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    Robert Mish: Front-Line Evidence That We Are Nowhere Near a Gold Bubble

    At closest, we're at a "2" out of 10
    by Adam Taggart

    Friday, March 9, 2012, 8:46 PM

Robert Mish has been a precious metals dealer for nearly 50 years and knows what gold bubble mania looks like. We are nowhere near that stage, in his opinion.

Instead, he sees a U.S. populace largely unappreciative of holding precious metal as a store of wealth, and engaged in a slow process of dis-hoarding their gold and silver to eager foreign buyers, who are more than happy to take the bullion back to their shores.

In terms of where we are on the gold mania spectrum, he sees us at a "2" out of 10.

But he foresees a very rude awakening ahead, as the populace eventually wakes up to the increasing damage that our over-debted global economy is doing to the purchasing power of world currencies. Because when the general investor finally realizes the protection the precious metals offer against currency debasement, much of the retail supply will already be out of the system, in very tight hands and largely overseas.

Moreover, when supply gets tight, there will be more challenges to obtaining physical bullion during a buying mania than there were during the last mania in 1980. There are many fewer local sources to exchange bullion these days, as much of that business is now transacted by online vendors dependent on mail delivery to ship product, and they are more vulnerable to supply chain disruptions.

Be sure you're aware of how the form in which you hold your bullion will affect the price you get during a buying frenzy, when refining capacity is overwhelmed. You may find that your gold or silver sells at a hefty discount because it's not in a preferred format for trade.

On What a True Gold Mania Looks Like

The phone calls were ringing so much we could not answer them. We had to just put all our lines on hold so we could service the customers, and we wanted to service our own customers first.

We would come in to open at nine in the morning and there would already be a line out the door and down the block. Sometimes the line was mostly buyers; sometimes there were sellers. We would run out of metal. We would run out of anything. And we would have to divide the line into two lines. We would take the sellers in first, get some product, and sort it before the buyers were let in.

And people were not very discriminating then; they were panicking. By the time it peaked in January 1980, there were people out there who did not even understand free market economics or precious metal economics; they were just buying because it was fashionable or because it was going up forever. Those are more the makings of a bubble; today most people are coming in to sell.

On Today's Typical Seller

The typical seller today is really the opposite of who they were 30, 40, 50 years ago. People used to save, either through a bank account, or keeping some coins around, putting away silver dollars when they came back from Reno or Lake Tahoe. They would be buying some interesting furniture or jewelry. And then they had income in excess of their expenses. Today, so many households are stressed having expenses greater than their income or servicing a lot of debt that they are starting to sell the things, the heirlooms, that they so prized before. So we are seeing people sell their Rolex they do not want anymore or cannot afford to keep, their old jewelry, their parent’s jewelry, and belongings that they inherited. The coins they collected when they were a kid. it is sad, in a way, because what we are seeing is the dis-hoarding of a culture.

On Today's Typical Buyer

Well, in the United States, the typical buyer is perhaps someone who has taken the Crash Course and has studied what is happening to our nation and understands that they have to protect themselves from the coming inflation and social ramifications of that inflation and the debt burdened economy. Big money is buying, but for every one buyer, there has got to be five sellers here, and I am sure that is similar among my colleagues around the country, maybe even more so. Because over here we are in a wealthier area, and I still have more sellers than buyers.

A lot of it is going overseas. A lot of the coins that came to America over the decades, over the generations, either through the fact that we had the money to buy them or through immigration or through the spoils of war, it is all going back now to the home countries. Especially if it is a home country, where their economies are rising and the people are saving rather than spending.

Just last night we had two visitors from China, colleagues of mine in Shanghai, they flew here just to see me, and they flew back the next morning. They cannot get enough coins in China; they are buying everything back that came here when the people in China could not buy their own coins. Next weekend I have more visitors coming. Coin shows, which have been all over America, are now appearing all over the world. There are now major coin shows in gathering marts in Singapore, Tokyo, Beijing, Hong Kong. It used to be once a year; now it is three, four times a year. Big auctions that used to be held in the United States are now organizing in Hong Kong and other countries.

So we are seeing a movement back in the opposite direction, and it is sad [for the U.S. market].

On the Importance of Physical Form

Chris Martenson: So you mentioned refinery problems. What is a refinery problem?

Robert Mish: A refinery problem is where a dealer buys the scrap gold and the scrap silver and his refiner cannot get it processed for several weeks or months. And that squeezes his cash flow so he has to pay less and less to the public.

Chris Martenson: So if I walk in with a bag of junk silver, it is 90% silver, it has always been trading well. But if we are in a real heyday, your refiner says, "I am backed up 11 weeks. I can take that in 11 weeks." Meanwhile, prices are gyrating. You are going to look at me and say what?

Robert Mish: I am going to say, "Mr. Martenson, I wish you had come in here with pure tradable silver or something that is exchange-ready."

The marketplace determines the choice for medium of exchange. If you have silver in any other form, if it is in odd form such as coins, broken spoons, and knives, or whatever, and I have to have it refined in order to get it back in a marketable form, it is going to suffer a discount. And that discount is going to be greater the longer it takes to turn that around.

Chris Martenson: So anything that has to cycle through a refinery has that refinery risk. What was the discount that got applied at its most maximum in the 1980s?

Robert Mish: In the 1980s, when we were about eight weeks backlogged and not everyone even had a refiner relationship and [thus] had to rely on other dealers who did, it got to about a 30% discount for having the wrong form of silver versus the right form.

Click the play button below to listen to Chris' interview with Robert Mish (runtime 28m:19s):

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Robert Mish is the proprietor of Mish International Monetary Inc. in Menlo Park, California. He has served as a major dealer in bullion and numismatics for clients worldwide for 49 years.


Our series of podcast interviews with notable minds includes:

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54 Comments

  • Sat, Mar 10, 2012 - 1:45am

    #1
    MasterOfMyDomain

    MasterOfMyDomain

    Status Member (Offline)

    Joined: Apr 20 2011

    Posts: 11

    U.S. junk silver not a good holding?

    Another great helpful interview, Chris! Lots of good info yet again.

    My most recent trip to my local coin store certainly confirms the observation that there are far more sellers than buyers right now. People seemed to be coming in to sell due to a (desperate?) need for immediate cash.

    I was quite surprised and disappointed in this interview to hear that Mr. Mish considers U.S. "junk silver" coins NOT a desirable form of silver to hold and could take a 30% hit from spot when sold at an appropriate time. That really sucks considering that’s the form of all my silver holdings — plus it’s recommended on the "Buying Gold & Silver" page. I’m wondering what Mr. Mish would recommend? Perhaps U.S. Silver eagles? I’ve never trusted that bars from a private vendor are going to have the "flusht" of genuine U.S. coinage.

    Chris, do you have any idea what he would have suggested? Are you going to reconsider your recommendation to accumulate junk silver?

    Thanks!

     

     

     

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  • Sat, Mar 10, 2012 - 2:19am

    Reply to #1
    2OLD4OKEYDOKE

    2OLD4OKEYDOKE

    Status Member (Offline)

    Joined: Mar 29 2011

    Posts: 5

    Agreeing with MasterOfMyDomain

    [quote=MasterOfMyDomain]I was quite surprised and disappointed in this interview to hear that Mr. Mish considers U.S. "junk silver" coins NOT a desirable form of silver to hold and could take a 30% hit from spot when sold at an appropriate time. That really sucks considering that’s the form of all my silver holdings — plus it’s recommended on the "Buying Gold & Silver" page. I’m wondering what Mr. Mish would recommend? Perhaps U.S. Silver eagles? I’ve never trusted that bars from a private vendor are going to have the "flusht" of genuine U.S. coinage.
    [/quote]
     
    With all due respect, I take exception to the term "junk silver" as describing 90% US silver dollars or even half-dollars! These are hardly old spoons and forks gleaned out of an auction barrell.
    This refining issue is something to be considered, but markets are seldom one-way streets — unless maybe energy and grains? Anyway, not all PM dealers are equal … at least not in my opinion. So what comes around goes around, no?
    Maybe there’ll be some great buys in silver coins coming up soon?

