Wednesday, July 08, 2009

Questionable backing for silver certificates.

I'd like my readers, especially the Canadians who hold bullion certificates to read this most recent work by This is the Mad Scientist Speaking for his look at Scotiabank's silver assets(bullion) vs. their liabilities (certificates).

Remember a silver or gold certificate is just as artificial as a fiat note if you can't trust the issuers promise to fully back the certificate with bullion.

Tuesday, July 07, 2009

Silver and Gold and forgetting ones history

I have a friend who keeps telling me that gold and silver is to pricy to buy, that he can't risk his savings or retirement money, or that it generates no income.

I started to tell this fellow my worries about the economy long before I started to write this blog and for the most part he blew me off, in his mind gold was too expensive at $550 and certainly could not appreciate more from that point. He told me roughly the same things post Bear Stearns and when I bought more gold at $650 or when I came in walking kind of off center because there was 100 oz of silver in one coat pocket. I'd often go across to Scotia at lunch and I'd come back and show him my new purchase of silver which he'd admire and them convinced himself yet again that it would be a bad idea to buy some himself.

Now I'm sure many people have had the same experience (from both sides) so why do I dwell on this one fellow?

The reason this one guys refusal to be convinced really bothers me is because of his family history and the role gold played in keeping his family alive during the second world war. You see my friend's family lived through the Japanese occupation of China in the late 30s until the defeat of Japan and during that time they suffered great hardship. At some point Japan introduced their own money to the occupied areas and as old Chinese script dried up or was seized many vendors refused to accept the new occupation currency. Of course when Japanese soldiers demanded goods for the script vendors could not refuse but among the Chinese themselves a great deal of commerce even for basics like rice were done on the black market and the only acceptable payment was either barter or precious metals.

Much like the hack silver of the Viking age, Chinese who had gold or silver would carve or clip small pieces from coins or jewelry and trade them for staples like rice, oil, spices or medical care when the government script would buy them little.

No one can know exactly what will happen in the future but like buying life, car or house insurance, we all know that hedging one bets may cost us a little up front but should the need arise the protection is priceless. History however, either from a book or perhaps the verbal tales of ones own family tribulations tells us that crises do happen, wars do happen, natural disasters do happen, inflation happens, fiat money always fails and that gold and silver have been considered real money since the Lydian's began to strike their first coins of Electrum around 650 BC.

Sure you can ignore a bunch of goofs on Youtube yelling at you to buy metals. You can certainly ignore the salesman whose livelihood depends on convincing you to make a purchase. You can even ignore a guy like me who's only motivation is helping people and the meager (and seriously it is meager) revenue from my ads but you cannot ignore what 2600 hundred years of history says about the value of real silver and gold money, neither can you discount the personal tales of people who survived and even thrived living in an occupied country because of a small nest egg of sound money.

I'm not going to tell you that you have to have 5-10% of your worth in metals like some advocates do. If you've never bought metals before I undertand it will seem quite different and perhaps even scarey, especially if you're asked to move that much money suddenly. I am asking you to buy something, anything from your first silver round or two, to a single fractional gold coin. Compare your new bullion to a stock certificate or a twenty from your wallet. Consider the fragility of that paper , the fact that a stock, a 20 dollar bill or a bond is simply a promise and as we've seen in the recent GM fiasco a promises, legal liabilities and even contracts are hollow when the state no longer enforces them.

Just one small purchase, then you will understand and you will be on the side of history.