Mr. Morgan continues to stand by his prediction of $60 silver before the end of the year and a proverbial leg up in a bull market for silver as well as gold. Is it all speculative or is industrial demand factored in? Nevertheless, he alludes to a market like none we’ve never seen for precious metals as fund managers plow resources of their middle class constituents into the bullion in numbers not seen previously….and…. Is IS is? We still don’t know. We may never know. Finally Mr. Morgan whips out Old Glory, quotes Patrick Henry and stumps nearly tearfully for freedom. He’s clearly got “nothing left to lose” to quote Janis Joplin, or at least the US doesn’t. ” Give me liberty” and while you’re at it, “Give me all the gold and silver bullion and all the gold and silver stocks that I can afford. />   /> http://www.youtube.com/watch?v=3-SCZhkq_VI

Well, here’s an interesting tidbit from the Treasury Borrowing Advisory Committee (TBAC) compliments of Zerohedge.  Their latest letter to Timothy Geithner contained the following paragraph:

“There was a lengthy discussion regarding the bid-to-cover ratios at recent Treasury bill auctions. It was broadly agreed that flooring interest rates at zero, or capping issuance proceeds at par, was prohibiting proper market function. The Committee unanimously recommended that the Treasury Department allow for negative yield auction results as soon as logistically practical.”

It’s probably the perfect summary of our insane monetary system in which common sense and everything else has been turned on its head.  Here we have a group of Wall Street bankers “advising” the Secretary of the Treasury to implement a system for allowing negative interest rates as soon as possible.  Yes, real life negative interest rates all in the name of allowing proper market function. /> Market function is the one thing that we have been sorely lacking for the last ten years with two once-in-a-lifetime bubbles brought about by non-market interest rates set by our central planners at the Federal Reserve. And now our global “markets” are little more than casinos betting on what the central banks will decide to do next.

Yes, proper market function is what we need most to clean out a system that been gummed up with unsustainable levels of debt and an insolvent banking system. But, negative interest rates aren’t going to do that.  What they will do is light a fire under the price of gold.

Real negative interest rates, in which the loss of purchasing power due to price inflation is greater than the interest earned, have been a powerful driver of the gold price for many years now.  But, what happens when actual interest rates go negative?

Well, what happens is that large portions of the investment community, who have been trained to believe in the infinite safety of the dollar, will start to shake off their stupor and realize that, at some point in the future, gold will be the only store of value left standing.  At that point the game will be on.

For years, silver bulls have lamented the metal’s failure to significantly outperform gold in this precious metals bull market.  They look at the statistics: silver’s dwindling warehouse inventories, only a fraction of what they were a few decades ago; no huge government stockpiles of silver overhanging the market; stagnant production with increasing demand; announcements of new uses released almost daily; annual sales of the American Silver Eagle, which is only one silver investment vehicle available, now exceeding yearly U.S. domestic silver production; the US a net importer silver as domestic production meets only about one third of demand.

Why, silver bulls ask, has the price of silver not outstripped the price of gold?  In past bull markets, most notably the 1973-1980 bull market, the price of silver shot up 25 times while the price of gold rose only seven to eight times.  Significant in the 1970s precious metals bull market was the “Hunt Brothers” factor; this bull market does not have such a recognized development.  Still, in other bull markets of shorter duration, silver significantly outperformed gold.  So, why not now?

Steve St. Angelo provides some of the answers in his article The Coming Paradigm Shift in Silver.

A paradigm shift comes with a radical change in the thinking of a large number of people.  It is a mass psychology phenomenon.  The housing boom is a perfect example.  The perception was that home prices would rise forever; the price paid was not important as prices would be higher next year.  Of course, the thinking was fallacious as the housing boom turned into a bubble, which crippled the world’s financial structure.

In making his point for a coming paradigm shift in silver, St. Angelo gives historical background on gold and fractional reserve banking in the United States.  It is an excellent discussion of where US banking used to be versus where it is today.

St. Angelo ratchets up his warning by noting Eric Sprott’s assertion that “The financial system is a farce.”  Eric Sprott is CEO of Sprott Asset Management, a Toronto financial adviser with more than $10 billion under management.  Sprott has some forty years experience in the financial market and is a frequent guest on KingWorldNews, which carries interviews with some of the world’s best know financial experts.

I’m in Sprott’s camp.  I have noted many times on KWN’s Weekly Metals Market Wrap, today’s money is the worst ever devised by mankind.  It is worse than paper, which can be burned for warmth after becoming worthless as money.  Today’s money is nothing more than electronic impulses on silicon bubbles.  Not intrinsic value at all.  None. Zilch.

The Coming Paradigm Shift in Silver is an excellent read, well worth the time.  The thing to keep in mind–if St. Angelo’s reasoning appeals to you–is that after a paradigm shift in silver it will be too late to take advantage of the shift.  Silver positions must be taken before the shift, not afterwards.

The issue of where a central bank stores its gold remains on the forefront.