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  • Sat, Mar 10, 2012 - 2:49am

    #2

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2651

    90% silver coins

    I just asked Robert for clarity on his comments about 90% silver coins, as that’s quickly proving to be a hot subject here:

    Whether or not there’s a discount applied to junk silver coins (and 2OLD, the term "junk silver" is widespread in the industry for describing pre-1964 US silver coins) is really determined by what the market is demanding. Back in ’79-80 when the Hunt Brothers were cornering the market for "pure" silver and there were refinery problems of the type Robert describes, the market was demanding pure product and anything not in 100% form was penalized with a stiff discount. Will the same happen again? Robert doesn’t know, but can’t say that it won’t.

    Are 90% coins a good candidate for being a medium of exchange in a post-fiat monetary system? Maybe but not likely, says Robert. The market prefers units that are in easily divisible fractions of an ounce (1/2, 1/10, etc). 90% US coinage is not (for example, a Mercury dime is .0723 troy ounces). In his opinion, a future silver-based currency would likely see some new kind of coin or ingot that would be minted in these intuitive fractional units. Again, this is simply his personal opinion based on his experience. He’s not campaigning against owning junk silver.

    So what form does he recommend for those looking to hold silver with an eye to using it for exchage at some future time? He thinks owning it in pure form will always be preferred by the market, so start there. He prefers rounds (from well-known mints) over sovereign coins, because with the latter you’re simply paying several dollars/oz over spot to get a different design on the same amount of silver. He recommends most owning 10oz or 100oz bars above all, as you can trade them in for the new medium of exchange once it’s been selected vs trying to predict in advance what it’s going to be (e.g. by buying rounds or junk coins).

    I hope this clarification is helpful.

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  • Sat, Mar 10, 2012 - 2:56am

    Reply to #1
    capesurvivor

    capesurvivor

    Status Silver Member (Offline)

    Joined: Sep 12 2008

    Posts: 217

    Eagles vs. ingots

    The question is, is it worth spending premium to have a "real" U.S. Eagle of AU, AG, or Pt, rather than a stamped brick from some refinery/seller in a huge denomination. Give me the Eagles, in various denominations, JMHO.My real concern is, say, a future 90% tax on any gold sales "for the good of the country", screwing the prudent, as seems to be the current zeitgeist.
    Indeed, there is only one coin dealer in my town and, as a monopoly, his sell price is way above that of a national store like Kitco, and, of course, his buy price is way lower. He will sell and buy anonymously, though, worth the $, IMHO. Several banks within traveling distance will selll Eagles but require ID, bizarre as it seems. Gold as a controlled substance, LOL
    CS
     

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  • Sat, Mar 10, 2012 - 2:58am

    Reply to #1
    teddyboy11

    teddyboy11

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    Posts: 0

    silver

    The writer’s perspective derives from looking at Ag as an investment. Odd pieces of broken jewelry and utensils not withstanding, US silver coins and "rounds" may someday soon regain their pre-eminence as Money. Trading Money for worth -less & less paper currency is premature, if not foolish.

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  • Sat, Mar 10, 2012 - 4:05am

    #3
    2OLD4OKEYDOKE

    2OLD4OKEYDOKE

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    Posts: 5

    Thanks, Adam!

    Very helpful remarks.

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  • Sat, Mar 10, 2012 - 4:27am

    #4

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    The Heat is On.

    I rode 700 kms through 38C heat  to listen to Stonleigh’s talk at Guildfords in Perth, Western Australia. I thought I would have her to myself. Not a chance. The room was full of newbies taking their first red pill.

    Nicolle Foss is the least photogenic person I know. She is a lot prettier in the flesh than in the flash.

    Anyway, she said that gold and silver are in a bubble and that when the deflationary crash comes silver will drop to $5 an ounce. Her message was that Cash is King.

    I was given the mike at question time and I introduced myself as a contributer to Chrismartenson’s blog. I said that Dr Martenson is about 60% inflationist (my profound apologies if I misrepresented Dr Martenson). I outlined my impression of money as being an abstraction and that money could be created by moving the decimal point around playfully. My implication was that I do not trust King Cash. How would she respond to these ideas?

    She said that she knew Dr Martenson and had shared the stage with him. She hit me with a rapid array of ideas such as the money created by central governments not getting into the wild where it would do have some effect on deflation. (I agree).

    She pulled everything together with the idea that first we have the deflationary event where competing claims on underlying assets is resolved and after that then we would be in danger of inflation because of the time delay in the reflex actions of the money press.

    I would like to have introduced Professor Steve Keen’s idea of a debt jubilee. But I believe that I could anticipate her response. Not going to happen while the Keynesians still breath.

    I am going to spend my money on TA65.  I wouldn’t miss the show for quids.

     Nicholle, if you are reading this, my gratitude to you for soldiering on through the heat.

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  • Sat, Mar 10, 2012 - 4:41am

    #5
    redfir223

    redfir223

    Status Member (Offline)

    Joined: Jan 10 2012

    Posts: 11

    Smelting your coins

    .A question I have is, Is it advisable after what we’ve just been told, to have some of your coins smelted into bullion now rather than later when the crunch comes?

    Could he put a person in contact with a smelter if it is advisable?  

    Since the 90% coins are legal tender is there any chance of them being used as money again in the future?

     

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  • Sat, Mar 10, 2012 - 6:15am

    #6

    Grover

    Status Gold Member (Offline)

    Joined: Feb 15 2011

    Posts: 695

    Coin Value Tax Consequences

    Concerning the price given for junk silver coins, I’m assuming that Mr. Mish is referring to the peak in 1980 when silver rapidly spiked to $50 +/- per ounce. Sixteen years before that point, these silver coins were still being supplied by the US mint and being traded at face value. Keep that fact in perspective before discounting the value of junk silver. Today’s financial climate is far different than the climate in 1980.

    I prefer owning PM coins denominated in the local currency. For me, that means US coins (including junk silver.) If I trade these PMs for a given quantity of federal reserve notes, I can see that I would have tax consequences on the increased value of the PMs. For instance, if I bought a bar of silver (or quantity of silver coins) at $500 and sold it for $5,000, I would owe taxes on the $4,500 increase.

    So, my question dances around the "barter" value. Say I find something that I want to buy for $5,000 and I have $200 (face value) of silver coins that would be worth $5,000 melt value. If the vendor (or individual) is willing to accept these silver coins in exchange for the product, and since the face value is $200, couldn’t the sale be transacted at $200? If so, what are the tax consequences since I paid more than $200 in FRNs? If it isn’t possible, why do the Eagles and old coins have a monetary value (far below melt value) engraved on the coin? Granted, if a retailer or another individual weren’t interested in the transaction as I’ve presented, then there would be no issue. I’d need to trade my PMs for FRNs so I would have a definable tax event.

    I went to the store a few weeks ago to buy some supplements. As I was walking past the closeout bin, I saw the very supplements I wanted to purchase at a 70%+ discount. When I paid for these, the receipt (and sales tax) were listed at the sale price rather than the original value. Apparently, a vendor and buyer can negotiate any price, and the tax consequences are based on that negotiated price rather than the original value. Why would the "silver coins" price be any different?

    Grover

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  • Sat, Mar 10, 2012 - 9:10am

    #7
    SPAM_qingxia9206

    SPAM_qingxia9206

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    Posts: 0

    Microsoft released Microsoft

     ~SPAM~

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  • Sat, Mar 10, 2012 - 11:21am

    Reply to #6
    robie robinson

    robie robinson

    Status Gold Member (Offline)

    Joined: Aug 25 2009

    Posts: 892

    currenct defacement

    is verboten? unless refining our 90/40%coinage isn’t defacement.  I dunno robie

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  • Sat, Mar 10, 2012 - 1:57pm

    #8
    Jamie Mason

    Jamie Mason

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    Joined: Jan 02 2012

    Posts: 16

    Bubble forming outside US?

