts under scrutiny.
Many precious metals firms maintain that old U.S. gold coins, proof sets, and commemorative gold coins are "collectibles" and would not be subject to another gold recall. Some firms say that premiums of at least 15% automatically make coins collectibles. Another notion holds that coins one hundred years or older are antiques and therefore not subject to confiscation. One large firm that sells rare coins goes as far as to say:
Under current federal law, gold bullion can be confiscated by the federal government in times of national crisis. As collectibles, rare coins do not fall within the provisions permitting confiscation.
No federal law or Treasury department regulation supports these contentions.
The myth that specific types of gold coins are "not confiscateable" stems from the Executive Order that President Roosevelt issued in 1933 calling in gold. The Executive Order exempted "gold coins having a recognized special value to collectors of rare and unusual coins," but it did not define special value or collector, and certainly not collectibles. Nevertheless, telemarketers promoting old U.S. gold coins perpetuate this myth because it makes easier the selling of high-priced coins.
Just because Roosevelt exempted "gold coins having a recognized special value" does not mean that any future call-in would exempt collectibles. Roosevelt's Executive Order would have no legal binding on another gold call-in. Besides, on December 31, 1974, with Executive Order 11825, President Gerald Ford repealed the Executive Order that Roosevelt used to call in gold in 1933. This was necessary because on the same day Congress restored Americans' right to own gold. Furthermore, in 1977 Congress removed the president's authority to regulate gold transactions during a period of national emergency other than war.
Even if a law did exempt certain coins from future confiscation, the government could change that law. Sadly, the government often simply ignores laws. Dealers who say they sell "non-confiscateable" gold have no basis for making such claims.
For further discussion of this matter, assume there were another gold call-in. Would old U.S. gold coins, which make up the bulk of the "non-confiscateable" market, be exempted? Probably not because they are common coins. (The old U.S. gold coins most often promoted are the $20 Libertys and the $20 St. Gaudens, also known as Double Eagles. A $10 coin is called an Eagle, a $5 coin a Half Eagle, and a $2-1/2 coin a Quarter Eagle.)
Although Roosevelt's Executive Order required Americans to turn in their gold coins and gold bullion, foreigners continued to redeem paper dollars for gold until August 15, 1971, when President Nixon closed the gold window. From the end of World War II to 1971, our gold reserves were cut in half.
It is generally believed that all the gold coins surrendered under Roosevelt's call-in were melted or refined into .999 fine bullion bars. That was not the case. It was to the government's advantage to give the foreigners gold coins instead of bullion bars.
With the official price of gold at $35 an ounce, a foreign bank presenting $35 million paper dollars received 1,000,000 ounces if the Treasury delivered gold bullion. However, when the Treasury delivered gold coins with a face value of $35 million, it delivered only 967,500 ounces, saving 32,500 ounces. Each $20 Liberty and St. Gaudens (Double Eagles) contains .9675 ounce of gold. The smaller coins contain the same proportions. Therefore, it was to the Treasury Department's advantage to give out U.S. gold coins instead of bullion bars. Additionally, before Roosevelt's call-in, millions of old U.S. gold coins already had made their way to Europe.
So, in view of the government's policy of delivering "confiscated" gold coins to foreign governments, how can a promoter of old U.S. gold coins claim to be selling "non-confiscateable" gold when the coins he delivers may have been called in back in 1933?
Promoters of old U.S. gold coins rarely reveal the sources of their coins. They foster the idea that the coins they sell somehow survived the 1933 call-in. Probably, the coins being promoted just arrived from Europe a few weeks earlier. Several large numismatic wholesale firms have offices in Europe for finding hoards of old U.S. coins. One firm advertises "Shipments coming in from Europe daily." Another firm boasts offices in Brussels, Paris, and Zurich.
As noted above, the premise of "non-confiscateable" gold lies in Roosevelt's Executive Order that exempted "gold coins having recognized special value to collectors of rare and unusual coins." Are old U.S. gold coins "rare and unusual" today? Not hardly.
Between 1850 and 1907, U.S. mints turned out over 100 million $20 Libertys. Between 1908 and 1933, they coined some 65 million $20 St. Gaudens. Today, no one knows how many have survived, but the number is undoubtedly in the tens of millions, with the bulk of them residing in European bank vaults.
Because of all the old U.S. gold coins in Europe and because of the huge premiums they carry, old U.S. coins are dangerous investments. As gold moves higher, European banks may become sellers, causing old U.S. gold coins to fall in price while gold goes up.
Or, the European banks may decide to hold their gold but convert their high-premium old U.S. coins into bullion, thereby increasing their gold holdings. Such a move, of course, would put downward pressure on old U.S. gold coin prices. (For a further discussion about why old U.S. gold coins are overpriced, visit our page on Old U.S. Gold Coins.)
Since 1989, PCGS and NGC, the two major grading services, have "slabbed" over two million coins rated MS-60 or higher. Now, the two services are grading 200,000 to 300,000 coins a month. Millions of lower-grade coins (VF through BU) do not even warrant being submitted. Yet, they are sold as "non-confiscateable" semi-numismatic coins. Low-grade coins that have no real collector value are called semi-numismatic. VF/XF common-date Double Eagles are definitely semi-numismatic coins.
Add in the uncounted smaller denomination old gold coins ($10 Eagles, $5 Half Eagles, etc.) and the number of available old U.S. gold coins grows even bigger. There is no way the old U.S. gold coins being promoted as "non-confiscateable" have a "recognized special value to collectors of rare and unusual coins."
The concept of "non-confiscateable" gold is counterfeit. The idea lives only because dealers continue to push it for their own benefit. Investors who do not have the facts are unable to know otherwise. Readers of this Web page, however, need not be victims to the hype and promotion so prevalent in the gold coin industry.
Investors wanting to buy gold should go with the bullion coins: American Gold Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No "expert" has to look at them.