The Dutch people want to know where the Dutch gold is stored.  Venezuela called home some 160 tons that previously was held in the US, London and Canada.  China has made it clear where its gold is to be with the export of gold prohibited and import licenses being liberalized.

Iran, which has become odd-man-out on the world’s political stage, sometime ago repatriated its gold from London.

Meanwhile, US gold reserves are stored (supposedly, no way to verify) between Ft. Knox and the Fed NYC vaults.  Another important issue as to “US gold”: who has title?  The US Treasury or the Fed?  I’ve never had this question answered to my satisfaction.  Foreign publications carry articles about “Fed gold holdings,” while domestic publication suggest US gold is owned by the US Treasury.

Julian Phillips of goldforecaster.com wrote an excellent piece on the importance of where a central bank stores its gold.

In 1954, Darrell Huff wrote his classic book How to Lie with Statistics, which covered many popular ways people use and abuse statistics to make them say anything they want.  Well, it appears that our good friends at the Bureau of Labor Statistics (BLS) are no stranger to these techniques.  Last Friday they released their new jobs number that said the employment rate had fallen to 8.3% on a net addition 243,000 new jobs.

While everyone in the mainstream media and the White House were busy celebrating the recovery of the American economy, Zerohedge dug into the numbers over the following days to reveal a much different picture of what was really happening.

The big problem they noticed was: how do you reconcile a reduction in the unemployment number with the fact that the labor force participation rate has been dropping for the last 12 years and is now at the lowest point in 30 years?

As it turns out, this is one of the primary tools by which the BLS manipulates its employment numbers. One of the easiest ways to get the unemploment figure to drop is to simply stop counting some of the unemployed as folks who are still looking for a job.  And that’s exactly what the BLS did, to the tune of almost 1.2 million people last month.

More abuses of statistics lay in the BLS’s definition of employment.  For example, if 100 engineers get laid off and then found jobs working part time at McDonalds, would you consider that a full recovery of the employment situation?  Of course not.  But the BLS does.  The most shocking part of the jobs report was that of all the new jobs the BLS claims were created, only 10% were full time positions.

Certainly not the picture of economic health that we have been led to believe.

In the GOP presidential debates, when Ron Paul talks about economics he is a giant among pygmies.  None challenge him.  The best his opponents can come up with is to rail about the need to balance the budget.  But, when he brings up the issue of the business cycle, the other candidates look like they want climb under the podium.  Further, no moderator has ever sought to question his economic positions.

Ron Paul’s grasp of economics comes from fifty years of studying economics and reading the best books from the Austrian School of economic theory.  He read Ludwig von Mises, Friedrich A. Hayek, Murray Rothbard, Henry Hazlitt and Hans Sennholz, to name only a few but the most high profile.  Further, he has rubbed shoulders with and discussed economic theory with many these giants of the Austrian School.  Although his formal education is in medicine, Ron Paul also is an economist. /> /> In his best-seller End the Fed, published in 2009, about the business cycle he wrote:

Rarely do we in Washington hear the real cause of the housing crisis, stated with full knowledge and without the usual hedging.  Most don’t understand the business cycle and its relationship to Federal Reserve policy.  What’s more, many of those who do understand how the monetary system operates are not anxious for the general public to find how it serves the interest of big government, big corporations, and big banks.

As far back as 1981, Ron Paul exhibited his understanding of economics when he wrote a short treatise on the links between gold, peace and prosperity.  Appropriately, it was titled Gold, Peace, and Prosperity. This 83-page booklet provides understanding as to why a people’s right to own gold is linked to peace, which in turn is linked to prosperity.

In Gold, Peace, and Prosperity, Ron Paul lays ruin to the concept that wealth and productivity are somehow created by an increase in the number of monetary units.  He predicted that there would be a “day of reckoning” for following the flawed notion that by expanding the money supply prosperity could be sustained.  Is that “day of reckoning” upon us?

Of special interest to gold investors should be the chapter titled How Our Money Was Ruined.  Ron Paul points out the Founding Fathers so despised unsound money that they “decreed death—in the Mint Act of 1792—for any officer or employee of the Mint who debased the coinage of the United States.”   When you look at what Bernanke and the Fed are doing, you see how far removed they are from the Constitution and the Founding Fathers’ visions for the United States.

The Mint Act of 1792 gave us the Gold Coin Standard, which gave way to the Gold Bullion Standard, which fell to the Gold Exchange Standard (the Bretton Woods Agreement of 1944), which led us to the Managed Fiat Currency Standard, under which the Fed now prints (actually, electronically creates on silicon bubbles) all the money it wants.

In this presidential election year, our country is facing its greatest financial/economic crisis ever.  With Ron Paul running for the GOP nomination, the Establishment has not been able to sweep those problems under the rug.  Ron Paul keeps them on the forefront.  Americans who read gold, peace and prosperity. Appropriately, it was titled Gold, Peace, and Prosperity will become more knowledgeable about gold, money and economics, and in becoming more knowledgeable will play a part, albeit small, in keeping discussions of those problems on the front burner.

dir=”ltr”>David thinks this decade for silver will be even more epic than the last.