     I’ve been acquiring gold and silver ever since I "took the red pill" a few months ago hoping that the increase in price is  more related to our weakening currency than an increased perception in the value of gold.  James Rickards, who Chris intereviewed recently, has some figures in his book Currency Wars on what the price of gold would have to be if we were to switch to a gold standard today, and they were higher than the current prices, some much higher.  However, I’m still somewhat alarmed to see how much the price has gone up and it’s hard not to suspect a bubble forming.  I found this interview very informative, but there is one aspect of it that still leaves room for concern in my mind.  There was an implicit assumption that, becasue there is no rush to buy gold in America, there is no worldwide bubble forming.  Since gold is priced on a global market, and since Americans are largely unaware of the fragility of the economy (and in many cases not in a position to be able to buy gold even if they were aware), it seems to me that we shouldn’t base our assesment of the status of a gold bubble on how busy traders are in California.  I’m still buying because I think metals are safer than the dollar, which is virtually guaranteed to loose value, but my (relatively inexperienced) hackles are stilled raised!

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  • Sat, Mar 10, 2012 - 3:16pm

    #9

    JAG

    Status Silver Member (Offline)

    Joined: Oct 26 2008

    Posts: 240

    Front-Line Evidence?

    Front-Line Evidence? There is no evidence here, just opinion and speculation.

    Taking investment advice from a coin dealer is like taking investment advice from a stock broker.

    Was a stock broker the right person to ask if there was a bubble in tech stocks in the late 90’s? How many real estate brokers were warning of a bubble in 2005-2006?

    Goldbugs are so entertaining…

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  • Sat, Mar 10, 2012 - 4:15pm

    Reply to #2
    Nate

    Nate

    Status Silver Member (Offline)

    Joined: May 05 2009

    Posts: 332

    Adam wrote:Are 90% coins a

    [quote=Adam]
    Are 90% coins a good candidate for being a medium of exchange in a post-fiat monetary system? Maybe but not likely, says Robert. The market prefers units that are in easily divisible fractions of an ounce (1/2, 1/10, etc). 90% US coinage is not (for example, a Mercury dime is .0723 troy ounces). In his opinion, a future silver-based currency would likely see some new kind of coin or ingot that would be minted in these intuitive fractional units. Again, this is simply his personal opinion based on his experience. He’s not campaigning against owning junk silver.[/quote]
    My neighbor is a "Storage War" guy.  About 3 years ago he purchased a locker containing quite a few one ounce silver bullion coins.  He offered to sell them to me, but I didn’t recognize the coins and passed.  When he offered a substantial discount, I passed again.
    The majority of Americans are not familiar with bullion coins, but they understand pre-1965 dimes, quarters and halves.  When Robert comes over from the Bay Area to purchase food from my farm, I will accept 90% silver but not his junk bullion.
    Nate 

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  • Sat, Mar 10, 2012 - 4:33pm

    #10

    jonesb.mta

    Status Member (Offline)

    Joined: Jun 11 2008

    Posts: 77

    PM's

    When Chris convinced us to get into PM, we bought 90% junk, Eagles, and silver bars. Nothing like covering all the bases. As far as gold we bought all Eagles in all denominations(1/10, 1/4, 1/2, and 1 ounce). Any I buy from here on in will be in jewelry that I can buy cheap for bartering. It’s amazing how many junk or second hand shops sell gold and silver for much less than it’s value. I can’t see how anyone can think we’re in a gold bubble with all the money being printed(I know, they don’t print it any more).

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  • Sat, Mar 10, 2012 - 4:35pm

    Reply to #8
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    Bubble Checklist

    [quote=jamster777] However, I’m still somewhat alarmed to see how much the price has gone up and it’s hard not to suspect a bubble forming.  

    There was an implicit assumption that, becasue there is no rush to buy gold in America, there is no worldwide bubble forming..
    Since gold is priced on a global market, and since Americans are largely unaware of the fragility of the economy (and in many cases not in a position to be able to buy gold even if they were aware), it seems to me that we shouldn’t base our assesment of the status of a gold bubble on how busy traders are in California.  
    [/quote]
    Jamster:  What is a bubble?
     
    After 2 back-to-back stupidity bubbles: Tech in the 1990s and housing in the 2000s, people are, understandably—bubble fearful.
    I would encourage you to read Hyman Minsky’s short one page checklist on defining and identifying bubbles. Off that link is an explanation for each stage.  Do we have Ninja (no income, no job, no asset) loans for people to buy gold?
    Is gold really even at stage 2??????????????
    Do you believe that gold prices are rising?????????????
    Egon von Greyerz of Matterhorn Asset Management AG is a short listen on KWN.  Link here
    Here are the highlights of that "must listen".

     

    Never have we had a situation where ALL the sovereign countries were bankrupt all at one time.
    Not solvable.
    The Central Banks will print.
    It’ll be like an avalanche where no one knows which snowflake it’ll be that sets it off.
    Happen fast because of inter-connectivity an there is one ECB for several countries.

     

    Stage One – Displacement
    Stage Two – Prices start to increase
    >>>>>>ding, ding, ding, ding>>>>>>>Stage three – Easy Credit<<<<<<<<<<<<<<<<
    Stage Four – Over-trading
    Stage five – Euphoria
    Stage Six – Insider profit taking
    Stage seven – Revulsion
    Then go back in your mind to the 1990s and run it on the tech bubble, go forward then to the 2000s and run it on the housing bubble.
    Then run it on gold.
    Additionally, gold is not priced on the global market.  The price of gold is really determined largely in London and on paper traded at 100:1 to physical with a caveat that in the end you reserve the right or the LBMA reserves the right to settle your account in cash not gold.  It is, like you say a metal of global demand.  But think about how China buys most of its gold: By buying mines.  Now that is gold that is taken out of the market, but at 100 pieces of paper for every piece of gold—who cares!
    Sprott has done magnifigant work on paper v physical.  I don’t have time today to find his paper on gold, but here is his paper on silver.   Gold is the same way.

     
    there were on average, over 1.1 billion ounces worth of silver traded every day in the month of April5. Truly a staggering number when contrasted against the actual amount of silver available for investment. To wit, the world will only supply about 979 million ounces this year from mine and recycling of scrap, of which it is estimated that 657 million ounces will be used up for non-investment purposes6. So in effect, that leaves roughly only 322 million ounces available this year for investment purposes. Converting to days (recall that at least 1.1 billion ounces traded each day) it leaves only about 1.3 million ounces per trading day of available supply. So, we are essentially trading the amount of physical silver actually available for investment, 891 times over each day! It really begs the question; just what are people trading in these markets?
     

    That’s not a bubble, that is a beach-ball held under 9’ of water.
    Here are just a few bubbles.
    Dot-com bubble, 1997 Asian financial crisis, Japanese asset price bubble 1991-on, Roaring 20s, Bengal Bubble of 1769, South Sea Bubble of 1720The Mississippi Bubble, TULIP BUBBLE 1637+/- Dutch.
     
     
     

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  • Sat, Mar 10, 2012 - 4:46pm

    Reply to #9
    MasterOfMyDomain

    MasterOfMyDomain

    Status Member (Offline)

    Joined: Apr 20 2011

    Posts: 11

    Huh?

    @JAG

    Goldbugs are so entertaining…

    What is this supposed to mean? I don’t appreciate being labeled or judged as worthy of your bemusement.

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  • Sat, Mar 10, 2012 - 5:37pm

    #11

    thc0655

    Status Platinum Member (Offline)

    Joined: Apr 27 2010

    Posts: 1540

    Authenticity

    I’m with Grover on #9.  The other thing no one has commented about here is authenticity issues.  What if I take my 100 oz silver bar to the dealer who is suspicious of fake bars and won’t pay me until he has the bar assayed at a refinery which itself is being overwhelmed without that kind of request?  A big delay ensues. I’m sticking with junk silver and Eagles.  No bars or commemorative rounds for me.  Go over to the FOFOA.blogspot.com site and you’ll see they believe that in the long run we’ll have to go to a gold standard and that the system will work best when citizens are encouraged to put their gold into circulation.  Circulation (flow) is the key. They do see the possibility of short term attempts at nationalization/confiscation and punitive taxes, but they believe that won’t last long. Eventually, the governments will do everything possible to create a new system in which people willingly spend their gold into circulation as the new system will not be based on reserves but on circulation.  They also believe it will be gold only in the official system, no silver. Interesting theory and a lot to wrap your mind around.