Avoid European Coins
Over the last few years, telemarketers have been importing European bullion gold coins dated before 1933 and claiming they, like old U.S. gold coins, would be legally beyond the reach of the government in another recall. The imported coins most commonly promoted as non-confiscateable include:
· French Twenty Francs (both the Roosters and the Angels);
· British Sovereigns (usually with the images of Queen Victoria or Edward II or George V);
· Swiss Twenty Francs (also called Helvetias);
· Belgium Twenty Francs (a.k.a. King Leopolds);
· Swedish and Danish 10 Kroners (Mermaids);
· Swedish and Danish 20 Kroners;
· Dutch 10 Guilders.

Investors should avoid European coins. As noted above, the notion of "non-confiscateable" coins has no merit, and dealers promoting European coins do so because they provide bigger profits. That's bigger profits for the dealers, not their clients.
European coins are not worth the high prices promoters ask. Regardless of the dates on them, they are not "non-confiscateable." Additionally, they hold little, if any, numismatic potential. It is a peculiarity of the coin collecting that coins are prized by numismatists (coin collectors) only in their countries of origin. Americans collect U.S. coins; the British collect coins of Great Britain; the Japanese collect Japanese coins, etc.
Furthermore, the European coins are often compared with old U.S. gold coins, which can and do achieve premiums at times (See Old U.S. Gold Coins). European coins, as a rule, are simply bullion coins and will never attain genuine numismatic premiums. Some of the coins have been around for a hundred years and have always sold at only a few dollars above the value of their gold content. That is why telemarketers promote them. They buy the European coins near bullion prices and mark them up, ensuring big profits for themselves
Still, there are other reasons for not buying European coins, even when you can get them at reasonable prices. First, they contain unconventional amounts of gold, such as .1867 oz, or .2354 oz, or .1947 oz. Americans prefer full ounce coins, or fractions of ounces they easily understand, such as 1/2-oz, 1/4-oz, or 1/10-oz.
Second, Americans prefer coins stamped in English. The European coins, obviously, are stamped in the languages of their countries of origin. But perhaps worse, the European coins do not have their gold content stamped on them. If you have to use such coins in an emergency, how are you going to convince someone other than a coin dealer that the coins contain the gold content you say?
Your best buys in fractional-ounce gold coins are American Eagles, Canadian Maple Leafs, or Krugerrands, although fractional-ounce Krugerrands can be difficult to find at times. These coins have their gold content stamped in English and come in sizes Americans are used to dealing with. Always, these coins are cheaper than promoted European coins. Even when you find European coins at bullion prices, fractional-ounce Gold Eagles, Maple Leafs, or Krugerrands are comparably priced. There are no compelling reasons for Americans to buy European coins. Americans should buy Gold Eagles, Maple Leafs, or Krugerrands.

