Silver Stock Report
by Jason Hommel, November 4, 2006
The gold world seems to be filled with pessimists. One of the main concerns of investors at the recent Chicago show and at the Silver Summit in Idaho, was along the lines of:
How will society fare during the coming economic crash? Will there be food in stores? Will the government collapse? How will people trade if paper money fails? Will all stocks become worthless, even mining stocks?
First of all, I’m bullish on the overall progress of mankind. I view human population growth as a good thing. Children are a blessing, and God told man to be fruitful and multiply and the world is surely succeeding at that. Life is getting better in more ways than fearful men can appreciate; especially over the last 100 years. Travel and knowledge will always keep increasing. As travel will increase, peak oil must be a fraud, or mankind will find alternative energy solutions. More people leads to more travel, more trade, more specialization, more knowledge, more solutions, and everything good that God can bless us with.
I don’t know why, but people in the gold world are pessimists. I suppose that’s because there is a popular myth that if you hold gold, you are not investing in people or people’s businesses and dreams. Instead, the media myth says that capital in gold is often viewed as “unproductive”. But as my knowledge has increased, I have learned that is a wrong view!
Holding gold leads to higher gold prices. Higher gold prices lead to more gold mining, which leads to more high paying mining jobs. More mining jobs leads to industrial growth, as mining has many challenges that often require innovation in metallurgy, engineering, and in large scale projects. More gold mining leads to greater by-product metal production such as copper, silver, molybdenum, and a whole range of other metals that are found and produced in the process of exploring for gold. Greater metal production leads to lower costs for infrastructure for the rest of society. So, holding gold is definitely not “unproductive”, nor “anti-people” in the slightest.
If gold prices go up, it will not cause an economic collapse. In fact, after 1980, the prior peak in the gold market, we saw an economic boom in the United States.
One of the most popular of the so-called intellectual excuses for abandoning the gold standard in 1933 and 1971 was because there was not enough gold to do the work of a modern economy. But that’s ridiculous! All the gold mined in all the world is valued at about $3 trillion. If gold prices go up, that gold could be worth $30 trillion or even $300 trillion! All the paper money is valued at about $50 trillion. We could make all bankers honest, and end fractional reserve banking, if only gold were valued upwards about 25 times (or, if only we valued gold more)! With gold, there is always an infinite amount of money available; just let the gold price rise to whatever the market will need!
All of the so-called economic benefits of the “magic” of fractional reserve lending and paper money could be accomplished even better through a return to honest weights and measures.
A gold boom removes laborers from the typical marketplace, which, in turn, enriches those who provide services to the gold miners! In the California gold rush starting in 1849 (Men who arrived the first year were called “the 49’ers”, and explains the name for the 49’ers Football team), men arrived by ship, and the sailors abandoned the boats in San Francisco to head to the gold fields where I live today. One of my ancestors earned $10 the very first day she arrived in California during the gold rush by serving soup at $1/bowl. (The average daily wage for a man was $1/day, and that was also the average haul from the local prospectors!) She earned so much because she was a woman, who knew that the men who made the most from mining (ten out of hundreds) would want the luxury of a good meal! One of the most prosperous businesses was Levi’s, who made canvas jeans for the miners, and despite fickle fashion trends, Levi’s jeans are the standard blue jean the world over.
Economic collapse comes not from the gold price rising, but rather, from price fixing and government intervention against free market economic principles. A rising gold price is evidence of the free market returning, and it will bring with it the corresponding economic prosperity, as long as the government does not fight it.
Nobody will die from a higher gold price, except for pessimistic gold bugs in old age who may not believe it, and die from shock.
If people are not dying from old age, then people generally die because governments, and people, do stupid and violent things, like go to war, or cause mass starvation among their own people by restricting trade by blocking imports.
But buying gold is not a stupid or violent act that causes economic problems. Buying silver is the smartest, most peaceful, and most economically stimulative and productive thing you can do.
In my opinion, governments fail if they do things that make them fail. Governments are raised up and torn down by God (Daniel, Chapter 4), and men get the governments that they deserve. If governments pervert justice more than they uphold it, then God himself will remove such a government from power. When governments pass laws that make markets fail, then the government fails. Witness the fall of communism for a recent example.
In my opinion, people fail if they do things that make them fail. People who riot and steal during times of crisis will be punished just like they always are. If the stores move out of an area that is prone to rioting, then that area suffers the most. If a people who are enslaved by debt today don’t turn to Godly values soon enough, they may end up in iron chains as a result.
I fear that my government may not be wise. I fear that my fellow man might be foolish. But the advancing history of mankind shows that things will continue to get better.
I pray that God will give us all the grace to prosper as good times return.
This gold bull market is not being caused by an economic downturn!
Gold is rising because capitalism and the free market are arriving in all of China, India, and more of the world than ever before; because it is increasingly being recognized that communism, price fixing, and trade barriers do not work. And as India, China, Russia, and the Middle East grow rich, they are buying more and more gold, and growing even richer by making even wiser investments than most in America. China’s economy may be growing somewhere about 15% per year, but gold is going up by about 30% per year!
But I have confidence in America. We are still a nation filled with many independent Churches (that should be preaching about honest weights and measures), and a nation filled with coin shops. Other entire nations are entirely without a single coin shop or bullion dealer.
At the gold and silver shows, I try to point out the obvious. “Hard times may come, but they probably won’t come to anyone in this room!” That usually gets at least a mild laugh from the pessimistic and serious crowd.
So, perhaps the biggest concern people may have is how to help all their friends and relatives who do not own any silver.
Well, you ought to preach to them about silver–and you are not under any Biblical admonition to give any silver away! Even Jesus said that when you go to preach, do not take any silver or gold with you. That command assumes that the preacher has gold and silver to take! Furthermore, in Acts, the preachers were the ones who received silver and gold from those to whom they preached!
If you truly want to give to the needy, you can always sponsor a local soup kitchen. I hear they can make a nutritional burrito with rice and beans for about 50 cents.
I pray that God gives you a heart to know how to give to anyone who is in debt. Maybe the best way to give to debtors is to give them free directions to the soup kitchen you have funded.
After all, the world is $50 trillion in debt, and there is barely $3-5 billion worth of silver in the entire world, so selling silver to pay down debt is not workable.
Finally, this last point refutes the idea that silver will perform badly in a deflation. In a deflation, silver detractors have said, people will sell anything to pay down debt. Back when silver was money, people may have sold silver to pay down debt. But today there is simply not enough silver to even remotely begin to pay down debt.
Interestingly enough, this brings me back into history, full circle. In the late 1800’s, in the Coin Act of 1873, or “Crime of 1873”, the trouble of the day was that other nations had been abandoning the use of silver as money, and so, silver became less valuable. The U.S. government had long fixed the price of gold to silver at about 16:1, and was thus buying up silver, and losing gold. The Democrats were pushing for inflation, and were pressing for continued price fixing, and they lost. The Republicans were pressing for a gold standard, and they won; and henceforth, you could not pay any debt larger than $5 with silver.
Silver did not lose. Price fixing lost. Remember that, and we will all prosper.
I sincerely believe that to the extent that you embrace free market principles, and acquire silver and gold, you will prosper. And the same applies to society.
To read why I believe silver will become so much more valuable in the future, see my speech from the Silver Summit