Debates on Inflation & Gold Prices

(A Helpful Discussion!)

Silver Stock Report

by Jason Hommel, October 19th, 2010


Through debate, we all get the chance to see more clearly, and understand better who is right, and what the truth may actually be. 

1 Corinthians 11:19  For there must be also heresies among you, that they which are approved may be made manifest among you.

Proverbs 9:8 Reprove not a scorner, lest he hate thee: rebuke a wise man, and he will love thee.

A critic responds to my latest article:

Today: Low Inflation = Massive Gold Rise!
http://silverstockreport.com/2010/inflation-massive.html

Jason,
Were you born with insufficient gray matter or was this an acquired characteristic?
Your "thinking" is so flawed, it is far beyond funny.
 
michael

I replied to michael with:

Your insult would count if it contained reason, but absent that, it's static noise.

Michael replied respectfully with a long discussion of many points. 

I'm posting Michael's letter twice.  First, I'm copying Michaels original letter.  Second, below his letter, I post it again with my explanations inserted.  My comments are in bold.

=====

Jason,
Your response is very, very good and well appreciated.
It was my error in "thinking" that someone who would write such nonsense would be as open to discussion as you may be.
Thus, here goes:

REGARDING:  The most common myth or misperception in the gold market today goes something like this:
"Since inflation rates are low, then there's no reason for gold to go up very much."
This misunderstanding is expressed in many different ways, such as:
"Since the Consumer Price Index shows only 4% inflation, then gold should go up by no more than about 4% per year."
RESPONSE:  The CPI is around 1.5%, not even close to 4%.

REGARDING:  "When interest rates begin to rise, the more attractive rates will pull money out of gold and back into bonds."
RESPONSE:   That is true.  Obviously, the higher returns will attract a portion of funds from all other forms of investment.  Further, the carrying costs of holding gold will be greater.

REGARDING:  All of these statements are not true because they are only vaid when the world is on a fully backed gold standard.
RESPONSE:  What do you mean, "when the world is on a fully backed gold standard"?  LOL

REGARDING:  Instead, paper money is highly leveraged to the underlying gold.
RESPONSE:  What does that mean??  What is your "concept" of "paper money"?

REGARDING:  So much so that, only in theory could the gold be used to back up paper money, and only as a last resort if paper money began to die through rejection by the people, which leads to hyperinflation.
RESPONSE:  Throwing words together without meaning is not worth too much.  Please explain your rhetoric.

REGARDING:  There is about $15 trillion in the US banking system, and only about $0.35 trillion worth of gold to back it up, if the gold even exists, and has not been sold or leased into the market to try to manipulate the market and contain gold's price rise in dollars.
RESPONSE:  Do you have any idea of the intrinsic value of gold.  The "price" of gold may be higher or lower than its intrinsic value.
Further, gold does not back the wealth in the U.S..

REGARDING:  (261 million oz. of "official" U.S. gold x $1350/oz. = $0.35 trillion)  This is gold leveraged 42 to 1.  This implies that g
old could rise 42 times.  That's 42 x $1350 = $56,700/oz.
RESPONSE:  Whereas I don't mean to be rude, but do you realize that the incremental cost to produce an ounce of gold is around $350??  Thus, you feel that the "intrinsic" value of gold is about 160 times its COST to produce??????  Please, please, get some perspective and rational "thinking".

REGARDING:  If you count all the unfunded liabilities of the US government, the leverage is hundreds to one.
So, to sum up, the popular myth correctly assumes that inflation will pour into gold, and on a one to one basis.  But it incorrectly assumes that paper money is fully backed by gold, but it's not.
RESPONSE:  Who has "assumed" that our currency is backed by gold?  Do you understand the concept of "currency"?

REGARDING:  And the myth also fails to account for all the prior inflation of previous years, which will also pour into gold and silver.
Here's a bit more math that more clearly shows why the myth is wrong.
The US government's budget now exceeds $3.5 trillion, but only collects $2 trillion, and thus, is printing/creating/borrowing $1.5 trillion of new money to pay the bills.  With M3 at about $15 trillion, the money creation inflation may be said to be about 10%.
This is the true inflation, the money creation, and this is only in the US; but the rest of the world is inflating, too.  The US is regarded as about 1/4th to 1/5th of the world economy, and the rest of the world's paper money systems are not in much better shape, and often worse, so the world's paper money inflation rate can be roughly estimated at 4-5 times bigger, or perhaps $6 trillion per year.
The world annual production of gold is about 2300 tonnes, which, at 32,151oz./tonne, is 74 million ounces.  At $1350/oz., that's $100 billion dollars worth of new annual world gold production.
See the problem?  How can $6 trillion ($6000 billion) of new money annually, buy only $100 billion of new gold annually, without a massive increase in the price of gold?
Gold prices would have to rise about 60 times, just to balance out the new money creation of the world.  That implies a gold price of $81,000.
RESPONSE:  I hate saying this, but, "are you nuts?"

REGARDING:  The US budget deficit alone, the $1500 billion, is 15 times larger than the $100 billion world annual gold production.
Thus, when the pile of paper money is already so very large, then small increases in the very large pile are relatively huge to the underlying tiny gold market.
Remember there is a bit of truth about the myth, and it's that all paper money creation will flow into gold on a 1 to 1 basis, as it eventually must.  Remember, all paper money will flow into real money, since all paper money represents a potential claim on real money, and can potentially be spent on gold, and this has implications far beyond what most analysts are capable of thinking about, or writing about.
RESPONSE:  I, truly, feel empathy for you (that is, unless you realize you are spewing nonsense) and those who read your convolutions.

