Why Silver Is Money
(Phoenix Silver Summit Workshop Speech)
Silver Stock Report
by Jason Hommel, February 25th, 2009
I'm very honored to be here. My name is Jason Hommel. I'm the Editor of the Silver Stock Report. This last year, I started dealing in silver, selling silver, at www.jhmint.com and I learned a lot more about the silver trade.
My speech today is on why silver is money, even though no nation on earth uses silver as money.
In other words, my speech is on why 99.9% of humanity is wrong, and why you are right!
The words that mean "money", and the words that mean "silver" are the same in most Romance languages. Silver is the only real money that there is. Gold, historically, is just too valuable to use as money if an ounce of gold is worth a year's salary, or a modest home. Even at today's prices, as you know, they don't make $1000 bills!
Throughout history, Silver has been used as money in more times in more places than gold.
Silver is just not used as money today, except as a store of value.
Silver does not circulate, but that does not mean it's not money.
Most people don't want to know about silver, or even dollars.
Most people don't even want to know about the silver price, which is the ratio between silver and dollars.
Instead, people just want to GROW THEIR OWN MONEY.
I've been a success in numerous things, and a failure too. One thing I've learned is that if you want to be a success, you have to study hard, and know your subject, and then, you are much more likely to be a success.
That's three topics of study then:
The first topic is GROWTH which includes compound interest and exponential growth, or following the first commandment, "to be fruitful and multiply".
The second topic is "YOUR OWN". People don't seem to know that possession is 9/10ths of the law. If you want to grow YOUR money, be sure it belongs to you. That means no futures, no certificates, no options, no ETF's, no third party storage programs. You have to actually own the real stuff. You have to hold it in your hot sweaty hands, lift it yourself, or hire your sons or some relative to lift and lock it up in your own safe for you.
Finally, the third topic, the topic of this talk, which is: Money!
So, if you want to MAKE MONEY, you'd better first understand the subject, and know what money actually is!
I've asked many experts; and they are nearly unanimous on one thing. They tell me, "Don't try to predict the dollar price of silver; because you will look like an idiot, you will most likely be wrong. And it will damage your credibility. And if silver is going past $1000/oz., why bother to say it before it happens. Just grow wealthy, and be happy."
But I don't listen to bad advice. See, I'd rather help people. Second, if I don't have any credibility, or if I don't care if I have any credibility, or if I think no man should ever have any credibility, then I have nothing to lose!
So, here it is--the opinion I have that everyone wants to know, and what some experts are uncomfortable in saying:
I think silver will head beyond $10,000/oz., in less than 15 years. And I'll tell you why.
Basically, that's the price if all paper money were to be backed by silver and gold again. That's the price if the dollar were falling to zero, if they stopped printing all money tomorrow, and managed to back up every dollar with all the U.S. gold, and if the silver/gold ratio returned to about 10:1.
We could get to that price in about 15 years, if silver merely rises about 50% per year for 15 years in a row. That's perfectly possible. It would merely be a mix of a growth rate in silver's value, going up only about 20 times in value, and the rest of the gains would be due to a decline in the dollar's value, happening at the same time.
There are many, many fundamental reasons why silver will go up in value. 10,000 reasons, since there are probably 10,000 industrial applications that use silver.
But it's my job to focus, and help you focus, on the big reasons, or biggest reasons.
Some of the big reasons are the story put out by GATA, the Gold Anti-Trust Action Committee. They have shown that the central banks of the world have loaned or leased about 15,000 tonnes of gold, out of about 33,000 tonnes. Gold is counted as "on the books", but it is no longer in the vault. It's an unsustainable manipulation or deception, and when it ends, gold will skyrocket.
Ted Butler has also written great things about the excessive short position in the futures markets. When that manipulation or deception ends, silver will skyrocket.
But I want to talk about the biggest fraud of all, the biggest deception out there.
The biggest deception is so big, it has warped the thinking of most everyone in this room, including myself.
It's very difficult to explain a deception. By definition, if you are deceived, you don't know you are deceived. That's the nature of a deception.
The other problem about deceptions is that lies can be exposed rather quickly.
That's because PEOPLE TODAY DO NOT EVEN KNOW WHAT MONEY IS.
I've struggled to define money; it took me several years!
Some say what you spend is money, or that you buy things with money. Or that currency is money. Others say the dollar is defined as a certain amount of silver in the constitution, and that's it; nothing more.
The definition of words changes over time. But essential concepts and truths do not.
Remember, the words for silver and money are the same in many languages.
Please give me your attention while I talk about the Desirable features of money, my definition that I've been working on.
To function as money, a monetary item should possess a number of features:
To be a medium of exchange:
* It should have liquidity, and be easily tradeable, with a low spread between the prices to buy and sell, in other words, a low transaction cost.
To be a unit of account:
* It should be divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again, with a low percentage cost. This is why leather, or live animals are not suitable as money.
To be a store of value:
* It should be long lasting, durable, it must not be perishable or subject to decay. This is why food items, expensive spices, or even fine silks or oriental rugs, are not generally suitable as money.
PROMISES THAT CAN DEFAULT AND GO TO ZERO VALUE ARE NOT A STORE OF VALUE!
PROMISES THAT CAN DEFAULT AND GO TO ZERO VALUE ARE NOT A STORE OF VALUE!
That means no ETFs, no futures contracts, no silver certificates, no bullion accounts, no storage programs, none of that nonsense!
To be anonymous:
* Money should not be subject to government tracking
There are two ways to approach the fundamentals: first, the supply and demand: and second, the nature of the thing.
