In this interview with Ellis Martin, David Morgan (The Silver Guru) shares his opinion as to whether or not the bottom has come and gone in the precious metals market, whether it be the price of the physical commodities or junior mining stocks. Is it time to jump back in?

A friend of mine, who was struggling with the idea of buying gold, lamented that gold only had any value if someone else perceived it to. Yes that’s true. As it is for everything, whether you’re talking about a share of Apple stock or a 1977 Chevy Malibu.

But perception is of particular concern for gold. To understand why the dollar price of gold languishes from time to time, you really have to step back and take a look at the larger picture. Understand that we now live in a world where almost every trader and investor today has lived their entire adult lives in a global system of fiat money. That almost every living person who has a degree in economics, finance, or business, has spent years having the false ideas of Keynesian promises drilled into their collective consciousness. That generations of the public have been told – and believe – that central banks notes are the ultimate arbiter of value for everything. /> /> Combine this overwhelming consensus with the emotional need for humans to have approval from the herd, and you are left with an incredibly powerful system of perception. One which will not change easily.

However, the reality is simply this: you cannot continue to accumulate debt forever. Eventually something must give way. Our public leaders are not only unprepared to deal with this, but most will not even acknowledge it as a possibility.

Take Nobel Prize winning economist Paul Krugman. In his recent Bloomberg debate with Ron Paul (see video below), he was asked, with the current debt to GDP number around 100%, how much more debt would he be willing to incur in order to stimulate the economy?  His answer was that he would be comfortable with an immediate increase in debt to GDP to 130%.

But how can this go on ad infinitum? Can an individual live beyond his means forever by accumulating credit card debt or is there eventually a day of reckoning?  How is it any different for a government? Yes there is the additional wrinkle that they can print new money to pay for things, but there are limits to that as well. Then what?

Krugman and his Keynesian ilk would have you believe that we will grow into our debt. Jump start the economy with some additional debt and soon enough additional tax revenues will be flowing in to cover it. Unfortunately that doesn’t happen. If that were the case, how did we get to 100% debt to GDP in the first place? How do we have any debt at all? By any metric you care to look at, the total debt of the United States continues to grow beyond its ability to pay for it.

Yes the current perception will not change easily. There are simply too many who profit from it to let it go without a fight. The role of economics in modern society is not to spread understanding and offer solutions, but rather to obfuscate truth. The role of economic policy in politics is to convince the majority to support programs that are contrary to their own self interest.

The harsh lesson of life is that you are on your own and always have been. You simply cannot blindly follow those who are presented as experts. You must become your own expert. You must ask the tough questions and put emotion aside as you analyze the answers – remembering that the truth is often not what you want to hear.

“Why is gold getting hammered? “the caller asked.  I could hear dejection in his voice.

“Gold’s not getting hammered,” I said.  “The euro’s getting hammered, and right now, just as I’ve warned on my Weekly Metals Wrap interviews with Eric King at King World News, for a while to come gold will trade against the dollar.

“When the dollar’s up, gold is down, and vice versa.  In time, gold will rise against all major fiat currency debacles, but right now there are still huge numbers of money managers who see the dollar as a refuge from the euro.   For gold to rise when there are eurozone problems, more money managers will have to come to recognize gold as the real refuge, not another fiat currency.”

As to when this will happen, no one knows, but it is inevitable.

Actually, such action in gold is – to me – proof that gold is still in the early stages of this bull market.  Yes, gold is now in the 11^th year of this run, but it’s still the early stages.

In the first leg of a bull market, prices rise will little to no attention.  That was 2001 to somewhere between 2009 and now.  In the second leg, prices rise with much publicity and attention, but average investors remain on the sidelines, as  does Wall Street.  In the final and third leg, everyone piles in.

Before this bull market can end, Wall Street has to become a gold bull, but primarily recommending gold shares because that’s where they make their commissions and because they don’t sell gold coins (at least not right now).  Finally, the man on the street buys, as in the 2000 dot.com boom and the housing boom.