Reportable Purchases
Often, promoters will claim that the coins they offer are not subject to "reporting." Such statements imply the government requires gold transactions be reported. However, no government regulations require the reporting of the purchases of any precious metals, per se. If payment is made by cash greater than $10,000, however, it becomes a "cash reporting transaction." It is not the gold that the government wants reported but the cash. Such reporting applies to all business transactions involving more than $10,000 cash.
Regarding cash transactions, Official General Instructions for IRS Form 8300 read: "Who Must File. - Each person engaged in a trade or business who, during that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions must file Form 8300. Any transactions conducted between a payer (or its agent) and the recipient in a 24-hour period are related transactions.
This regulation applies to cash - greenbacks, paper money. It does not apply to personal checks, wire transfers, or money market withdrawals. When cashier's checks or money orders are involved, cash reporting may be triggered.
Form 8300's General Instructions define as cash "a cashier's check, bank draft, traveler's check, or money order having a face amount of not more than $10,000." Using a cashier's check less than $10,000 would be a "cash transaction," but it would not be reportable because it is less than $10,000. However, two cashier's checks, each less than $10,000 but totaling more than $10,000 for a single purchase, would be considered cash and subject to reporting.
Further clarification: If an investor makes a $15,000 investment in gold and pays with a single $15,000 cashier's check, it is not reportable. If, however, he pays with two or more cashier's checks each less than $10,000, the dealer would be obligated to report.
Cash reporting requirements were not written specifically for the precious metals industry but for all businesses. The purchase of a car, boat, or jewelry, and payment with two cashier's checks, each less than $10,000 but totaling more than $10,000, would be a reportable transaction.
Another example: an investor agrees to buy precious metals totaling more than $10,000, again say $15,000, and wants to make payments with money from two accounts. If the investor withdraws $8,000 from the first account and gets a cashier's check, and then gets another cashier's check for $7,000 from the second account, the transaction becomes reportable. A purchase of $30,000 and payment with two $15,000 cashier's checks would not be a reportable transaction. The significant amount is $10,000.
Personal checks or checks drawn on the payer's own account are not considered cash. Form 8300's General Instructions read: "Cash does not include a check drawn on the payer's own account, such as a personal check, regardless of the amount. "

Related Transactions
Form 8300's General Instructions say "Transactions are considered related even if they occur over a period of more than twenty-four hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions." For example, if an investor agrees to buy $20,000 in gold but makes installment payments with cash in amounts less than $10,000, the purchase would be reportable.

Bank Reporting
It is often erroneously thought that banks report to the government all personal checks more than $10,000. Banks do not. But, a cash transaction exceeding $10,000 requires a bank to fill out and file a Cash Transaction Report (CTR). A cash deposit more than $10,000 to any bank or other financial institution account by an individual possibly would be reported.
However, purchases of cashier's checks with cash for amounts $3,000 to $10,000 require banks to complete Monetary Instrument Reports (MIRs). (Some banks call them Monetary Instrument Logs.) MIRs are not filed with the government but are records that enable banks to help comply with cash reporting requirements. It is not clear when a MIR requires the completion and filing of a CTR, but an individual regularly purchasing cashier's checks between $3,000 and $10,000 would probably be reported.
If a business reports a cash transaction, the customer will know it. Form 8300 requires name, address, citizenship, and social security number. It also asks for method of identification, driver's license, passport, etc. Additionally, Form 8300's General Instructions call for anyone filing a Form 8300 to "provide a written statement to each person named in a required Form 8300 on or before January 31 of the year following the calendar year in which the cash is received."
Finally, Form 8300 General Instructions has a box to be marked if the transactions appear "suspicious." The box can be marked for transactions less than $10,000 if the recipient believes the purchaser is trying to avoid cash reporting.
No one wants any red flags at the IRS. Unscrupulous dealers know this and use it to avert clear thinking; they use the threat of "reporting" to raise investor fear. This enables them to sell overpriced coins. Investors justify higher prices by thinking they are getting "non-reportable gold." No investor need be taken advantage of this way.