So, for two items, silver and dollars, that's 4 areas of study.
supply and demand of silver, and of dollars, and
SILVER, SINCE 2003, HAS BEEN A GREAT STORE OF VALUE; actually increasing in value at a much faster rate than the stock market or bonds.
Dollars are falling and failing as a store of value. A few years ago, many commodity prices went up 1000%, ten fold!
There is about a 7% spread for silver between the cost to buy and sell it. But is the 7% a spread on silver, or is it really a spread on dollars? There is a VAT of 17% on silver in most of Europe. Is that a tax on silver, or is it a disincentive or penalty on selling the Euro?
Durable? Cash can go up in flames, or go to zero value.
Stable value? No; the ratio of silver in dollars is changing.
Dollars are not rare; not difficult to obtain; & are going down in value.
Dollars are easy to counterfeit; and $100 bills are not always accepted overseas. Even Star buck's will not take a $100 bill.
Dollars are traceable. There are numbers all over the place; both on the money, and on your account.
In essence: dollars are fraud. They were a promise to pay in silver. The promise was broken. They are not a just weight and measure.
Dollars are a unit of account, with no accounting!
Dollars are not essentially money. At best, they are the current medium of exchange--that's only 1 out of 4 major things that money needs to be, and they don't even do that job well, due to banking hold times, and income taxes!
A promise is not the same thing as having received what was promised!
If people could be happy with mere promises, I'd never have to spend a dime on my kids! Even kids know the difference!
I feel stupid for having to point it out, but paper dollars are not money.
People will actually argue with me over this. But paper is not money.
It's not even the ghost of money. It's not even a promise to pay in money, like it used to be.
Clearly, a promise to pay money, and the actual money, cannot be the same thing!
And when one is no longer even a promise to pay money, that's even further removed from being money!
We may call dollars money; we may think of dollars as money; but we are using the word "money" wrong; or we just do not understand what the word "money" means; as I've explained.
For many people in the world, the word "money" means the same thing as silver.
There is Zero demand for silver as a medium of exchange-- it is not really used as a currency anywhere in the world.
There is almost Zero demand for silver as a unit of account--it is not used for debt in most of the world. (Except by a few traders in the futures markets.)
There is now a small, but rapidly growing demand for silver as a store of value. Last year, it was 40 million ounces. This year, investment demand is perhaps up to 100 million oz/year?
I'm using silver as MY store of value, and as MY unit of account. If I acquire more silver, I consider myself to be successful.
Most of the demand for silver today is for industry, jewelry, & photography.
That does not leave much room for investment, or monetary demand.
The Silver ETF has acquired 253 million oz. That was surprising. I don't think they have any silver backing it up.
JP Morgan is the custodian! JP Morgan was fingered as the last remaining silver short at COMEX! That's the biggest conflict of interest that there could be!
The amount of actual silver available for investment has been variously estimated as between 60 million to 600 million oz. Or as much as 4 billion oz. if you include all silver jewelry and flatware and tableware.
4. Finally. Lets look at the supply and demand of dollars.
$50 trillion world bond market.
$1000 trillion is about a million times larger than 1000 million ounces of silver.
It is impossible to exchange all the promises for payment.
But the world tends to try to cash out all at once.
People have asked me, do I think silver is a "once in a lifetime" opportunity?
No, I think it's a "once in human history" opportunity, with no prior historic examples. Never before have conditions like today ever existed.
1. We have consumed nearly all the silver in the world.
But whether you know it, or can accept it, silver is money. And nothing else is.
When gold becomes too expensive, and when paper money fails, silver is the only thing left to use as money.
One of the best books ever written on trading, and highly regarded by many traders today, is "Reminiscences of a Stock Market Operator" by Jessie Livermore. In the book, he talks about how the markets totally stopped trading for up to nine months at a time during war in the early 1900's. I know several millionaires out there, in this audience, who think they will be protected in a monetary collapse, because they have brokerage accounts and silver stocks. But nothing can replace real silver that you may need to spend on food during a time period of a market crisis. Everyone here should have at least $5000 worth of silver.
Two years ago, I advised people to clean out the local coin shops. Last year, that happened. So, that's why I started dealing in silver, to help provide it, when you can't get any, because so many dealers are sold out!
Before I conclude, I want to mention the big thing I learned about the silver market in the last year. I always thought that monetary demand for silver would cause the price to rise. That's what happened with rising premiums in the silver investor market for bars and coins. But premiums rose, and silver prices did not.
That's because silver investment demand is still so small, about 10% of the market.
Also, I did not realize that the silver dealers and mints were in such bad shape from the 27-year bear market in the metals. Nearly half of them ARE bankrupt. Not maybe, ARE. If you buy from a dealer, chances are now about 50/50 that you will be scammed with a very delayed delivery, which means they are floating on your money because they ARE bankrupt.
In fact, all the most heavy bullion dealers who are the biggest advertisers ARE probably bankrupt.
And if you just try to "buy silver" and don't know to avoid the ETF's and all the other paper silver scams, you are likely to be scammed about 80-90% of the time. It's rough. That's what makes and marks a market bottom.
I barely got my silver out of one very reputable mint that said it would be 3 weeks, which turned into 8 weeks, and I still only got 1/3 of my silver minted after 8 weeks. And that's typical now. If the mints are scamming me, they sure are scamming the other dealers, and other customers.
And that's why I ship "same day" so that if I do get scammed with a default, you won't be.
Go to the bank, get your cash, and get your silver. And get a safe, and bolt it to your garage floor, or put it in your closet.
Again, if you want to grow wealthy, you must know about growth, you must make sure you are growing your own wealth, and you better be sure you know what money is.
So get your silver!