Silver Stock Report
by Jason Hommel, December 16, 2005
“Peak Oil” is a theory, that is beginning to concern many people, that says the world will soon, if not already, reach a peak of oil production. This theory is based on the observation that with any oil field, there is a time of peak production, at which point, production decreases. And if oil fields have “peaks”, and if nations have “peaks”, then the world itself will have a time of peak production. And with declining world oil production, and with growing world population, oil prices will only continue to skyrocket, until it chokes off the modern economy, and we all end up back in something like the stone age. We may have declining world oil production, but I can assure you that society is not going back to the stone age. I believe that the market will solve this problem, as I will explain.
As a comparison, silver production has peaked at various points in the past, and then plateaued and declined, only to rise to a new peak, time and time, and time again, for thousands of years. At various times, silver prices become too cheap to encourage much exploration, which eventually leads to lower production, as mines run out. But then, higher silver prices, or higher base metals prices, or modern productivity increases, lead to greater exploration and greater silver production. I believe the same thing will happen with oil. Whatever society needs, will be found, and produced, period. Read no further if you are satisfied with that, but for those who are truly frightened by the prospect of “Peak Oil”, please allow me to soothe your concerns.
As another comparison, nervous nellies have worried about food production not keeping up with population growth, and considered this as a problem for hundreds of years. It’s just hysteria, or excessive and unreasonable fear–a common human condition.
Oil prices have really declined since about 1980, in real terms, adjusted for inflation. During this recent down cycle in price, there has been much less of an incentive to explore for more oil. But as oil prices rise once again, I believe exploration will surely increase, and so too, will production. The fact is that commodity investing happens in cycles and becomes fashonable at times, and unfashonable at other times, and this is the market doing its work to solve the economic demands of mankind. Overproduction is a problem just like underproduction, since overproduction reduces prices and profits, and destroys incentive for investment, until we reach a time of underproduction again–which typically takes about 20-30 years. And that briefly explains the cycles of investing in commodities.
I believe in Biblical Capitalism, which is extremely similar to what most people call “free market capitalism”. However, biblical teachings make no allowances for usury. Usury (lending at an interest rate) enslaves, and you can’t have slaves in a free world with “free” market capitalism. So, I really believe in a type of free market capitalism (Biblical) that is a lot more free and beneficial than even most free market advocates realize. My point is that God has the answer to man’s economic problems, and the answer is in the Bible, which teaches free market capitalism (such as private ownership of private property, honest weights and measures & no usury) as the key to productivity, wealth, and prosperity.
God has also made a prophecy about the world’s economy: travel will increase towards the time of the end.
Daniel 12:4 “But you, Daniel, close up and seal the words of the scroll until the time of the end. Many will go here and there to increase knowledge.”
So, if there are two irrefutable trends that will continue in the long run, it is that travel and knowledge (of Biblical truths, such as the benefits of free market capitalism) will increase.
Many investors have asked me about peak oil. For about a year, I had no opinion on the subject. I thought it may be accurate, because it sounds believable, and I still don’t know if the Peak Oil theory is true. But I’m growing increasingly skeptical, because its proponents are so clueless about free market capitalism, and economic cycles. Further, Peak Oil proponents are vocal advocates of swift and massive governmental intervention, which just goes to show how utterly clueless they are: both about free market capitalism, and also about the inefficiency of government. But, it is natural that if they turn their back on true Godly values, they make for themselves a new God, such as government.
My argument is that even if peak oil is true, it will not mean the end of our modern way of life. The reason is that we will continue to travel as much as we do now, but even more so into the future. So, if our cars are not powered by oil, they will be powered by something even more efficient, and cheaper, to allow travel to increase. Hybrids, that run on a combination of electric power from batteries, and gasoline or diesel, will likely be a sufficient alternative to help conserve oil in the face of ever-rising gas prices if Peak Oil is really true.
But the trend of the last century has been one of travel increasing. It’s a good thing to assume this trend will continue. There’s really no need to worry about the trend changing until after it changes.
I’m not going to refute “Peak Oil”–although I may have already done so. I’m going to refute the notions that all “Peak Oil” proponents believe that I have read so far, which is that the free market cannot supply the solutions to the possible and potential problem of “Peak Oil”. I argue that the free market, is, already, funding solutions to the Peak Oil problem.