Reportable Sales
Customer sales to dealers of certain precious metals exceeding specific quantities call for reporting to the IRS on 1099B forms. The 1099B forms are similar to other 1099 forms taxpayers commonly receive; the "B" means they have been issued by a business other than a financial entity.
Reportable sales (again, customer sales to dealers) apply to 1-oz Gold Maple Leafs, 1-oz Krugerrands, and 1-oz Mexican Onzas in quantities of twenty-five or more in one transaction. Reporting requirements do not apply to American Gold Eagles, no matter the quantities. Furthermore, reporting requirements do not apply to any fractional ounce gold coins.
Only one common silver product is reportable when sold: pre-1965 U.S. coins. The quantity that causes the filing of a 1099B, however, is not clear. The IRS bases its authority to require reporting on CFTC-approved contracts that call for the delivery of $10,000 face value. Consequently, many dealers do not report sales of pre-1965 U.S. coins unless the sale totals $10,000 face value; others report $1,000 sales.
Sales of American Silver Eagles, privately-minted Silver Eagle 1-oz silver rounds, and 100-oz silver bars are not reportable, no matter the quantity. Other precious metals products are reportable, but they are not covered here because the average investor does not trade them.
Most investors have no first-hand knowledge of these matters; consequently, when precious metals dealers talk about cash reporting, 8300 forms, or 1099s, investors are unable to know that they may not be hearing the whole story. Wanting to avoid the government knowing about their precious metals investments, many investors are delighted to learn that their purchases will not be reported and end up buying overpriced coins.
As explained under "Reportable Purchases," no precious metals purchases are reported unless cash reporting thresholds are exceeded. Investors wanting to avoid reportable sales should buy American Eagles.
The above discussions about cash reporting, IRS Form 8300, and bank reporting are for editorial purposes only and should not be relied on as definitive and final. Persons involved in cash transactions should consult their attorney or accountant.
Investors wanting to buy gold should go with the popular bullion coins: Krugerrands or American Gold Eagles.  These coins move dollar for dollar with the world price of gold and are easy to buy, sell, and trade. Additionally, tracking the value of these coins is easy. No "expert" has to look at them.

Read more: http://www.cmi-gold-silver.com/gold-confiscation-1933.html#ixzz0qZdvn6MS

(The following is based on spot silver at $19.50)

Last night, I received an Email from our Miles Franklin's Daily reader Frank. Frank corrected me on the price I published, in yesterday's Daily, of a McDonald's hamburger. He wrote, "I think your figure for a McDonald's Hamburger is off. I remember their slogan at that time. It was FORTY SEVEN CENTS, not .57, FOR A THREE COURSE MEAL! That included the hamburger, some French fries, and a milk shake!"

Frank was right. I was off by a dime, and In those days, a "dime" was a big deal. Now, if I find a dime in my pocket I throw it into a large glass jar and I let the grandchildren take a handful of "coins" every time they cover here to visit.

A dime "ain't what it used to be." That is unless it is a SILVER dime.

I graduated college in 1964, was married that August and went to work for Helene Curtis, selling shampoo and deodorant to retail stores. My annual wage was $4,800. That works out to slightly more than $91/week - or $2.30 an hour.

Frank's comment got me to thinking - $4,800 Dollars is the same as 48,000 dimes, or by today's metric, 4.8 bags of "junk" silver.

Currently, a bag of pre-1965 circulated "junk" silver dimes goes for around $15,000. The $4,800 that I earned in 1964 was enough for Susan and me to get along on just fine. Granted, it sounds like a very low number, but measured in its silver value in 1964, it was today's
equivalent of $72,000! I didn't realize just how well I was doing at the time.