As for today’s action, bad news out of Europe where unemployment surged to 10.9%.  This was quickly compared to the official US unemployment rate of 8.2%, which is not only lower than the eurozone rate but is in decline as the unemployed who quit looking for jobs are no longer counted, therefore posting declining official unemployment numbers in the US.

On Europe’s bad unemployment news,  European bank shares took hits, and money managers switched from euros to dollars.  And, judging by gold’s decline, too few euros went into gold to offset the knee-jerk move of moving from euros to dollars.  This, of course, set the speculators to selling gold as the dollar climbed.

Unfortunately, gold investors are going to have to learn to deal with this, and they have to remember that the real reason for buying gold (and silver) is as a hedge against dollar debasement.  Fortunately for the dollar, it remains the world’s primary reserve currency.  The euro is secondary.  Worse for the euro, there lies in the back of the minds of many people the fear that the euro may not survive the eurozone’s problems.  In which case, the dollar looks really good, until you start looking at the financial state of affairs for the US.

For a look at the sad state of financial affairs in the United States—at only the federal level— watch United States Budget Dilemma, a five minute video.

Let me start by saying that I am not a technical analyst. Consider the following to be for learning or entertainment purposes only.

If you take a look at the silver chart from last October, there appears to be a classic reverse head and shoulders pattern forming with a neckline in the $36-37 area. This is considered to be a very bullish formation. The difference between the head and the neckline is about $10, which is indicative of the size of the breakout once the second shoulder has been completed. If the formation plays out, it would mean somewhere around $46 silver in the mid to late summer time frame. /> /> Is classic technical analysis relevant in today’s silver market? Can a reverse head and shoulders pattern overcome the summer doldrums? Stay tuned and find out…

Long term, the fundamentals look stronger every day with central banks around the world continuing to grow their balance sheets (the real QE) and bankrupt governments foolishly pursuing their panacea of endless debt.

Dear Liberty Lovers,

Liberty Coin & Precious Metals 

 

I was asked if there were any good books about gold confiscation and do I have any recommendations. As it turns out I do. The guys over at Dollar Vigilante have a put out “Get Your Gold Out Of Dodge” – A complete resource on Internationalizing Your Precious Metals.  ~David Morgan

There’s so much confusion in the short term markets regarding QE and its ilk, that it’s easy to get whipsawed into oblivion – or at least complete frustration. You must maintain a steady fix on the big picture. Regardless of what the mainstream media experts would have you believe, none of the problems of the last four or forty years have been solved. In fact all of them are now worse.

We live in a period of unprecedented global debt. As Margaret Thatcher famously observed: the problem with socialism is that eventually you run out of other people’s money. Well here we are. We are now officially out of money and only artificially low interest rates are allowing the music to continue. But where to from here? QE or not QE?

Every market and every trade now hinges on attempts to read the tea leaves left behind by the Federal Reserve and its central banking brethren. Market forces, fundamentals, earnings, etc. are all irrelevant in a centrally planned global economy. The only question that remains: what is the future value of government money?

There are several ways to attempt to answer this question. We can look at history for examples, we can study human nature, or we can listen closely to what George Soros says about the Euro.

The following 19 minute clip reveals much about the future of money printing in Europe, and by extension, the rest of the world.

But first he breaks out Paulson’s bazooka and warns that a failure to save the Euro would lead to an end of the common market and the European Union itself, leaving the continent in a potential state of warring nations. This must be avoided at all costs.

“You first somehow have to get back to normal. In other words you have to invent some nonexistent device that will get us back to… closer to the Maastricht criteria. And that’s normally what central banks are supposed to do… to preserve the system. And in a crisis they sometimes do things they’ve never done before… and I think that that is the only way.”

Preserve the system, the system being one in which the central banks control all of the debt and all of the money creation. They have the power to save themselves and they will use it regardless the cost to everyone else. If that’s not clear enough an answer about the future of QE, then this should clear it up:

“A sovereign that can print the money can’t default. It will never default”

The real challenge the central banks face isn’t what to do, but how to do it such a way that the public will accept a “solution” that the public pays for via a reduced standard of living. In other words, it must me marketed with a sufficient level of obfuscation that plain old QE no longer provides.