    Here’s where to start:  http://fofoa.blogspot.com/2012/01/gold-must-flow.html

     

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  • Sat, Mar 10, 2012 - 5:39pm

    #12
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    Elaborate

     I do want to elaborate a bit:

    Is it legitimate to call someone a goldbug because they are a little concerned that we turned the corner (borrow/print 54 cents of every dollar spent) given our short and largely forgotten history?

    Please don’t get me wrong my friend, I HATE gold too.  I hate hoarding.  Look at Apple (though I’m not impressed with their labor/factories) look at what they create versus what banksters create.  I’m just saying, these are unique and very sadly, familiar times.

    1779, 1790, 1841, 1862, 1934, 1971 & 201?


    Previous United States of America Defaults:

    1. 1779 Continental Dollar, 2 cents on the dollar.
    2. 1790 Defaulted on external debt obligations.
    3. 1841 9 states defaulted.
    4. 1863 Greenback- Gold was refused in exchange for Greenback gave notes in exchange for each Greenback.  People lost 40% on each Greenback.
    5. 1873 10 states defaulted.
    6. 1934 Liberty Bonds were oversold so they called in all gold and revalued the dollar by 70%, before then bonds were backed by gold.  Gold in 1933 was $20.67 after Executive Order 6102 (link to it here) gold was revalued at $35.00.
    7. August 15, 1971 Nixon slammed the gold window shut and other countries couldn’t redeem U.S. dollars for gold.

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  • Sat, Mar 10, 2012 - 6:12pm

    #13

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2651

    The Bigger Picture

    I’d like to make sure we don’t get so sidetracked by the 90% silver comments that we miss discussion of what I took to be the two biggest takeaways from Chris’ interview with Robert:

    1) The buy/sell dynamics of today’s retail bullion market look nothing like those seen during the last PM buying mania (’79-80)

    2) The general US populace is slowly (and carelessly IMO) dis-hording its bullion wealth to a mostly foreign few

    A main goal of this site is to obtain empirical information that helps us determine where we are in the ‘ThreeE’ timeline. Robert has provided some very useful insights for us:

    • PM demand from the masses has yet to arrive. A mania involves long lines outside the door of your local coin shop. In some cases, demand is so intense you need to let the sellers in first so you’ll have product to offer the buyers outside. Right now, we’re nowhere near that stage. In Robert’s shop, it’s rare to see more than a single customer in the store at any given time.
    • Sellers far outnumber buyers & their composition has dramatically changed vs previous decades. In the past, most sellers were knowledgable investors or collectors who timed the market to sell bullion they bought in a calculated manner over many years. Today, most sellers are largely indiscriminate, and are selling out of financial pressure (mostly either elderly who need to liquidate b/c they are not getting enough income from their other investments, or younger folks who have inherited PMs and simply want cash now). In short, most people transacting with a bullion dealer today are prioritizing short-term fiat over longer-term sound money.
    • The few active buyers are well-informed, deep-pocketed and predominantly foreign. This to me was the biggest and most concerning (for the US) point of Robert’s interview. After many decades of amassing bullion from around the world, the US populace is now blindly dis-hording that wealth. It’s now going to very savvy buyers who are buying based on a fundamental appreciation of the true future value of gold & silver. They buy in big quantities on a regular basis, and make even bigger ones during price downdrafts. And much of what they buy goes outside the US (Robert sees the biggest demand from Asia these days).

    As an adjunct to this last point, I dropped by Robert’s shop at the end of the day yesterday to let him know we published the interview. We chatted about these points above, and he observed that I was the only non-foreign customer who had come into his shop that day. Almost as if on cue, a regular customer of his from India walked in the door and quickly purchased nearly $35k in bullion. 

    I’m the first to agree that Silicon Valley exists (for now) in a reality-distortion field. There are super-concentrated percentages of both wealth and foreign residents here, so I don’t pretend this is indicative of the rest of the US. But, my small example above shows that buying of the sort Robert describes is indeed going on.

    And if there ever is another PM buying mania of the sort we saw in 1980, things could get even nuttier, faster. As Robert said: there will be fewer local shops to go to, there will be fewer (and possible more relecutant) sellers to offer inventory to the buyers, and a material amount of potential supply will have already been shipped off of our shores. 

    This in my mind is the bigger picture that merits discussion.

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  • Sat, Mar 10, 2012 - 6:33pm

    #14
    Davos

    Davos

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    Joined: Sep 17 2008

    Posts: 811

    Sprott

    In the LBMA market, for example, market participants traded an average 19.6 million ounces of gold PER DAY in July 2011.1,2 Keep in mind that the total gold mine production in 2010, globally, was approximately 86.5 million ounces. Global gold mine production is not expected to increase significantly year-over-year, so the LBMA is essentially trading a year’s worth of production in less than a week. And this is just ONE market. When you add the COMEX futures and gold ETFs, the paper trading volume becomes absurdly high. When price discovery is dictated by levered paper contracts with no physical backing, it’s extremely easy and relatively inexpensive to jostle the spot price around.~Source

    And, speaking of COMEX, from Jesse’s Cafe’

    In summary: I expect physical dealers will soon see what real lines outside their doors are like.

    Oh, and one more thing!  Catch 

    Grant “Things That makes You Go Hmm” Williams on Gold (A Must Listen) Check out the gold Indian Households are thought to hold and compare that to the supposed holdings of the world’s Central Banks…

     

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  • Sat, Mar 10, 2012 - 6:37pm

    #15
    redfir223

    redfir223

    Status Member (Offline)

    Joined: Jan 10 2012

    Posts: 11

    Selling PM

     As I read the discussions on this topic, I realize that I probably won’t be selling into a bubble market, so liquidity won’t matter so much to me because I will probably sell at a later time. Those who are CM readers are most likely ahead of this frenzy. If I have to sell in this type of market it will be because of an unforeseen emergency or to build up cash reserves. I can believe that if TSHTF most Americans would recognize the value of silver coins and accept them for goods or services since the market will probably  determine the value, i.e. a dime for a loaf of bread. I know that I would. 

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  • Sat, Mar 10, 2012 - 7:21pm

    Reply to #15
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    redfir223 wrote:I can

    [quote=redfir223]I can believe that if TSHTF most Americans would recognize the value of silver coins and accept them for goods or services since the market will probably  determine the value, i.e. a dime for a loaf of bread. I know that I would. 
    [/quote]
    "It" happens.
    [youtube: http://youtu.be/7ubJp6rmUYM%5D

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  • Sat, Mar 10, 2012 - 7:28pm

    Reply to #15
    capesurvivor

    capesurvivor

    Status Silver Member (Offline)

    Joined: Sep 12 2008

    Posts: 217

    Some laws

    I didn’t know these laws. This is taken from a writer to a libertarian blogger. He is oddly against copyright laws so…CS
    "At no inconsiderable expense with my Canadian and US CPAs, I plumbed the depths of US Tax law on bullion sales and exchanges and discovered some interesting facts. Of course in the process of discovery, pretty much anything I found just chapped my hide. 

    "Here are some items, in no particular order–received from my CPAs and my metals dealer:

    "1. The small premium you typically pay for Gold US Eagles reflects the fact that these are not reportable by dealers during the sale of same. Nice! Thanks!

    "1a. Non US gold coins are reportable in sales of 25 ounces or more. 1,000 or more silver ounces are also reportable.

    "2. If you trade gold for silver to take advantage of the insane gold to silver ratio of over 50 to 1, these are not like commodities. You can be taxed on the gain of gold in this trade. My dealer did not know this. Did I take note of this. Oh, Hell No!

    "3. If you sell gold or silver that you held less than 1 year, this is ordinary income. Stack, don’t sell.

    "4. PM holdings of more than 1 year are capital gains. Gold bullion is up to 28%. Interesting juxtaposition in the non-reporting of American Eagles gold coins. Report a trade and pay 28%, twice the normal cap gain rate. 

    "5. If you sell PMs for a loss, the wash sale rule applies. In other words, if you sell and buy back the same metal within a 30 day period, you can’t take the loss immediately. You must wait more than 30 days to get the losses. 

    "6. The $600 1099 rule was removed by Congress last year. No dealer I worked with is obeying this rule in any case. A nice stab at the beast.