In the winter of 1965 I splurged and purchased a brand new Triumph TR-4. That was one of the better days of my life. That winter, I taught Susan how to drive a stick shift in the parking lot behind our one bedroom apartment. I think it cost around $3,500. Compared to my
earnings, at the time, that was a LOT of money. But young boys had to have their sports cars, and I was a very young boy in 1964. I still drive a sports car and have owned one, almost non-stop since that first white Triumph. Over a dozen in all. But, let's get back to the story - The $3,500 that I paid (actually it was financed) is the same as 3.5 bags of silver dimes. Today, 3.5 bags of silver dimes cost $52,500. With $52,500, you can purchase a new Porsche Boxter. A car that is comparable to the 1964 Triumph is the Mazda Miata and one of
those will set you back about $27,000. The Boxter costs around twice as much. So, in my twisted mind, since the same amount of silver will purchase a car that costs twice as much, silver has doubled its purchasing power since I first got married.

Silver was too "cheap" in 1964 and it was too "cheap" in 1972. But by 1979, as silver was roaring upward, I could trade a silver dime for a gallon of gas at my local gas station. By today's price, a silver dime in 1979 was worth around $3.00, or a gallon of gas. A bag of 10,000 "junk" dimes sold for around $30,000.

Let's back up for a moment - in 1964 I worked all year for 4.8 bags of silver. In 1972, I joined Target. I worked all year for 9.8 bags of silver. In 1985 I was selling gold and silver and earned $90,000. Silver was around $9 an ounce and a bag of dimes cost about $6,500 so
I earned the equivalent of around 14 bags of junk silver dimes.

My earnings, for the first 20 years of employment, rose from $4,800 to $90,000; by a factor of 18.75. Calculated in junk silver bags, my earnings rose from 4.8 to 14 bags of junk silver; by a factor of 2.9. Silver's value was rising FASTER than my dollar-based wages. Much faster. As the years went by, it took more dollars to buy the silver.

Using the "official" inflation calculator, what cost $90,000 in 1985 (which was the same as 14 bags of junk silver) would cost $177,071.11 in 2009. $90,000 will get you 11.8 bags of junk silver today. Silver is still rising FASTER than "official" inflation. The "inflation adjusted" dollar only gets you 11.8 bags of junk silver now instead of 14 bags 25 years ago.

Now if you were really an early entrant into this decade-long bull market in precious metals, you could have purchased a bag of junk silver in 2001 or 2002 for $3,500, or less. The 25 year increase is mis-leading since silver is moving up faster in the last 10 years than
it did in the previous 15 years. Timing is everything - and the timing NOW is in your favor.

I started this conversation with a discussion of a dime and a .47 cent hamburger. I said "a dime ain't what it used to be." It isn't, if the dime happens to be silver. Today, a silver dime is worth $1.50. Five silver dimes bought the McDonalds .47 cent special way back when and today you can pretty much buy anything on their menu for the equivalent of three silver dimes. Just another way of saying your silver will outpace inflation.

In 1964, when I graduated college, got married and started my first full-time job, it was worth .10 cents. The silver value of the dime has increased 15-fold. My starting wage of $4,800 had to increase to $72,000 to keep up. Silver is holding its own, as a store of value.

From this point forward, silver will pull away even faster. If gold doubles in the next 12 months, as I suspect it will, silver should be at least the equal of its 1980 high at $50. My own personal experiences have convinced me that one of the best things I can buy that will hold value over time is silver. Everyone should have at least a bag of junk silver dimes! It was worth $1,000 in 1964, is worth $15,000 now and I will not be surprised to see it sell for $36,000 a year from now. As with gold, the rise is gettint steeper and will soon be vertical.

Kiss the buying power of your Dollar good-by.