Soros puts on his thinking cap and comes up with a potential (temporary) solution. How about creating a holding company to run a fund that purchases some of the debt using the ECB’s seignorage rights? The average Joe might have figured out QE, but good luck sorting through that one.

When asked whether his proposal complied with the letter and spirit of the law which prohibits the ECB from purchasing government bonds (monetizing the debt). He explained that there is no problem as the holding company is not the ECB but rather the ECB shareholders. Got that? Good.

And as a final word of warning, Soros breaks out the old central banking chestnut of “driving Europe into this deflationary debt trap.”  But remember that deflation to a banker has a very specific meaning – the writing off of unpayable debt at the expense of the bank’s bondholders.  In other words, deflation is nothing more than the free market ridding itself of failed banking institutions. Once you understand this basic fact, it’s easy to grasp the implications of Soros’ observation that, a sovereign – or more accurately, a central bank – that can print it’s own money, can’t default.

It’s QE to infinity as Jim Sinclair says.

Although gold is frequently considered as the only expensive metal that can serve the function of money, silver too is gaining significance in the investment market. The commercial use of silver is increasing and with this, the value of silver is climbing fast too and even quicker than the cost of gold. Thus, if you’re in debt and looking for debtreduction services, you can utilize the cash from your investment to repay your debts. Between Jan 4, 2010 and June 30, 2011, silver made an immense rise above gold in the market. Gold lifted its cost by 34 percent, whereas silver went up in excess of 100 percent, setting an unmatched sellable value via silver investing. Pure silver investments are conducted through the acquisition of .999 pure silver coins or rounds.

The coins are one of the safest means to conduct an investment in the silver market. These rounds or coins are recognized as the most liquid and least expensive way to retain your silver to hand and if the need occurs, a good type of deal or exchange material. The Taxpayer Relief Act of 1997 included the costly metal objects to hold eligibility for addition in the IRA, producing a richer, steadier portfolio via silver investing for the proprietor. Silver has a history of its own. In 14 diverse languages, the words for “silver” and “money” are identical. People have employed silver for trade over gold. Even though gold used in coins were closed in production, silver retains its position as a strong metal worth in the trade market. The silver rounds are a means to invest in a sound, well-built financial future.

Silver – An investment option

Under the existing scenario, a lot of investors are looking for safe investment options. Gold is probably the most accepted safe shelter in disturbed markets, although its authentic use as a metal is comparatively low. There has been much guesswork over whether or not the metal is overrated, frightening a lot of investors out of gold and into a different valuable metal, silver. Silver has turned out to be an increasingly well-liked safe shelter option as it’s available with an economical price mark and a list of realistic uses in comparison to the other precious metal, gold. However, gold’s chief attraction has been its excessive profits over the last few years, generating handsome returns for numerous investors. Whereas the SPDR Gold ETF earned 23.99% and 29.27% in the year 2009 and 2010, the SLV or iShares Silver Trust made a profit of 47.29% and 82.14%, overshadowing the wonderful performance from gold.

Even though silver has created some startling figures, 2011 witnessed a steep fall in the price of the metal. With the costly metal at its cheapest price, and global instability likely to continue, purchasing into silver at such economical costs seems quite alluring. If you’re seeking the maximum return on a safe investment, you might opt for silver. Silver remains the finest and most sensible investment opening out there. As the terrors of inflation are slowly sweeping out of the global financial system, the silver market is clearly building on the new highs.

Do you have the fortitude to be right and sit tight?

The Doc sat down with silver analyst and guru David Morgan from Silver-Investor.com regarding silver’s supply/demand fundamentals, the implications of an Iran invasion on silver, the leap-day take-down, and whether position limits in silver will ever be enforced by the CFTC.

You can listen to the full audio here…

http://silverdoctors.blogspot.com/2012/03/david-morgan-with-doc-cartel-wearing.html

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