But first, Peak Oil proponents note that the world claims that there are 40 years of oil reserves worldwide (even if in dispute). In contrast, there are only 14 years of silver reserves world wide. Therefore, if Peak Oil is a problem, then these worry warts should be far more concerned about “Peak Silver” and promote “Peak Silver” as a bigger problem, because silver is used in virtually every electrical device known to man, because silver is the greatest conductor of electricity. The solution to both problems is the same. Rising prices. Rising prices, as the free market will demand and require (regardless of intervention), will solve all problems of scarcity, and will help to allocate such scarce resources most efficiently to those who can benefit others the most (via making profits in the market) from using them.
But why don’t Peak Oil proponents promote Peak Silver? Perhaps because peak oil proponents do not like silver, and the free market lessons that the study of silver teaches. Peak Oil proponents like Big Government, and argue for Big Government solutions.
There are basically two possible solutions for allocating a scarce resource. Rationing per person (during excessively low prices or government price caps), or allocation through the free market via higher prices. Government intervention typically results in rationing and price caps. This would be the worst possible solution, since there would be shortages, and other viable economic alternatives would have a more difficult time being profitable.
So, I will be refuting the following arguments against free market solutions at the following page:
(Proverbs 18:17 NIV) The first to present his case seems right, till another comes forward and questions him.
Arguments from that page are in italics, and not indented.
Jason: My responses are in red, bold, below, and start with “Jason:” and are indented.
“Won’t the Market and the Laws of
Supply and Demand Address This?”
Not enough to prevent an economic meltdown.
As economist Andrew Mckillop explains in a recent article entitled, “Why Oil Prices Are Barreling Up,” oil is nowhere near as “elastic” as most commodities:
One of the biggest problems facing the IEA, the EIA and a
host of analysts and “experts” who claim that “high prices
cut demand” either directly or by dampening economic
growth is that this does not happen in the real world.
Since early 1999, oil prices have risen about 350%. Oil
demand growth in 2004 at nearly 4% was the highest in 25
years. These are simple facts that clearly conflict with
received notions about “price elasticity”. World oil demand,
for a host of easily-described reasons, tends to be bolstered
by “high” oil and gas prices until and unless “extreme” prices
Jason: Oil prices have now risen from $10/barrel to over $74/barrel. This is an increase of 640% in price! Yes, conservation has not quite started, but it will. True, conservation has not yet started, and this, in no way, implies that it will not happen as prices continue to rise. Our free market critic does note that conservation happened in the 1970’s, when oil soared to $43/barrel. But that is a price before you adjust for inflation. Now, you can adjust for inflation in two ways. First, you can use the government’s CPI (Consumer Price Index) numbers, which exclude food, housing, and energy. (Which obviously under-report inflation.) Or, you can use the increase in M3, a statistic that the Federal government will soon discontinue. In 1980, M3 was $1.8 trillion. Today, in October, 2005, M3 hit $10 trillion. That is an increase of 455%! That implies that our high price of $43/barrel back in 1980 is the equivalent of 455% higher, or $238/barrel in 2005 dollars. Clearly, we have a long way to go to reach $238/barrel for oil before expecting such high prices to hurt the public enough to encourage them to conserve, and that’s just fine. It means people do not yet have an economic incentive to conserve, and neither do producers have an economic incentive to withhold oil production, which is just fine for everyone.
As mentioned previously, this is exactly what happened during the oil shocks of the 1970s – shortfalls in supply as little as 5% drove the price of oil up near 400%. Demand did not fall until the world was mired in the most severe economic slowdown since the Great Depression.
Jason: The 1970’s also saw a boom in silver and gold prices. Rising gold prices will help the economy, as I note in my essay:
Rising Gold Prices Will Help The Economy – 02 December 2003
Jason: The oil shocks were a response to the U.S. abandoning the free market principle of the gold standard in 1971, when paper dollars held by foreigners could no longer be redeemed for gold at the U.S. Treasury. This gold default, just like the gold default of the 1930’s, is likely the cause of the economic slowdown, because it reduced trade. Why trade if you are going to be defrauded? Starting in 1971, we started giving the oil nations irredeemable paper money for their oil, and so they decided to rise prices substantially, from $2/barrel to $10/barrel just for starters.
Jason: I really wonder if peak oil production in the U.S. was a response to the abandonment of the gold standard. After all, if a nation can just print wealth, why produce wealth through difficult and costly oil production? By sending irredeemable paper money overseas for oil, we were literally getting oil for “free”–which is contrary to free market economics. We were, and are still, engaging in fraudulent market economics, as long as we pay for oil with paper money. We have a monopoly on printing press money. Monopolies, by definition, have no competition which is a part of a free market. How can domestic producers compete with “free” oil from overseas?