Dr. Jeffrey Lewis,
June 20, 2010

G20 Summit and Metals
By Dr. Jeffrey Lewis   
Jun 29 2010 2:10PM

World leaders met at the G20 in Toronto to discuss how they will work to get the global economy moving again. If you're new to the global economic forums like these, you might think that they're actually productive. However, if you've been around long enough to follow them for a few years, you'd realize that politicians from the top 20 economic countries show up just to lay out their idealistic plans that they'll never really complete.
World Banking Tax
One of the top items at the G20 was the world banking tax that several countries, the US included, wants to impose on banks to insure against another financial crisis. 
The irony here is that it was the government, not the banks (this time), that created the financial mess that originated in US real estate. The government, in its infinite wisdom, decided to increase the availability of home loans to those people who quite frankly couldn't pay for them. They then tasked Fannie and Freddie to lower their standards and buy any mortgage backed security they could get their hands on. The banks, sensing a money making opportunity, made terrible loans under the pretense that Fannie and Freddie would buy them with no questions asked. Of course, we all know how well that worked out.
There were more than a few objections to a banking tax, most notably from Canada, which had the simple (and correct) view that Canadian banks were not a part of the financial crisis, and in no way, shape, or form would they be punished for the mistakes of the United States. To make a long story short, one of the headline items at the G20 was swept off the table, and each country was left to moderate banks however it pleased within its own borders.
Deficit Reduction
If you thought a world banking tax was laughable, just wait until you hear about the deficit reduction plan upon which all nations agreed. The G20 members will all work together to reduce their deficits 50% by 2013. Also, they'll work to reduce government debt to GDP by 2016, which means that they'll either have to grow their economies or actually run surpluses. 
President Obama took his G20 promise to the American press today, and he noted that next year the government will have to do something to reduce the deficit. If you've looked at gold, you'd notice that some gold investors actually took this pledge seriously, with a sell off occurring in the early hours of trading the day after the pledge.
Believe it When You See it
The pledge to reduce debt, cut spending, and promote economic growth was nothing more than a pledge. While we can agree that precious metals would be poor investments if the government did really work to fight the debt and inflation, we can also agree that never in history has any government completed such a quick turnaround. 
Buy silver with both hands, as the people in power are either going to have to take drastic steps to cure the budget, or they're just going to keep doing what they have for more than a century. What do you think they're most likely to do?
Dr. Jeff Lewis

By Lorimer Wilson
Jul 6 2010 4:24PM

www.FinancialArticleSummariesToday.com

Approximately 70 respected economists, academics, gold analysts and market commentators (see list below) are of the firm opinion that gold is going to go to at least $2,500 if not as high as $10,000 per ounce (or more) before the parabolic top is reached. As such, just imagine what is in store for silver given its historical price relationship with gold. We’re looking at an extreme case scenario of a future parabolic top of perhaps as much as $714 per ounce for silver, the ‘poor man’s gold’. Let me explain.
 The current price of gold and the price of silver – the silver:gold ratio - continues to hover around the 67:1 range which is way out of whack with the historical relationship between the two precious metals.  It begs the question:
 “Is now the perfect time to buy silver instead of the much more expensive gold metal?”
It is critical to step away from all the noise and clutter that passes for knowledge and take the time to gain perspective on where the price of gold and silver are in terms of the ‘big picture’, i.e., where they are in their individual performance channels and in respect to their historical relationship with each other over the long, medium and short term and, based on those relationships, how they might perform in the future.
Bull Market Stages
The key to a secular gold/silver bull is the collective gold/silver transactions of investors worldwide buying and selling gold/silver that ultimately sets the price and determines their fortunes. The collective demand trends of gold/silver investors effectively divide precious metals bulls into 3 distinct demand-driven stages, namely:
1. Stage One which occurs when a devaluation of the dominant currency in which gold is priced, i.e. the USD, leads to a moderate increase in the price of gold. Stage One for gold began on February 15th, 2001 when it reached a 22-year secular low of just $255.10.
2. Stage Two which occurs when the decoupling of gold from local-currency devaluation begins to outpace the dollar’s losses and gold starts rising significantly in virtually all currencies worldwide. Stage Two began on June 5th, 2005 when gold (at $417.67US) first surpassed 350 Euros for the first time.
3. Stage Three which occurs when the general public around the world starts investing in gold and this deluge of capital into gold causes it to escalate dramatically (i.e. to go parabolic) in price. We are approaching Stage Three and it will become clearly evident when the price for gold begins its daily record ascents to dramatically higher prices.