    "7. Trading appreciated silver or gold for another commodity such as land, hard assets, services etc is a taxable event. See item 9

    "8. And a notch or two on the weird-o-meter.

    "My Canadian CPA told me bankers in the land of the loonie are fearful of the FUBR and FACTA laws. They are concerned that if they violate those laws they could be arrested upon entry to the US. They worry they may be placed on some sort of Fascist Stasi list if they are thought to be sequestering US citizens assets in their bank, even to the extent of allowing US Citizens living in Canada to depositing their PMs in Canadian Bank safe deposit boxes.
     
     

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  • Sat, Mar 10, 2012 - 8:41pm

    #16
    2OLD4OKEYDOKE

    2OLD4OKEYDOKE

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    Posts: 5

    Very good, capesurvivor and Davos!

    Thank you!

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  • Sat, Mar 10, 2012 - 9:04pm

    #17
    safetyfactorman

    safetyfactorman

    Status Member (Offline)

    Joined: Nov 02 2009

    Posts: 0

    so much to think about ...

    1.  If you can’t touch it, hold it, possess it, control it, you likely have nothing.

    2.  You cannot eat pms. If things get really bad (AND YOU HAVE NO INKLY AS TO BAD THEY ARE REALLY GOING TO GET), pms will become meaningless – think about the lady in leningrad with box of gold jewellry she collected from all the people who thought they could exchange gold for bread when there was none.  There are so many priorities before pms.

    4. a series of natural catastrophes is imminent.  they will overwhelm everything.  what remains will be plundered by the human locust hoarde that survives the catastrophes.

    5.  a better strategy might be to get right with whatever belief system you wish to adhere to. 

     

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  • Sat, Mar 10, 2012 - 10:39pm

    Reply to #17
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    safetyfactorman wrote:1.

    [quote=safetyfactorman]
    1.  If you can’t touch it, hold it, possess it, control it, you likely have nothing.
    2.  You cannot eat pms. If things get really bad (AND YOU HAVE NO INKLY AS TO BAD THEY ARE REALLY GOING TO GET), pms will become meaningless – think about the lady in leningrad with box of gold jewellry she collected from all the people who thought they could exchange gold for bread when there was none.  There are so many priorities before pms.
    4. a series of natural catastrophes is imminent.  they will overwhelm everything.  what remains will be plundered by the human locust hoarde that survives the catastrophes.
    5.  a better strategy might be to get right with whatever belief system you wish to adhere to. 
     
    [/quote]I’ll stick to my 5 G’s.

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  • Sat, Mar 10, 2012 - 10:59pm

    #18

    KugsCheese

    Status Gold Member (Offline)

    Joined: Jan 01 2010

    Posts: 844

    Italian Silk Suit Index?

    How many Italian Silk Suits could you buy with an ounce of gold in 1980 versus 2012?

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  • Sat, Mar 10, 2012 - 11:45pm

    #19
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    ps

     ps the 5 g’s are"

    G*faith it’ll work out, has 3,800 times before.

    In fact, there are over 3,800 past examples of paper currencies that no longer exist.~Source Crash Course Chapter 6

    Gold (Heart Silver Too)
    Guns
    Grub
    Government will eff it up tryin to fix it—they’re quite experienced at that

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  • Sun, Mar 11, 2012 - 2:56am

    #20
    Audigit

    Audigit

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    Joined: Oct 16 2011

    Posts: 0

    Silver 90% coins

    OMG !, Where to start in response to the issue of “refinery backups” and the potential for taking a deep discount if your silver isn’t in the” right form”.Does anyone out there including Chris see what a total can of worms you open by postulating this idea in reference to 90% US silver coins? I’m not talking about spoons and chalices here but rather a known entity in terms of silver content. How convenient for one party to the transaction declaring that ” oh, by the way, we’ve decided we only want to give you 70% of the value of the silver in your alloy(coin)your trading because it’s Sooo inconvenient to us ” who in his right mind would believe they are telling the truth??What an easy way to scam an extra ~25%. Mish do you really think it’s worth that kind of a discount to refine an alloy like silver coinage? If you do than you must believe in the “we say so” power of the refineries. We are not talking about refining low grade ore here. Do you also think that all the coinage in these transaction will be refined to pure silver-that the market will demand only purity- and if so what is your knowledge base for this- tell us what the percentage of coins is that are currently refined in these transaction. The answer is that they are not necessarily refined at all as there is a healthy market in their current form and that is likely to increase if things collapse or the value of silver skyrockets.They are refined so they can be used in industrial, manufacturing processes but under the scenario of a currency collapse this is not what will be needed- there will be enough pure elemental silver and gold for these things .

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  • Sun, Mar 11, 2012 - 4:18am

    #21
    Nate

    Nate

    Status Silver Member (Offline)

    Joined: May 05 2009

    Posts: 332

    22K gold bullion coins

    Does Mish also think copper contaminated gold (Eagles and Krugarrands) will be deeply discounted while Maple Leafs sold at spot?

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  • Sun, Mar 11, 2012 - 4:32am

    Reply to #13

    Tom Page

    Status Silver Member (Offline)

    Joined: Sep 26 2008

    Posts: 266

    gold takeaways

    Good points Adam that before this podcast I was not fully aware of.[quote=Adam]
    I’d like to make sure we don’t get so sidetracked by the 90% silver comments that we miss discussion of what I took to be the two biggest takeaways from Chris’ interview with Robert:
    1) The buy/sell dynamics of today’s retail bullion market look nothing like those seen during the last PM buying mania (’79-80)
    2) The general US populace is slowly (and carelessly IMO) dis-hording its bullion wealth to a mostly foreign few

    [/quote]
    I was barely a teenager during the last PM mania, but can remember it being a daily topic on the evening news on the TV.  I don’t have a TV in my own home now, but my sense is gold is not in the media in the same way now.   Almost no one in my daily circles I know is even thinking about buying gold.  
    I remember during the housing bubble my friends were all talking about how much their house had appreciated and they were going to sell and buy even bigger houses; no discussion of bubbles at all though.   

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  • Sun, Mar 11, 2012 - 11:51am

    #22
    Spiralsoflight

    Spiralsoflight

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    Joined: Mar 11 2012

    Posts: 0

    Junk

    I am fine with junk coins and any type of scrap.  All it takes is a little math to determine the value.  If you are trading or bartering with "junk" chances are you have exact change.  A refiner that says they are going to pay you less for junk is insane,  especially with copper getting hotter as time goes on.  I understand it takes time and energy to refine "junk".  But I also don’t think you need to recycle a coin into another coin.  If you and I needed to do business when there is no cash involved,  I would accept your junk items without an arguement.  If you have a lot of flat coins I might only need to place them on my scale to confirm the weight.  Why would I destroy something that was designed to be traded?  Don’t let the thought of having to do math to determine value make you feel the need to melt something because exercising your brain is extremely valuable.  I consider junk to be high grade ore. lol

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  • Sun, Mar 11, 2012 - 2:17pm

    #23

    Chris Martenson

    Status Platinum Member (Online)

    Joined: Jun 07 2007

    Posts: 4767

    Off Track on the 90% silver issue

     During the 1980 silver spike, all forms of silver that were not in .999 form were discounted by dealers that had to contend with a very serious problem.

    Imagine that you are a small bullion/coin dealer and you have people lining up outside to buy and sell.  It’s a frenzy. Spot prices are gyrating wildly, up and down, but mostly up.  Most of this was in response to the Hunt brothers attempting to corner the physical market, which they nearly did until the rules were changed on them.

    In order to satisfy the Hunt’s needs for storage-ready silver, the refiners had to take what was coming in off the market and fashion it into 1000oz 0.999 pure bars.  

    So these Brinks trucks are scavenging silver from all the coin shops and other locations around the country and delivering it to the refiners.

    Now, if you know anything about the refining process, the 0.999 form silver coming in could simply be melted and poured into the requisite 1000ox bars, assayed, stamped and sent off.

    Anything less than 0.999 has to go into a nitric acid process for purification.  It’s a much more involved and slower process and has a throughput that was swamped by the volumes at the time such that an 11 week back up developed.  