While many analysts claim the market will take care of this for us, they forget that neoclassic economic theory is besieged by several fundamental flaws that will prevent the market from appropriately reacting to Peak Oil until it is too late. To illustrate, as of April 2005, a barrel of oil costs about $55. The amount of energy contained in that barrel of oil would cost between $100-$250* dollars to derive from alternative sources of energy. Thus, the market won’t signal energy companies to begin aggressively pursuing alternative sources of energy until oil reaches the $100-$250 mark.
Jason: As I noted, such high oil prices are survivable, and somewhat close to the inflation adjusted high of $238/barrel, from back in 1980, when real alternatives were being aggressively pursued. There is no “fundamental flaw” of the market here.
*This does not even account for the amount of money it would take to locate and refine the raw materials necessary for a large scale conversion, the construction and deployment of the alternatives, and finally the retrofitting of the world’s $45 trillion dollar infrastructure to run on these alternative sources.
Jason: I think our free market critic has exaggerated. You don’t need to retrofit a skyscraper or home that runs on electricity, that will continue to run on electricity, which is a viable alternative to oil, since electricity is produced by nuclear power, and coal power. We are not running out of coal. We probably have hundreds of years of coal right here in the U.S.A.
Once they do begin aggressively pursuing these alternatives, there will be a 25-to-50 year lag time between the initial heavy-duty research into these alternatives and their wide-scale industrial implementation.
Jason: That claim is just flat out not true. There is not a 25 to 50 year time lag. We already have alternatives, such as nuclear. But even if there was such a time lag, we may have a 40 year supply of oil. And that’s a long time to find more reserves, to increase oil reserves. There are many investment opportunities in oil right now, and many unexplored areas of the world, such as the Falkland Islands, ANWAR in Alaska, Canadian Oil Sands, or possibly even under Florida. And when peak oil proponents say those areas don’t have the oil, (prior to drilling), they are claiming to know far more than the investors who are currently putting their money at risk in projects like those! Furthermore, nuclear was already researched and developed in 1951, over 54 years ago. That means we should have expected wide-scale industrial implementation of nuclear by now. (Nuclear, by the way, also solves the Global Warming problem, because no greenhouse gasses are emitted since no carbon is burned with nuclear. Even environmentalists are beginning to embrace nuclear as a viable solution.)
However, in order to finance an aggressive implementation of alternative energies, we need a tremendous amount of investment capital – in addition to affordable energy and raw materials – that we absolutely will not have once oil prices are permanently lodged in the $200 per barrel neighborhood.
Jason: This is the most ridiculous claim made by our free market critic: that investment capital will somehow go away “that we absolutely will not have” if we reach $200/barrel. First of all, we do not live in a zero sum world, where someone’s gain comes at another’s loss. Wealth production (mining & growing & pumping oil) adds to total prosperity, and takes nothing from anyone. Second of all, capital is never destroyed, it just changes hands. Once you pay for oil, your dollars are not destroyed, they just change hands and are owned by the oil producer, who is among the most likely investor to invest in alternatives if peak oil is really true.
Jason: Our free market critic is really complaining that capital (paper money) will end up in the hands of oil producers. This is covetousness (breaking one of the ten commandments), and wrong.
Jason: But real wealth is not paper dollars anyway. Real wealth is gold (and silver). Ninety five percent of all gold ever mined in all of human history is still with us. Gold is never thrown away, even if it is spent. May I propose something very simple to perceive? That even if oil prices reach $300 per barrel, that gold will not be thrown away, and that gold will still exist as investment capital that can be used to invest in alternatives to high priced oil. If just a fraction of oil profits, about 1%, were to be invested in gold and silver, those precious metal prices would skyrocket, and create plenty of investment capital in the existing and limited supplies of gold.
Jason: Our free market critic must be confusing oil with money. Oil is destroyed when used. And paper money may vanish. But real money, gold, is not destroyed when used.
While we need 25-to-50 years to retrofit our economy to run on alternative sources of energy, we may only get 25-to-50 days once oil production peaks.
Jason: Again, this is pure speculation, and just flat out not true. Did we have 25-50 days back in 1980? Of course not. We survived with our society just fine, and we will again.
Within a few months of global oil production hitting its peak, it will become impossible to dismiss the decline in supply as a merely transitory event. Once this occurs, you can expect traders on Wall Street to quickly bid the price up to, and possibly over, the $200 per barrel range as they realize the world is now in an era of permanent oil scarcity.