Gold

We are now in the very early stages of Stage Three with gold having gone up 24% in 2009 and up 13.3% in the first 6 months of 2010. As such there are no shortage of prognosticators who see gold going parabolic reminiscent of 1979 when gold rose 289.3% in the course of just over a year (from a $216.55 closing price on Jan. 1, 1979 to a closing price of $843 per ounce barely a year later on Jan. 21, 1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks! A 289% increase in the price of gold from $1250 would put gold at $4,866.   That being the case what appear on the surface to be rather outlandish projections of what the bull market in gold will top out at don’t seem quite so far-fetched.  
Below is a list of the parabolic tops for gold as discussed in articles and/or speeches by well known economists, academics, market analysts and financial commentators.  Their prognoses are limited to those above the CPI adjusted 2010 price of $2,300 and they are grouped according to the extent each individual sees gold appreciating over the next few years (and next few months in a few cases).
The list below is provided on my site - with a link to the actual article in which each estimate was put forth if you care to check out the rationale behind each individual’s projections. 
Higher than $10,000
1. Mike Maloney: $15,000;
2. Howard Katz: $14,000;
3. Silver-Coin-Investor.com: $7,000-$14,000;
4. Jim Rickards: $4,000 - $11,000
5. Roland Watson: $10,800 (in our lifetime);
$5,001 - $10,000
1. Arnold Bock: $10,000 (by 2012);
2. Porter Stansberry: $10,000 (by 2012);
3. Tom Fischer: $10,000;
4. Shayne McGuire: $10,000;
5. Eric Hommelberg: $10,000;
6. Gerald Celente: $6,000 - $10,000;
7. Peter Schiff: $5,000 - $10,000 (in 5 to 10 years);
8. Egon von Greyerz: $5,000 - $10,000;
9. Patrick Kerr: $5,000 - $10,000 (by 2011);
10. Peter Millar: $5,000 - $10,000;
11. Alf Field: $4,250 - $10,000;
12. Jeff Nielson: $3,000 - $10,000;
13. Dennis van Ek: $9,000 (by 2015);
14. James Turk: $8,000 (by 2015);
15. Joseph Russo: $7,000 - $8,000;
16. David Petch; $6,000 -  $$8,000;
17. Michael Rozeff: $2,865 - $7,151;
18. Martin Murenbeeld: $3,100 - $7,000;
19. Dylan Grice: $6,300;
20. Murray Sabrin: $6,153;
21. Harry Schultz: $6,000;
22. Paul van Edeen: $6,000;
23. Paul Brodsky/Lee Quaintance: $3,000 - $6,000;
$5,000
1. David Rosenberg: $5,000;
2. Martin Hutchinson: $5,000 (by end of 2010);
3. Doug Casey: $5,000;
4. Peter Cooper: $5,000;
5. Robert McEwen: $5,000;
6. Martin Armstrong: $5,000 (by 2016);
7. Peter Krauth: $5,000;
8. Tim Iacono: $5,000 (by 2017);
9. Christopher Wyke: $5,000;
10. Frank Barbera: $5,000;
11. John Lee: $5,000;
12. Peter Dawes: $5,000;
$2,500 – $5,000
1. Pierre Lassonde:  $4,000 - $5,000;
2. Howard Katz: $3,300 - $5,000;
3. Mary Anne and Pamela Aden: $3,000 - $5,000 (by February 2012);
4. Larry Edelson: $2300 - $5,000 (by 2012);
5. Luke Burgess: $2,000- - $5,000;
6. Ian Gordon/Christopher Funston; $4,000;
7. D.P. Baker: $3,000 - $3750;
8. Christopher Wood:  $3,500 (in 2010);
9. Adam Hamilton: $3,500 (by 2010/11);
10. Eric Roseman: $2,500 - $3,500 (by 2015);
11. John Henderson: $3,000+ (by 2015-17);
12. Hans Goetti: $3,000;
13. Michael Yorba: $3,000;
14. David Tice: $3,000 (by 2012);
15. David Urban; $3,000;
16. Michael Lambert: $3,000;
17. Brett Arends: $3,000;
18. Ambrose Evans-Pritchard: $3,000;
19. Trader Mark: $3,000 (by mid-2011);
20. Ian Williams: $3,000;
21. Byron King: $3,000;
22. John McAvity: $2,500 - $3,000 (by 2012);
23. Graham French: $2,000 - $3,000;
24. Sascha Opel: $2,500+;
25. Rick Rule: $2,500 (by 2013);
26. Daniel Brebner: $2,500;

