To HL and others interested in investment talk

[Willi]

Apr 27 2011 8:54AM

Advantages of Silver Over Gold

The average person can’t afford to buy gold, so it is most suitable for wealthy people for investment and central banks.
With silver being so much cheaper, the average person can go to his local coin dealer and buy some.
The advantages of silver over gold as an inflation hedge are numerous and need to be considered:

1. The silver market is much smaller, and it doesn’t take as much money moving into silver as an investment to move the market up. Silver has outperformed gold dramatically over the last few years, going from $3 an ounce to over $40 an ounce.
2. Silver is also a very important industrial metal with over 3,000 industrial uses.
3. The government has never seized silver, although they have seized gold. If that worries you (it doesn’t worry me much), you would feel safer with silver rather than gold.
4. The government actually has no stockpile of silver to unload. There is now more gold above ground than silver because of the silver industrial usage.
5. I look upon silver as money. Throughout history more silver has been used more for money than gold. Historically, silver coins became the common denominator for money in more places and more times than gold.

If you are wealthy and can afford to buy some gold, be my guest. I think you will do just fine. However, silver will outperform gold about three to one. When I receive income from my business, I set aside enough cash to take care of my normal business affairs because paper money is still a means of exchange, although it is no longer a store of value. As a means of exchange, you can conduct your normal affairs. If I have any left over, I go to my local coin dealer and buy silver.
What kind of silver should you buy?
There are American silver eagles, junk silver, and foreign silver coins that can be bought from any coin dealer, and they are also easy to sell. The price fluctuates not only daily, but hourly. So there is always a place you could sell it.
But why would you want to sell it if the government is still inflating the currency? Hang on to your silver.
How far will silver go? Darned if I know; that’s above my pay grade. All I know is that we are in a bull market, and we ain’t seen nothin yet.
I don’t expect it to retreat. When I buy silver, I am just buying another form of money that I believe will prevail over paper.
Where will you keep it? Any place that thieves won’t be able to find it or get to it. Concealment is probably the best strategy. I wouldn’t keep it in my bank safe-deposit box, just in case the government decided to change its position on silver. Right now, silver is just treated as another commodity.
The government is even manufacturing and selling silver coins. But they have no stockpile, so they have to buy on the open market just like you do.
There are more people in the world who can afford to buy some silver than can afford to buy gold; thus, smaller volume will move the market up and up, and up.
Who cares about that? I don’t care if it goes up. I won’t sell it any time soon. This bull market will not end until the world changes its attitudes towards paper money. There is no sign of that.
Some day you might want to give it to your children or build your estate for them to inherit it. They will thank you and call your name blessed.
By Howard Ruff
The Ruff Times

*****

Howard J. Ruff, the legendary author and financial advisor, is the author of the 1978 mega best seller, How to Prosper During the Coming Bad Years, which still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times financial newsletter. The newsletter is much more comprehensive and deals with a broad spectrum of middle-class financial issues and includes an Investment Menu from which you can build your portfolio. (You can learn about it here). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world. You can get Howard’s current book, How to Prosper In the Age of Obamanomics free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.

[Willi]

Gold is the final refuge against universal currency debasement

Companies:PACIFICGOLD STANDARD Topics:CurrenciesAsiaEurope
Ambrose Evans-Pritchard, 14:58, Monday 27 September 2010
States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.

We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself, said former Fed chair Paul Volcker in Chris Whalens new book I nflated: How Money and Debt Built the American Dream.

It is a serious question. We are no longer talking about a single country having a big depression but the entire world.

The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20bn (£12.6bn) a month.

Premier Wen Jiabao confesses that Chinas ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. I cant imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs, he said.

Plead he might, but tempers in Washington are rising. Congress will vote next week on the Currency Reform for Fair Trade Act, intended to make it much harder for the Commerce Department to avoid imposing remedial tariffs on Chinese goods deemed to be receiving benefit from an unduly weak currency.

Japan has intervened to stop the strong yen tipping the country into a deflation death spiral, though it too has a trade surplus. There is suspicion in Tokyo that Beijings record purchase of Japanese debt in June, July, and August was not entirely friendly, intended to secure yuan-yen advantage and perhaps to damage Japans industry at a time of escalating strategic tensions in the Pacific (002790.KS - news) region.

Brazil dived into the markets on Friday to weaken the real. The Swiss have been doing it for months, accumulating reserves equal to 40pc of GDP in a forlorn attempt to stem capital flight from Euroland. Like the Chinese and Japanese, they too are battling to stop the rest of the world taking away their structural surplus.

The exception is Germany, which protects its surplus ($179bn, or 5.2pc of GDP) by means of an undervalued exchange rate within EMU. The global game of pass the unemployment parcel has to end somewhere. It ends in Greece, Portugal, Spain, Ireland, parts of Eastern Europe, and will end in France and Italy too, at least until their democracies object.

It is no mystery why so many states around the world are trying to steal a march on others by debasement, or to stop debasers stealing a march on them. The three pillars of global demand at the height of the credit bubble in 2007 were by deficits the US ($793bn), Spain ($126bn), UK ($87bn). These have shrunk to $431bn, $75bn, and $33bn respectively as we sinners tighten our belts in the aftermath of debt bubbles.. The Brazils and Indias of the world are replacing some of this half trillion lost juice, but not all.

East Asias surplus states seem structurally incapable of compensating for austerity in the West, whether because of the Confucian saving ethic, or the habits of mercantilist practice, or in Chinas case by the lack of a welfare net. Their export models rely on the willingness of Anglo-PIGS to bankrupt themselves.

So we have an early 1930s world where surplus states are hoarding money, instead of recycling it. A solution of sorts in the Great Depression was for each deficit country to devalue, breaking out of the trap (then enforced by the Gold Standard (GOLS.OB - news) ). This turned the deflation tables on the surplus powers France and the US from 1929-1931 forcing them to reflate as well (the US in 1933) or collapse (France in 1936). Contrary to myth, beggar-thy-neighbour policy was the global cure.

A variant of this may now occur. If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness. This is the default cure if all else fails, and I believe it is well under way.

The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz or QE2 will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernankes real purpose as he aired in his November 2002 speech on deflation is to weaken the dollar.

If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.

Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.

This is not to say that gold has any particular "intrinsic value". It is subject to supply and demand like everything else. It crashed after the gold discoveries of Spains Conquistadores in the New World, and slid further after finds in Australia and South Africa. It ultimately lost 90pc of its value hitting rock-bottom a decade ago when central banks succumbed to fiat hubris and began to sell their bullion. Gold hit a millennium-low on the day that Gordon Brown auctioned the first tranche of Britains gold. It has risen five-fold since then.

We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.

The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of unsterilized intervention.

Of course, gold can go higher.