    So if you were a coin dealer your choices included buying and selling the 0.999 stuff at or around spot or buying so-called junk silver that was piling up at such an alarming rate that your back rooms were entirely crammed and it was spilling out into the rest of your store as you waited for the refinery backlog to clear.

    Your choice, as a business-person is to either keep tying up your capital in a growing pile of unrefined silver even as prices are making you nervous, not accepting any more sub-0.999 silver, or offering a discounted bid.  

    While this next mania may well play out differently, and there may be less demand for COMEX deliverable material, we thought there would be some value in listening to a very smart man who happened ot be there, right in the thick of it all during the last mania.

    Finally, to those that are jumping right over an entire stretch of probable history to "we’re going to be using junk silver for barter’ I would suggest that it’s quite likely that there’s a lot of territory between here and there, if we ever get there in our lifetimes.  Also, if we do go there more quickly than I am thinking, then I would next suggest that we’ll have other more pressing problems than what the putative dollar exchange value of our coinage might be.  Such as, there won’t be a dollar to compare our silver against and our economy will have largely collapsed.

    As always, if a piece of information creates an emotional response it means that a belief is in play.  Finding out what that belief is, and whether it is a limiting or enhancing belief is a good practice in these interesting times.

     

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  • Sun, Mar 11, 2012 - 2:46pm

    #24

    TommyHolly

    Status Bronze Member (Offline)

    Joined: Nov 10 2010

    Posts: 55

    When I first "took the red

    When I first "took the red pill", I needed to figure out what form of bullion to buy.  I went to my friends who knew absolutely nothing at the time and presented a few different forms to them and this was thier reply:

    – 90% Silver coins (old dimes/quarters):  "Dude, that is a dime.  It’s worth a dime.  I don’t care what you say, it’s worth 10 cents.  You got jipped."

    – 10 ounce Silver Bar: "What is that? Lead or something?  Wait this is Silver?  How do you know the guy who sold it to you didn’t sell you Lead or painted this or something?  This isn’t Silver, BS!"

    – Canadian 1oz Silver Maple Leafs: "Oooohhh damn these are cool!  I’ve never seen real Silver coins before.  How much is that worth?  It says $5 but this is worth more right?"

    – Suisse PAMP 10gram Gold (in sealed hard plastic): "Wow, is that a mini-Gold bar?  Can we open the package, I wanna feel it.  How do you know if it’s real Gold if you’ve never opened the package?  Why is there an Indian on it?  Somebody probably got this at Burger King as a toy when the movie Pocohantas came out, LOL!"

    So basically, if you bought Silver and Gold with the intent to actually BARTER or TRADE, this is what the general public thinks.  You will never convince the average person who has never seen Precious Metals before that a 10 Cent Dime is worth anything but.  The average joe on the street has never seen a Silver or Gold bar in their life and will think its fake.  People will always recognize a minted coin and rarely will argue it’s authenticity.  Your best bet is to pay the 10% minting fee and just get Eagles, Maple Leafs, or one of the others if your intention is to trade in any kind of situation with the general public.

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  • Sun, Mar 11, 2012 - 3:00pm

    #25

    KugsCheese

    Status Gold Member (Offline)

    Joined: Jan 01 2010

    Posts: 844

    Gold Humor

    Scroll down to mock NYT Front Page, classic:

    opinion.financialpost.com/2011/08/19/gold-to-decent-suit-ratio-suggests-gold-overvalued/

     

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  • Sun, Mar 11, 2012 - 5:08pm

    Reply to #24
    CurlysGold

    CurlysGold

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    Joined: Mar 11 2012

    Posts: 0

    never seen precious metals before

    Tommy, just a thought, but what would the average Joe have that I might want to trade my 1964 coins for? I mean, if they’re that ignorant, surely they’re not prepared to function and I would move on to someone that was. And don’t you think that by the time tshtf the general public will be much more informed?

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  • Sun, Mar 11, 2012 - 9:11pm

    Reply to #23

    SagerXX

    Status Gold Member (Offline)

    Joined: Feb 11 2009

    Posts: 399

    A good rule of thumb for not BS-ing yourself

    [quote=cmartenson]As always, if a piece of information creates an emotional response it means that a belief is in play.  Finding out what that belief is, and whether it is a limiting or enhancing belief is a good practice in these interesting times.
    [/quote]
    Fine advice for accurate internal navigation (without which, all our external efforst will eventually come a cropper).
    Thanks!
    Viva — Sager

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  • Mon, Mar 12, 2012 - 2:00am

    Reply to #23
    2OLD4OKEYDOKE

    2OLD4OKEYDOKE

    Status Member (Offline)

    Joined: Mar 29 2011

    Posts: 5

    Limiting or enhancing belief?

    [quote=cmartenson]As always, if a piece of information creates an emotional response it means that a belief is in play.  Finding out what that belief is, and whether it is a limiting or enhancing belief is a good practice in these interesting times.
    [/quote]
    My belief has been that pure silver is too soft to be handled frequently, so it’s mixed with alloys — usually 90% or 95% silver.
    My thinking (or belief) has also been that should the time come that "there won’t be a dollar to compare our silver against and our economy will have largely collapsed" — in that possible transitional period of time, gold is too valuable and too scarce to serve as a currency in daily use. Yes, of course, gold would still serve as a store of value as would silver and many other things, but silver coins stamped U.S. Mint would very likely be a useful form of money to have on hand. Of course, something will likely eventually be put forward as currency estblished by putative holders of gold … but that is subject in its turn to hyperinflation or other forms of currency-banking fraud, no?
    Now, is my belief limiting or enhancing?

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  • Mon, Mar 12, 2012 - 10:02am

    #26

    Mirv

    Status Member (Offline)

    Joined: Sep 30 2008

    Posts: 17

    Is the World in a gold bubble?

    Doesnt gold have a world price and isnt the price determined by the world and not necessarily by self absorbed narcisstic Americans?  I think that most wealth in the world is outside the US, most disposable money is outside of the US, and that the gold price is determined mostly by non- American behavior.  Further, it feels like a selling frenzy in the US because of constant  advertisements by pawn dealers etc to "come in and sell your gold."  Still further, I understand that (am I wrong?) the Chinese government is accumulating gold  as fast as it can and actively encourages its citizens (via the media) to buy  gold.  Why arent these other factors more  important in determining whether there is a gold bubble?  I am not under the impression that the newly rich hard working value creating Americans are leading the world in bidding up or bidding down prices with all of their new found disposable wealth.  I wonder if gold is in a renminbi bubble or even rupee bubble, while simultaneously perhaps not in a dollar bubble.

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  • Mon, Mar 12, 2012 - 11:32am

    Reply to #26
    Jamie Mason

    Jamie Mason

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    Posts: 16

    World Bubble

     Mirv,I had a very similar thought (post #11) and Davos answered it reasonable well (post #13).  I found the video Davos linked in that post to be quite helpful.  It seems reasonable to me that the price of gold would increase sharply (based on fundamental reasons, not psychological) given all the currency that’s been printed in the world since 2008.  More currency plus relatively constant gold supply leads to higher prices, right?  Perhaps gold was just way undervalued amidst all the good times, and it is now correcting as more and more people become aware of the critical condition of the global economic situation.  If you believe that we will return to some semblance of a gold standard, then gold is currently greatly undervalued given the amount of currency in circulation.  If you don’t believe we will ever return to a gold standard, then you may want to figure out all the psychological and historical factors driving its perceived value.  I can’t quite get my head around all that, but it does seem clear to me that dollars are not a good way to store wealth (dollar bubble?!?).  

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  • Mon, Mar 12, 2012 - 1:29pm

    #27

    jbariz

    Status Member (Offline)

    Joined: Jan 27 2009

    Posts: 1

    Junk silver coins

    In a real SHTF situation I am convinced that a value for each coin denomination would quickly be established and I would accept them in exchange for one of my bottles if Jack Daniels.

