By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
By now I think most of you know that I own a company that buys and sells a lot of gold and silver products. You have probably also heard me predict that gold and silver prices have a strong likelihood of a major increase in the coming months and years.
Does the fact that I deal in this merchandise perhaps influence what I say and predict? After all, we have all seen politicians and private people announcing things that they knew to be false at the time they said them. But they went ahead and lied or omitted important information because they had ulterior motives for their own benefit. So, is it just possible that I might slant what I write and say for my own self-interest?
That question should be asked of every person who expresses opinions or makes predictions. But, in my heart of hearts, I don’t think I am being dishonest.
You see, soaring gold and silver prices might temporarily be good for my business, which I would appreciate. However, I don’t want that to happen!
Huh?
Sharply higher gold and silver prices would not occur in a vacuum. If that happened, the news for the rest of the economy would be really horrible. People buy precious metals as protection against their paper US dollars and other currencies falling in value and possibly becoming worthless. But the economic pain inflicted on people when paper money is failing is devastating to everyone.
The African nation of Zimbabwe gave us a demonstration of this national trauma just a few years ago. Inflation of the money supply was so high that notes of 100 trillion dollars face value were issued just before the currency failed four years ago. With constantly changing currency values, merchants could not obtain inventory because their suppliers would not accept Zimbabwe dollars for payment. Factories, farms, and mines closed because of the inability to obtain raw materials and labor or to sell their output using stable money. People had enormous difficulty coming up with the necessities of life, and more than a few died from hunger or civil unrest.
I don’t want to see this disaster occurring in America, which would cause gold and silver prices to soar as measured in US dollars. Unfortunately, that seems to be exactly the direction that politicians are taking this once great nation. If, somehow, American once again became a nation of liberty and prosperity, and gold and silver became virtually worthless as a result—I would take that deal in a heartbeat.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com
Nice piece, Patrick! Kudos. I do not believe that many of your ardent fans have thought thoroughly enough about what types of societal horrors would HAVE TO accompany a collapse of the currency and the hpoer-spike in metals values.
As one coin podcaster once famously said, “If it all goes to h*ll, the metals you’re going to need aren’t gold and silver, but lead, coated with copper, mounted in brass.” Speaking for me, if that’s what I have to go through in order to “cash in big” in bullion, no thanks!
Does anyone believe this?
(crickets)
The created perception of the potential to rise rather than the actual rise in bullion will be bullish for your business.
When did the U.S. stop being “a nation of liberty and prosperity”? I did not get that news release.
I also do not accept the premise that the system has to collapse for metals to soar. Look at 1980. It was high inflation, a bandwagon effect (as everyone sought to cash in), and manipulation by the Hunt Brothers, not the prospect of collapse that sent metals soaring.
And as Kurt points out, if the system really did collapse to the point of something like what happened in Zimbabwe, I really doubt precious metals would be what people want.
Besides, a strong case can be made that things are getting better in the U.S., not worse, although there are of course plenty of problems too like the decline of the middle class.
Look at the energy situation, where we are now expected to be energy independent in about a decade, and to become the world’s biggest energy exporter a few years after that.
Patrick, I too hope frenetically that our economy does not collapse. The German Weimar currency collapse caused a tremendous amount of suffering and eventually gave birth to Nazism, so we have historical reasons to fear a collapse here. 10 years ago I laughed at the possibility of an economic collapse occurring here. Too bad, I could have done well to have started buying gold and silver at that time.
We have to keep in mind that Weimar and/or Zimbabwe style inflation may bear a quaLitative resembalnce to our much more pedestrian rate of inflation, it has absolutely no quaNTitative resemblance whatsoever. I cannot even IMAGINE what sort of twisted mind one must need to have to bring forth that spectre at this point.
The U.S. money supply has increased (even WITH QE, QE2, QE-real estate edition, and QE3) “only” 2.23x in 13 years. That’s not hyper-inflative in any sane person’s mind. In Weimar, the money supply would increase 2.23x in a week, and in Zimbabwe, by the time you get to the end of this post. We need to “keep it real”, folks. Don’t get caught up by the rhyme of the illions. The “m” or the “b” or the “tr” make all the difference in the world!
When you look at, as I did, a Zimbabwe $100 trillion note (ONE NOTE!!!), keep in mind that that’s almost 10 TIMES as many U.S. dollars as EXIST IN THE ENTIRE WORLD! We need to get a stinking grip, dudes! Chill. Have a cool drink. Breathe. THINK!