Silver medicine for inflationary
ills By The Mogambo Guru
People write to me all the time offering
helpful suggestions ("Go hang yourself, moron!")
and wanting to know things like, "Are you as
stupid as you sound?" (Answer: yes), and "How high
will gold go?" (Answer: I don't know and I don't
know anyone who DOES know or ever DID know!),
rather than asking the question that I think I CAN
answer, namely, "How high can gold go?"
The answer is, obviously, infinity,
because if the dollar is worth literally zero,
gold will sell for infinite dollars.
Another answer is probably found when the
Fed says it has 260 million ounces of our gold in
custody. With an M3 money supply of about $12
trillion, this means that if gold rose to
$46,153.00 per ounce, the entire money supply
could be 100% backed by gold!
We'd get
back to the gold standard required by the US
constitution!
But nobody wants to hear
this stuff, as gold seems so far away from reality
at $960 and upwards an ounce. And besides, who in
the hell has $960 just lying around? And if I had
$960, don't you think I would have one of those
big, new whiz-bang 460cc drivers that can knock a
golf ball "farther and with more forgiveness" than
any golf club in all of freaking golfing history?
And maybe a new set of those spiffy hybrid irons
and an expensive putter that can somehow overcome
my complete lack of talent? And a nice new bag to
carry it all around in? And some nice golf shoes?
Don't you think I'd have those things if I had 960
damned dollars?
But while golf equipment
will undoubtedly continue to go up in price, gold
may actually go lower in the short run, as is
implied by the Bloomberg.com headline, "Gold
Plunges as US Pledges Support for Some IMF Bullion
Sales." The article says that "Gold fell the most
in almost two weeks, erasing earlier gains, after
the US said it would back 'limited' sales of
bullion reserves held by the International
Monetary Fund, the third-largest holder of the
precious metal."
I laughed out loud at the
sheer stupidity inherent in the comment made by
David McCormick, the Treasury's under secretary
for international affairs, who said, "Some of the
IMF's $98 billion in gold reserves should be sold
to cover a revenue shortfall." Hahahaha! This is
too rich! And this IMF is an organization that has
24 executive directors! Apparently, each more
clueless than the last, and they want to sell our
gold to make up for their incompetence so that
they can keep on being incompetent. Hahahaha!
In other words, the IMF mismanaged its own
affairs, while forcing others to follow their
misbegotten "advice", and now they want to sell
the gold we loaned them to pay themselves big
money and maintain their expensive, disastrous
little empire, because the gold is the only thing
they have left that is worth any money! Hahahaha!
What losers!
The article itself doesn't
say anything about losing, or about how the IMF is
such a failure, or how much I hate their guts, but
it did say that, "the price of gold has more than
doubled in the past five years", which is not to
mention the 41.2% gain in the price of gold over
the last 12 months (according to the Economist
magazine), which is de facto proof that inflation
is screaming like a banshee from hell that is
going to eat your guts out through your wallet.
The only prophylaxis known to man against
the scourge of inflation devouring your financial
guts is to buy gold and silver, which brings up
the admission that I have been neglectful of some
things here of late, mostly as regards hygiene and
manners, but also about relentlessly pounding the
table demanding that you buy silver if you want to
make the most profit, percentage-wise, because I
consider it to be one of the most under-priced
elements in the whole periodic table.
I
bring up this "periodic table" thing because it
implies that I know a lot about chemistry, which I
don't, but it makes me sound smarter than I am,
which may lead you to the nonetheless correct
conclusion that you ought to be buying silver and
storing that stuff all over the house. And if your
stupid family starts objecting about how you spend
all the money on silver instead of buying food and
medical care for them, then you can just tell them
to shut up, shut up, shut up, too, just like I do
my own whining little family!
I mean, how
do you explain to these simple Earthling creatures
that it seems like every freaking day there is
some news about silver, like appearing in new
applications in materials and medicine, and in all
of commerce in general? And how do you explain the
supply/demand dynamic of silver to them, which is
due to vastly increase in demand because of its
irreplaceable usage in all electronic and
electrical applications, to say nothing of its
astonishing antiseptic qualities?
And if
you think the usage of silver to date has been
excessive, then you ain't seen (as they say)
nothin' yet, in that there is already a structural
deficit in silver as more is consumed than is
mined out of the ground, and most of that silver
has been used up thus far in history to make
consumer items that lasted, and will last,
probably less than 10 years from date of
manufacture, and so all of it will have to be
replaced, again and again, all made with more and
more silver!
And with China coming
on-stream, with all that attendant NEW demand for
silver in all the NEW demand for all those
applications, how can it be languishing at such
low prices, when inflation in consumer prices is
running somewhere between 5% and 13%, when gold is
over $900 an ounce, when the money supply is
expanding at 15 freaking percent, which makes me
scream out in anguish, and people turn to each
other and ask, "What in the hell is that God-awful
noise that sounds like a sick raccoon choking on a
pork chop bone?"
There are far, far too
many variables for my Puny Mogambo Brain (PMB) to
comprehend, and in desperation, I shove Jason
Hommel of silverstockreport.com out onto the
stage, who says, "The world produces about 650
million ounces of silver per year. All of that,
and more, is consumed by industry, silverware and
jewelry." So what has made up the shortfall? "Only
recycling and investor selling has made up the
difference," he says. But, "as investor selling
slows and turns into buying, silver prices will
soar, and vastly outperform gold, because silver
is probably more scarce than gold these days, with
maybe only 1 billion oz of silver in the world, or
less."
Still, even after hearing this, the
stupid kids sit there, staring at me, not
understanding a thing anybody says about silver,
and conceitedly thinking only of how their bloated
stomachs ache, and how their pustules ache, and
their teeth ache, and how they need to see a
doctor about some stupid rash or some stupid fever
or something, and blah, blah, blah, which means
(if nothing else) expensive prescriptions to fill.
So I try impressing them with a little
math, and I tell them, "The gold-to-silver ratio
is, historically, about 15:1. This means that gold
at $930 indicates that silver should be selling,
on average, for $62 an ounce! Right now! And yet
silver is selling at less than $19 per ounce! It's
historically waaAAAaaay under-priced, you morons!
Can't you see that?"
I could see that I
was again losing them, and so I resorted to the
tried-and-true approach; greed. So I bent down and
got real close to their faces, which accomplished
two things at once. Firstly, if I lower my voice
as if I am revealing some secret, they pay more
attention. Secondly, I insure less questioning by
being that close to them, as it lets them smell my
musky bodily odors, as I have been too busy to
take a bath, furtively shuffling their "college
money" around and forging their signatures on
various documents to buy more silver, and then
sitting in the middle of the living room, making
stacks of silver, counting it over and over and
laughing and laughing and laughing and having a
wonderful time.
So I say, "And when gold
hits $2,000 an ounce, can silver at $135 be far
behind? And when silver explodes in price, like we
both know it will, then we will be rich, rich,
rich, and I will give you your share and you can
move your nasty little rebellious teenage butts
out of my house and never come back!"
It
still didn't work. They just want to talk about
how hungry they are. And now there are social
workers banging on the door, so I have to listen
to them yammer, yammer, yammer at what a bad
father I am, too, as if I don't hear that enough
from my family.
But when silver explodes
in price, like we all know it will ... !
Richard Daughty
is general partner and COO for Smith Consultant
Group, serving the financial and medical
communities, and the editor of The Mogambo Guru
economic newsletter - an avocational exercise to
heap disrespect on those who desperately deserve
it.
Republished with permission from
The Daily
Reckoning .
Copyright 2008, The Daily
Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