Jason: Our free market critic’s argument just goes to show that some investment capital will quickly multiply and grow. If Peak oil is true, then perhaps our Peak Oil proponent should buy oil futures contracts, or options, and take his gains, and use it to invest in alternative energy investments that will continue to multiply his initial profound investment gains. If you know, in advance, that oil will rise from less than $74 to over $238/barrel within two years, and if you buy options on futures contracts, I suppose you could get gains of up to 20 to 1, 50 to 1, or maybe even more. Check with a commodities broker who sells oil options, and give him your price target of $238 two years from now.
Jason: In actual fact, I have been doing something similar, and I’ve been doing great. (But I’m not an investor in options, nor futures contracts, because I believe defaults are coming. I invest in physical silver, or silver stocks, owning only fully paid for positions.) A few months ago, when oil hit $74/barrel, and silver was at $7/oz., the ratio was about 11 oz. of silver for every 1 barrel of oil. But back in 1980, silver hit $50/oz., and oil was $43/barrel, with the ratio of silver to oil of less than 1. And when prices bottomed out for oil and silver in about 1999, oil was $10/barrel, and silver was $5/oz., and the ratio was about 2. Therefore, when the ratio hit 11, I knew that investing silver would be even smarter than investing in oil, and I was right. Since then, oil prices have come back down to $60/barrel, and silver rose to $9/oz. And silver still remains the better investment, since the ratio today on Dec. 14, 2005, is down to 7.23, but surely headed to below 1, as silver will rise above oil again. Remember, there is a 14 year supply of silver, and a 40 year supply of oil.
With oil at or above $200 per barrel, gas prices will reach $10 per gallon inside of a few weeks. This will cause a rapid breakdown of trucking industries and transportation networks. Importation and distribution of food, medicine, and consumer goods will grind to a halt.
Jason: Again, this is nonsense. We survived $238/barrel back in 1980 (adjusted for inflation), and can do so again, and food will remain in the stores just fine. Paper prices will definitely increase for many things, as the costs of trucking, and fuel, are passed along to the consumer. A hyperinflation in the currency is what I expect. And as the dollar goes down in value, many other commodities, such as copper, gold, & silver, will go up in value far faster, to more than make up for the “capital loss”.
The effects of this will be frightening. As Jan Lundberg, founder of the Lundberg Survey, aka “the bible of the oil industry” recently pointed out:
The scenario I foresee is that market-based panic will,
within a few days, drive prices up skyward. And as supplies
can no longer slake daily world demand of over 80 million
barrels a day, the market will become paralyzed at prices
too high for the wheels of commerce and even daily living in
“advanced” societies. There may be an event that appears
to trigger this final energy crash, but the overall cause will
be the huge consumption on a finite planet.
The trucks will no longer pull into Wal-Mart. Or Safeway or
other food stores. The freighters bringing packaged techno
-toys and whatnot from China will have no fuel. There will be
fuel in many places, but hoarding and uncertainty will trigger
outages, violence and chaos. For only a short time will the
police and military be able to maintain order, if at all.
Once the seriousness of situation is generally acknowledged, a panic will spread on the markets and bring down the entire house of cards even if production hasn’t actually peaked. For this reason, the mainstream media cannot discuss this issue without largely whitewashing the truly dire consequences for the average person. If they told the truth, people would panic and the markets would crash.
Jason: Well, I admit that the media is controlled, and does not tell the truth about silver and gold, which I specifically believe, that, if told, would cause a crash in the bond market. But as that market goes down, other markets will go up, such as gold, silver, gold mining, silver mining, and all other mining–and we would have the benefit of abundant copper, zinc, and lead as by-products of silver mining. And cheap base metals help an economy thrive. But rising gold prices are good for the economy, and gold is a more efficient money than dollars are, and can encourage more economic prosperity than the dollar does. In fact, rising oil prices are helping copper prices to rise, as oil is a cost of mining. But also, more copper will be needed in things like hybrid cars, and power lines.
In summary, we are a prisoner of our own dilemma:
Jason: Our critic is a prisoner only of his own misguided thinking.