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  • Mon, Mar 12, 2012 - 2:10pm

    #28

    thc0655

    Status Platinum Member (Offline)

    Joined: Apr 27 2010

    Posts: 1540

    Different coin dealer

    Different coin dealer, different blogger, different results.  Hmmmmm. 

    http://silverdoctors.blogspot.com/2012/03/local-coin-shop-open-thread-doc-visits.html

     

     

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  • Mon, Mar 12, 2012 - 4:24pm

    #29

    fiatagogo

    Status Member (Offline)

    Joined: Jan 01 2010

    Posts: 6

    case for junk (in shtf)

    I agree with jbariz that the use of junk silver would be easy to re-establish.  The coins are familiar and in most cases worn in a way that would be difficult to counterfeit.  At least it would add an extra step into the process and discourage most metal scammers.

    When and if we do trade in PMs the potential to be gypped is mind boggling.

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  • Mon, Mar 12, 2012 - 7:21pm

    Reply to #8

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 316

    Davos wrote:Here are just a

    [quote=Davos]
    Here are just a few bubbles.
    Dot-com bubble, 1997 Asian financial crisis, Japanese asset price bubble 1991-on, Roaring 20s, Bengal Bubble of 1769, South Sea Bubble of 1720The Mississippi Bubble, TULIP BUBBLE 1637+/- Dutch.
    [/quote]
    Great post Davos. Don’t forget the ultimate bubble though that NEVER gets discussed in the MSM: the bond bubble (marketed as "the safest asset class of all), culminating its 30 year bull market with 0% interest rates that cannot go any lower.
    Gold bubble? You have got to be kidding me.
    Silver bubble? It will probably get hammered harder in the interim due to its industrial status but has higher long term appreciation prospects.
    The ONLY things you need to have concern about in buying physical PM’s are: 1) will you be able to weather the storm without being forced to sell before they skyrocket, 2) confiscation / taxation issues (but you’d have taxation on any hard asset you buy to carry you through hyperinflation — that’s why debt may be an attractive option), 3) making sure someone doesn’t steal them.
    I am curious what the ratio of buyers / sellers of PM’s would be in a more prosperous Western country like Canada with fewer distressed sellers.

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  • Tue, Mar 13, 2012 - 6:49am

    Reply to #23

    Grover

    Status Gold Member (Offline)

    Joined: Feb 15 2011

    Posts: 695

    Rational Reasoning

    [quote=cmartenson] During the 1980 silver spike, all forms of silver that were not in .999 form were discounted by dealers that had to contend with a very serious problem.
    <snip>
    Your choice, as a business-person is to either keep tying up your capital in a growing pile of unrefined silver even as prices are making you nervous, not accepting any more sub-0.999 silver, or offering a discounted bid.  
    While this next mania may well play out differently, and there may be less demand for COMEX deliverable material, we thought there would be some value in listening to a very smart man who happened ot be there, right in the thick of it all during the last mania.
    Finally, to those that are jumping right over an entire stretch of probable history to "we’re going to be using junk silver for barter’ I would suggest that it’s quite likely that there’s a lot of territory between here and there, if we ever get there in our lifetimes.  Also, if we do go there more quickly than I am thinking, then I would next suggest that we’ll have other more pressing problems than what the putative dollar exchange value of our coinage might be.  Such as, there won’t be a dollar to compare our silver against and our economy will have largely collapsed.
    As always, if a piece of information creates an emotional response it means that a belief is in play.  Finding out what that belief is, and whether it is a limiting or enhancing belief is a good practice in these interesting times.
    [/quote]
    The peak in 1980 was caused by the Hunt Brothers trying to corner the silver market. Could they possibly have succeeded given the huge supposed stockpiles in government warehouses? (Remember that there were billions of ounces of silver in pre 1965 silver coins.) Were the Brothers to attempt the same feat today, would it be possible to succeed? According to Harvey Organ’s site http://harveyorgan.blogspot.com/
    [quote=harveyorgan]
    The registered silver inventory rests tonight at 34.439 million oz.
    The total of all silver rests at 130 million oz.
    [/quote]
    According to http://about.ag/futures.htm, a primer on financial terms "COMEX 101: All About the Gold and Silver Futures Market" (lots of interesting definitions here …), here are a couple of definitions:
    [quote=about.ag/futures.htm] 
     
     

    Eligible – When referring to silver in a warehouse, it means that the silver is eligible for delivery (to a long that has a warehouse receipt, and is paying storage fees). See also Registered.

    Registered – When referring to silver in a warehouse, it means that the silver is owned by COMEX and/or bullion banks, and can be bought by shorts for delivery. See also Eligible.
     
    [/quote]
    NOTE: Total inventories = Registered + Eligible
     
    Currently, the silver price is $33.67 per ounce. To drain the "registered" silver out of COMEX would cost $1.16 Billion and to get the total inventory would cost $4.38 Billion. To put it in perspective, the US government has been borrowing approximately $4 Billion per day every day for the last several years.
     
    I’m continually astonished that someone like Soros, Buffett, or China hasn’t tried to corner the market. I must be missing something (and I hope someone can point out my shortcomings.)
    Nevertheless, I trust gold and silver much more than federal reserve notes. I use FRNs to transact business because they are still accepted and I’m not willing to part with my PMs yet. In order to currently use PMs, I’d need to sell them first to get FRNs. I’d then be liable for the taxes on the nominal increase that I realized by selling my PMs. Were I to directly use silver or gold bars, trinkets, or foreign coins, it would be considered barter and again, I’m liable for the net dollar value increase.
    I have a mixture of gold and silver, but I’m more heavily weighted in silver simply because I expect silver will appreciate more than gold. I am more heavily weighted in pre 1965 coins due to the familiarity and potential for avoiding (not evading) taxes when I choose to spend (not trade) these coins. To accomplish this, I need a seller/vendor/merchant willing to reduce the sales price because my coins are worth more than paper promises or the "sandwich" currency that has been minted since 1965. Can they reduce the sales price? Sure. Will they? Sometimes, but not always. Am I at a serious disadvantage for choosing coins rather than bars? Perhaps, but unlikely. I can always walk away from the terms of their deal.
     
    Are there downsides? Absolutely. You can’t eat precious metals. If nobody has what you need, you won’t be able to buy it … regardless of how much PM you have. Silver is much bulkier than gold. Fleeing with gold is much easier than fleeing with silver. Who knows what will be the preferred medium in the future (coins, bars, ASEs, Krugerrands, etc.)? Will silver be accepted for trade? — Nothing is risk free.
     
    Bottom line – if you’re comfortable with the state of your preparations and you’re trying to save some of your current wealth to be used sometime in the future, what media are you going to use? I don’t see it as an emotional issue.
     
    Grover

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  • Tue, Mar 13, 2012 - 7:35am

    Reply to #23

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 316

    I wouldn't put too much

    I wouldn’t put too much weight on COMEX numbers, they are likely heavily manipulated. I presume that the reason no one forces a default is because of intimidation and because silver is still being mined out of the ground. They are trying to accumulate while they still can. Just my thoughts.

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  • Tue, Mar 13, 2012 - 12:25pm

    Reply to #23
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    Grover wrote:cmartenson

    [quote=Grover]
    [quote=cmartenson]
    I’m continually astonished that someone like Soros, Buffett, or China hasn’t tried to corner the market. I must be missing something (and I hope someone can point out my shortcomings.)Grover [/quote]
    Grover, I think those 2 are afraid of Blythe the queen master of paper with an unlimited digitial line of FR credit—who essentially trades the amount of physical silver actually available for investment, 891 times over each day!
    Also, who the heck knows what China is buying.  They are framing out a 25% renewable power supply—to acheive this they are buying silver, copper and other resources directly from mines. 

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  • Tue, Mar 13, 2012 - 3:42pm

    #30

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 316

    Davos, that's why I thinik

    Davos, that’s why I thinik that in the medium to long term it won’t matter what form your silver is in because of its high demand from industrial users. If our only realistic alternative energy strategy going forward is solar then the demand for silver from that application alone will be astounding. So in the short term, yes we may find that junk silver might not be accepted as much as we’d like during a crisis, but in the long term, silver is silver so even lead free solder may become very valuable (3% silver).

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  • Tue, Mar 13, 2012 - 6:50pm

    #31
    2OLD4OKEYDOKE

    2OLD4OKEYDOKE

    Status Member (Offline)

    Joined: Mar 29 2011

    Posts: 5

    Thanks for some of the best of CM!

    I haven’t been following CM for very long, but IMHO this topic or discussion has provided some of the best ever of CM forums.