Silver

Silver has proven itself, time and again, to be a safe haven for investors during times of economic uncertainty and, as such, with the current economy in difficulty the silver market has become a flight to quality investment vehicle. The 49% increase in silver in 2009 attests to that in spades (albeit up only 10% in the first 6 months of 2010). During the last parabolic phase for silver in 1979/80 silver went from a low of $5.94 on January 2nd, 1979 to a close of $49.45 in early January, 1980 which represented an increase of 732.5% in just over one year. Such a percentage increase from the current price for silver would represent a future parabolic top price of $155.   Frankly, such prices seem impossible in practical terms but that is what the numbers tell us.
Silver:Gold Ratio
How both gold and silver perform, in and of themselves, does not tell the complete picture by a long shot, however. More important is the price relationship – the correlation – of one to the other over time which is called the silver:gold ratio.
Based on silver’s historical correlation r-square with gold of approximately 90 - 95% silver’s daily trading action almost always mirrors, and usually amplifies, underlying moves in gold. With significant increases in the price of gold expected over the next few years even greater increases are anticipated in silver’s price movement in the months and years to come because silver is currently seriously undervalued relative to gold as the following historical relationships attests.
Let’s look at the silver:gold ratio from several different perspectives:
- Over the past 125 years the mean silver:gold ratio (i.e. 50% above and 50% below) has been 45.69 ounces of silver to 1 ounce of gold.

- In the last 25 years (since 1985) the mean silver:gold ratio has increased to 66.9:1

- The present silver:gold ratio is range-bound between 63:1 and 70:1 (66.77:1 at the end of June 2010).

- Interestingly, during the build-up to the parabolic blow-off in 1979/80 silver outpaced gold going up 732.5% vs. gold’s 289.3% causing the ratio to drop from 38:1 in January 1979 to 13.99:1 at the parabolic peak for both metals in January,1980.

Conclusions:
There are many! Let’s look at the various price levels for gold and the various silver:gold ratios mentioned above one by one and see what conclusions we can draw.
First let’s use the mid-year (June 30th, 2010) price of $1243 for gold and apply the various silver:gold ratios mentioned above and see what they do for the potential  % increase in, and price of, silver.
Gold @ $1243 using the current 66.77:1 silver:gold  ratio puts silver at $18.61 (June 30/10)
Gold @ $1243 using the above 45.69:1 silver:gold ratio puts silver at $27.20 (i.e. +46.2%)
Gold @ $1243 using the above 13.99:1 silver:gold: ratio puts silver at $88.85 (i.e. +377.4%)
Now let’s apply the projections made above by the various economists, academics, gold analysts and market commentators listed above to the silver:gold ratio and see what that suggests is the parabolic top for silver.
@ $10,000 Gold
Gold @ $10,000 using the silver:gold ratio of 66:1 puts silver at  $150
Gold @ $10,000 using the silver:gold ratio of 45:1 puts silver at $222
Gold @ $10,000 using the silver:gold ratio of 14:1 puts silver at $714!!
@ $5,000 Gold
Gold @ $5,000 using the silver:gold ratio of 66.1 puts silver at $75
Gold @ $5,000 using the silver:gold ratio of 45:1 puts silver at $111
Gold @ $5,000 using the silver:gold ratio of 14:1 puts silver at $357
@ $2,500 Gold
Gold @ $2,500 using the silver:gold ratio of 66:1 puts silver at $38
Gold @ $2,500 using the silver:gold ratio of 45:1 puts silver at $55.50
Gold @ $2,500 using the silver:gold ratio of 14:1 puts silver at $178.50
From the above it seems that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns than investing in gold bullion.
Summary
History will look back at the artificially high silver to gold ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they’re all an illusion. This fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks and warrants.
Indeed, while gold’s meteoric rise still has room to run, silver’s run is yet to get started. As such, it certainly appears evident that now is the time to buy all things silver.

Lorimer Wilson