1.Right now, we have no economically scalable alternatives
to oil. (Emphasis placed on economic scalability, not
Jason: Yes, we do. Nuclear. Currently, about 80% of the energy needs of France are supplied by nuclear. Common sense tells us that the primary reason that nuclear does not supply more than 100% of France’s energy needs is that would be uneconomic, and would drive down power prices which would hurt those investors who would have invested in the oversupply. The introduction of nuclear energy in the U.S. after World War II created such cheap energy that people could afford air conditioners, which encouraged a migration of the population to warmer climates across the U.S. We will build more nuclear power plants when oil reaches a high enough price, and cheap electricity will help make hybrid cars more viable. Cheaper energy is the longer term societal trend, even with any oil shortages.
2.We won’t get motivated to aggressively pursue
economically scalable alternatives until oil prices are
Jason: That’s just false. Currently, there is a boom in Uranium stocks, some moving up ten fold in price already, that’s up about 1000%, rising in sympathy with rising oil prices, and due to the supply/demand fundamentals of Uranium, and the expectation of hundreds of Nuclear reactors to be built by China in the next 20 years! Look at the chart of the biggest Uranium stock, Cameco (CCJ on the NYSE). It’s been soaring from about $5 to over $60 in the last two years, more than a ten fold increase! And I’m doing similar in silver stocks, some of which have risen 20 fold, and 10 fold as well. The Uranium story is quite compelling. Uranium is an extremely low cost to the operation of a multi billion dollar Nuclear reactor. Uranium costs only about $35/pound these days, (http://www.kitcometals.com/) and is expected to rise as high as $100/pound, at which point, it is expected that there will be abundant Uranium production from many companies that today are merely exploring, or buying up Uranium properties. The Uranium investment story is compelling because Nuclear Plants must buy Uranium without regard to price, since they need it, or will shut down. And they can afford to pay extremely high prices, without much effort or strain. But similarly, electronics manufacturers will buy silver without regard to cost, because there is little alternative, and so little silver is used in each product. But further, as paper money fails due to continuing inflation, driven by higher oil prices, people will invest in silver and gold, without regard to cost, because there is little alternative. Oil is not a monetary alternative for the common man, and is simply unsuitable to use as money, as it is too heavy & bulky. If an investor has $7000 to invest, which is he more likely to buy: a bag of silver that he can throw at the bottom of his closet, or 100 barrels of oil that he’ll have to put on his front lawn? And the choice is even more clear if the investor has $70,000 to protect, or $7 million or $7 billion to protect. Oil is not a viable alternative to dollars to hold during times of hyper-inflation. Only gold and silver are.
3.Once oil prices are sky-high, our economy will be
shattered, and we won’t be able to finance an aggressive
switch-over to whatever modest alternatives are available
Jason: This ridiculous claim is just not true. Again, real wealth, gold, is never destroyed if it is spent. Rising oil prices will create many alternative investment opportunities, and other wealth creation projects, such as Uranium mining, Nuclear Reactor building, gold mining, silver mining, etc. Financing alternatives is not a costly process. It is a profitable process.
4.An aggressive conservation program will bring down the
price of oil, thereby removing the incentive to pursue
alternatives until it is too late.
Jason: “Too late?” This is just one defeatist, pessimistic assumption on top of another. Today, there is little incentive to conserve, because oil prices are still too cheap, and oil is still too abundant. Oil is barely more expensive than bottled water. Some bottled water is more expensive than oil! There is no economic need to conserve oil right now, and consumers are showing this in the statistics, which show no conservation. But alternatives are being pursued by investors right now, as I explained with the boom in Uranium mining and exploration stocks.
5.The raw materials (silicon, copper, platinum) necessary for
many sources of alternative energy are already in short
supply. Any attempt to secure enough of these resources
to power a large scale transition to alternative energies is
likely to be met with fierce competition, if not outright
warfare, with China.
Jason: I agree that raw materials and base metals are in short supply. The world has about a two day supply of copper above ground right now, and I’m very bullish on copper prices. I own many silver exploration stocks that also have copper, since copper is commonly found with silver. And yes, there is competition to secure these resources, which is driving up the prices of my stocks. But the competition is not resulting in war, merely higher prices, which is the free market solution that our critic of free market solutions fails to see.
6.The media and government can’t tell the public the truth
without creating a panic and crash of the Stock Market.
Jason: Maybe the media and government are “not telling the truth” because so little truth is found in Peak Oil propaganda. Nevertheless, Peak Oil has gotten 100 to 1000 times the press of “Peak Silver” which is not even a term used anywhere (except to describe various mountain tops), a term not even used by silver bugs! But, again, even if the stock market will crash, and I do expect it to crash because it is severely overvalued, along with the overvalued housing and bond markets… life will continue. Life continued after the crash of 1929, too. In fact, life got a lot better over time, since then. Back then, few people had refrigerators and TV’s, and now everyone has them. In fact, more refrigerators are now manufactured in China than in the U.S.!