    I think I’ve learned a lot, although I’m still not sure that I know anything!

     

    BTW: Let’s don’t forget silver still underground.

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  • Wed, Mar 14, 2012 - 6:51am

    #32

    Grover

    Status Gold Member (Offline)

    Joined: Feb 15 2011

    Posts: 695

    End game

    [quote=Davos]

    I think those 2 are afraid of Blythe the queen master of paper with an unlimited digitial line of FR credit—who essentially trades the amount of physical silver actually available for investment, 891 times over each day.

    [/quote]

    Sherman,

    You are probably right. The queen demands much respect. Nevertheless, if all the available inventory were to be removed from COMEX, wouldn’t her magic wand magically turn to rubber? Her clothes would suddenly appear to be invisible. What other mainstream PM viaducts are there?

    Mark_BC,

    I agree that the COMEX is manipulated beyond belief. Unfortunately, most of the decision makers look to see which tune COMEX is playing. That alone means that COMEX controls much more influence than they deserve.

    I agree that China and India and other accumulators are gathering as much PM as they can without trying to attract attention. When (or if) do they decide they have enough in their possession (meaning that it isn’t worth prolonging the charade to gather more) and start the end game so they can cash in their winnings? That is what I’m waiting for.

    Grover

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  • Wed, Mar 14, 2012 - 1:28pm

    Reply to #32
    Davos

    Davos

    Status Silver Member (Offline)

    Joined: Sep 17 2008

    Posts: 811

    Grover wrote:... if all the

    [quote=Grover]

    if all the available inventory were to be removed from COMEX, wouldn’t her magic wand magically turn to rubber? Her clothes would suddenly appear to be invisible. What other mainstream PM viaducts are there?

    [/quote]
    +1
    Physical will determine the price.  
    Link to Jesse’s Cafe’ for the entire read. Ms Masters gained notoriety for pioneering credit default swaps, blamed by many for the financial crisis. She acknowledged in a 2008 speech that she had been branded “the woman who created weapons of mass destruction”, although she defends the products, saying the people using them were at fault. 
    ✓ “One thing we know about people individuals high in psychopathy, through the literature, they don’t think there is anything wrong with them—it’s just the rest of the world that is screwed up.” (Source).  Just saying…

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  • Mon, Mar 19, 2012 - 4:36am

    #33
    2OLD4OKEYDOKE

    2OLD4OKEYDOKE

    Status Member (Offline)

    Joined: Mar 29 2011

    Posts: 5

    Whither The Fundamentals?

    "Blythe …. with an unlimited digitial line of FR credit — who essentially trades the amount of physical silver actually available for investment, 891 times over each day."

    Yeah, all that computer automated trading by the huge moneys. WTF (pardon my English). Whither The Fundamentals? And then the CDSs. Some dollars are more equal than other dollars.

    The NYT guy has written about this, whether gold follows the ‘laws’ for commodity markets or the ‘laws’ for currency markets or the Hoteling model — one of many problems with the concept of a gold standard for the 21st Century. The gold standard … and that’s how we will get to markets that are not manipulated by TPTB ????? Meanwhile, I guess everything follows the "laws" of Queen Blythe.

    I watch the gold-silver price ratio. To me, that’s what it’s all about. There’s like one of those lines — is it resistance or is it support? I mean gold-silver at 50.

    BTW: About unlimited digital line of FR credit. Check out this little-known provision of the American Monetary Act — YES, eliminate FR banking! What a concept!

    Check out recent pre-publication online release of a chapter from upcoming book by Greg Coleridge on impact of the FR banking system (to be published by American Monetary Institute) —

    createrealdemocracy.blogspot.com/2012/02/banking-political-influence-how.html

    beginning with this quote —

    "And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created –– are still the most powerful lobby on Capitol Hill. And they frankly own the place." — Dick Durbin, US Senator, Illinois, 2009

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  • Mon, Apr 09, 2012 - 4:41pm

    Reply to #33
    capesurvivor

    capesurvivor

    Status Silver Member (Offline)

    Joined: Sep 12 2008

    Posts: 217

    structuring

    I wanted to post this somewhere and here looks pretty good. I get a free newsletter that offers advice and seminars on ex-patting (not in the cards for me). She posted these three example, with number two being possibly relevant to a bunch of CM readers. Then Google "structuring" and see how the IRS is screwing guy #2. Are we living in a developing fascist state or what?CS
     
    "Here are three examples from my experience. There are hundreds of similar cases being argued throughout the United States right now.
    Example #1: Offshore Account
    "I know a single father of three who makes about US$80,000 a year as a self-employed consultant. Eight years ago, he moved some money offshore, to diversify and for asset protection. He never filed the necessary IRS forms, and he failed to report the account on his tax return.
    "Unfortunately for him, the account was at UBS Switzerland. He was reported to the IRS, which has decided to prosecute him.
    "Here is the rub: He did not have any unreported or untaxed income…which is to say, the account did not earn any interest, and the guy would not have had to pay any additional U.S. tax had he reported it.
    "That’s irrelevant now. In settlement negotiations, the man is facing up to one year in jail and a fine of US$540,000.
    "He has little money left and will never be able to pay the fine. What is the point of the prosecution? The IRS gets to issue a press release showing a conviction in this city. This press release will forget to mention that there is no tax loss in the case, but it may induce many others to come forward…thereby increasing revenues on the back of an everyday citizen who made a mistake.
    Example #2: Cash Transactions
    "A retired U.S. citizen I know, living in California, age 60, is concerned about a major devaluation of the U.S. dollar. He decided a while ago that he wanted to purchase gold. He owns a condo with some equity and has a few hundred thousand dollars in retirement money.
    "As a regular guy, he can’t afford to buy large amounts of gold bullion, so he purchased gold coins from a local dealer. He paid cash for these coins so the dealer would not have to wait for a check to clear before handing over the merchandise. He has never sold any of his coins, thus there is no tax issue.
    "What did he do wrong? He took cash out of his account once or twice a week, always less than US$10,000 at a time, to make the gold purchases. To the IRS, this can qualify as "Structuring," which is a crime.
    "The man’s bank sent two suspicious transaction reports to the IRS and closed his account. He had been a client of this bank for more than 30 years, yet the bank made no effort to warn him in advance of the reports they made to the IRS or to offer any assistance. They just turned him in.
    "As a result, the man is looking at a fine of up to US$100,000 and possible criminal charges that could incarcerate him for up to five years. Add to this a minimum of US$100,000 in potential legal fees, and the reality for this guy is that he and his family could be wiped out. Again, this is all the result of an innocent mistake.
    Example #3: Dual Citizen
    "Another client is a 55-year-old engineer who has been working at the same job for 20 years. He is a dual citizen of the United States and the United Kingdom. When he moved to the States, he rented out his U.K. home. Ever since, he has deposited this rental income in a U.K. account.
    "The man has filed tax returns in the U.K. reporting the rental property, but he did not report it, or the U.K. account, to the IRS. Had he reported the property and the related rental income all along, it would not have made any tax difference in the United States. In fact, reporting the rental could have reduced his U.S. tax, thanks to the depreciation he could have claimed.
    "In 2009, this man learned of the requirement to file an FBAR form and entered the IRS Voluntary Disclosure Program. As a result, this story has a happier ending than the others. This guy will not face criminal charges. He will, though, pay a fine of approximately US$22,000.
    "Cases like these and the hundreds of others currently being argued have changed the way that tax attorneys deal with clients. While we once would say, ‘Come clean, be honest, and let’s get through this,’ now we advise, ‘Be afraid…be very afraid.’
    "It is this culture of fear that is pushing many Americans to look around the world for places where they might live better, freer, and less fearfully.
    "I’ll note that these changes are not the result of one political party or another. They represent a permanent change in perspective by the U.S. government in general, in how both parties view their citizens. Changes to the tax laws, and in the ways the laws are interpreted, began under George Bush II with the Patriot Act and continue under Barack Obama with the Bank Secrecy Act and the HIRE Act.
    "In the face of a troubled U.S. economy and out-of-control spending, the U.S. government desperately needs to expand its tax revenues, and the IRS has decided that it can raise more money with fear and violence than with honey.

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