7.Most of the steps we need to take to deal with this, such
as driving less, would severely hurt large sectors of the US
economy. For instance, an aggressive fuel conservation
program would lower the demand for new vehicles as
people would be driving less, thereby increasing the life of
their vehicles. One out of every six jobs in the US is either
directly or indirectly dependent on the automobile
manufacturing sector. With GM and Ford already on the
ropes, any aggressive program of conservation would likely
send them spiraling into bankruptcy. While some interests
may rejoice at the notion of “Big Auto” going bankrupt, this
is only because they don’t realize the devastating effects
a GM and/or Ford bankruptcy would have on all of us,
regardless of our political affiliations.
Jason: GM has about $280 billion in debt, and is losing about $1500 per car manufactured, and is losing about $4-10 billion per year, and is losing market share from 30% down to 23% in the last few years, and has about $31-37 billion in unfunded pension obligations, and about $15 billion in cash on hand, and has had its credit rating reduced to junk status, severely limiting its ability to borrow more money. Technically, GM is bankrupt today (but not yet because they can still make interest payments on their bonds, which are probably about $22 billion per year at 8%), they have just not filed yet. But the expectation of informed investors is that GM will go bankrupt within 6-12 months–within 2006–because GM does not have $22 billion to make bond payments, and no way to get $22 billion while losing money.
Jason: The biggest ramification that I can see from the upcoming GM bankruptcy is that $280 billion in bonds will default. This will be a severe hit to the $22 trillion U.S. bond market, and could initiate a rush out of bonds and into gold and silver, which are really the only viable monetary alternatives that do not have a risk of default. Gold and silver cannot default, they are payment in full. Interestingly, all the gold in all the world is 150,000 tonnes, or about $2.5 trillion at about $500/oz. And there is probably less than $1 billion worth of silver available.
Jason: Yes, there will be bankruptcies. But you know what? Most things will stay in tact. Buildings and houses won’t just explode, they will still be there, just like gold. Ownership will just change hands. We will still have cars. In fact, we will likely have cheaper cars, made in China. And with more Nuclear power producing electricity, we will probably regularly buy hybrid cars from Japan and China before too long. Hybrid cars will require more copper, nickel, and platinum group metals. Invest in those, Uranium, and don’t forget silver. We’ll be just fine. Higher oil prices are creating other investment opportunities, and other wealth creating alternatives.
Jason: Scarce items are best allocated through higher prices. Asking for government to intervene, to keep prices artificially lower, will cause shortages from rationing, and will reduce and prevent the investment opportunities needed to solve the problem of scarcity. Imagine if a copper miner is unable to mine copper due to oil rationing. Then, we will not have the copper needed for the hybrid cars. Yes, Peak Oil, if true, is a problem only in people’s minds. With higher oil prices used to ration oil, only the most efficient users will buy oil. Only the most efficient copper and uranium projects would be developed. But if government rationing is used to allocate oil, the government would be choosing which ones come online, and would probably play favorites according to bribes, and not choose the most efficient copper and uranium projects–as the free market will.
Jason: If free market capitalism is to work, people have to trust God’s process of free market capitalism, and not trust government induced market-intervention type solutions. The best government solution, is to defend property rights, and to defend the free markets. That’s why God established government in the first place.
Jason: The biggest problem that the world now faces is not real world scarcity of items that are really scarce. The biggest problem right now that our markets face is the false appearance of abundance that is allowed by aggressive and unrestricted short selling in the futures markets. Short selling, the process of selling something you do not have, is like going into debt. It is bad enough that our society is filled with paper debt, but commodity debts are even worse, and even less likely to be paid. You can print money to solve the problem of paper debt, but we can’t just “print oil”, “print copper”, “print gold” or “print silver” or to help those who are short oil, copper, gold, and silver in the futures markets, and holding down prices. Besides, debt is like slavery. Slavery should have no part in a free market.
Jason: The best way to protect yourself from the coming defaults of those who are short various commodities, is to not play the futures markets, but rather, to take full delivery of gold, and especially, silver bullion. The world will need the investment capital of silver and gold to get things going again as the markets continue to embrace more of God’s truths, specifically, that unrestricted usury and debt does not work to produce a prosperous society.
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