REGARDING:  Therefore, there is no reason to think that gold is in a bubble.  Did gold increase 15 times this year from $1000 to $15,000?  No?  Then gold has not yet "kept pace" with the inflation.
RESPONSE:  What?????????   LOL

REGARDING:  Paper money is the bubble, it's the bubble that created the housing bubble, and paper money will remain a bubble for years to come, until it all comes crashing down, and flows into gold.
RESPONSE:  Jason, paper money wasn't the cause of the RE bubble.  Mr. Alan Greenspan and the Fed stimulated the RE bubble by, precipitously, reducing interest rates in 2001.  The Fed created "funny money", which was used to bid up the prices of RE and enabled the economy to grow.

REGARDING:  The thing to remember about gold is that it is like a magnet that attracts and devours fake money.  It will draw into itself all the fake money in the entire world until the paper money fraud is extinguished from the system, and it will do this naturally, all on its own.
RESPONSE:  It is quite conceivable that there is, absolutely, no hope for you. You are so confused, it will take a good deal of work to bring you back into the realm of reality.

REGARDING:  The reason is that any fool can see the truth of the situation today, and more and more people are buying gold.  As more and more people buy gold, the gold price will continue to rise.  As more and more people see gold prices rise, even the most foolish of fools will naturally and simply follow the trend, and buy gold for the obvious gains they are seeing.
RESPONSE:  WOW!!! You do understand!!  When the "powers" believe that most of the "retail" buyers are in, the slide will commence!
All will be saying, "why didn't we see this bubble, and why didn't someone do something to mitigate it?"

REGARDING:  This is why the "powers that be" are manipulating the gold prices, trying to keep them down, or contain the rise, with a vengeance.
RESPONSE:  Jason, you are 100% backwards in your "thinking" or lack thereof.  Prices are being manipulated higher.  Think about how they got crude to rise to $147 and then dropped it to under $40 in a very, very short period.

Jason, I have attempted to offer rational responses to your "interesting" commentary.  Please read with some form of objectivity.

In late 1974, I wrote to William Simon, the then Secretary of the Treasury, and to Alan Cranston, one of California's Senators, suggesting that legalizing American ownership of gold was bad for our Nation, as it would stimulate people to invest in a metal that is non-productive and ships our wealth to South Africa and the Soviet Union.  Although, both agreed, Cranston said that it should create a few hundred jobs in the gold mining areas of California and Simon suggested that it was a "freedom" that Americans should have.

Good luck....

michael z

=====

Jason,
Your response is very, very good and well appreciated.
It was my error in "thinking" that someone who would write such nonsense would be as open to discussion as you may be.
Thus, here goes:
 
REGARDING:  The most common myth or misperception in the gold market today goes something like this:
"Since inflation rates are low, then there's no reason for gold to go up very much."
This misunderstanding is expressed in many different ways, such as:
"Since the Consumer Price Index shows only 4% inflation, then gold should go up by no more than about 4% per year."
RESPONSE:  The CPI is around 1.5%, not even close to 4%.

Jason Explains:  First, the CPI is a liar index, and does not count food, energy, or housing. 
http://www.usatoday.com/money/economy/inflation/2007-06-13-inflation-usat_N.htm
Second, my statement is an example statement, and the main point is that the entire statement is not valid, whether CPI were 1.5%, or 4%, which is not relevant.

REGARDING:  "When interest rates begin to rise, the more attractive rates will pull money out of gold and back into bonds."
RESPONSE:   That is true.  Obviously, the higher returns will attract a portion of funds from all other forms of investment.  Further, the carrying costs of holding gold will be greater.

Jason Explains:  That is true only on a gold standard.  If paper bonds pay 5%, and if gold prices are flat, clearly, gold bonds start to become more attractive to many gold holders than gold itself.  But if gold is going up 20-30% per year, or even up to 50% per year, why would gold holders sell gold to get 5%? 
 
REGARDING:  All of these statements are not true because they are only vaid when the world is on a fully backed gold standard.
RESPONSE:  What do you mean, "when the world is on a fully backed gold standard"?  LOL

Jason Explains:  Technically, the world has never had a fully backed gold standard, but it came close for over 100 years, up until 1914, people could convert paper dollars into gold at the rate of about $20/oz. in the USA, and in many parts of the civilized world.
 
REGARDING:  Instead, paper money is highly leveraged to the underlying gold.
RESPONSE:  What does that mean??  What is your "concept" of "paper money"?

Jason Explains:  Paper money is anything that is not physical gold or silver.  Paper money, in a broad view, includes all electronic deposits, wire transfers, bank debts to customers in checking and savings accounts, short term bonds, etc.
 
REGARDING:  So much so that, only in theory could the gold be used to back up paper money, and only as a last resort if paper money began to die through rejection by the people, which leads to hyperinflation.
RESPONSE:  Throwing words together without meaning is not worth too much.  Please explain your rhetoric.

Jason Explains:  I cannot explain everything in one sentence.  I try.  Explanations continue with the math below that shows the relative amounts of paper money and underlying gold.  To explain a bit further:  If the US tried to save paper money from destruction by people who wanted only gold, the goverment could offer gold at a price that would fully back all the paper money.  That price is $81,000/oz.  Clearly, at that offered price, nobody would buy it, since you can get gold from us at about $1450/oz.  The point is that such an offer at $81,000 would be valid and sold, and could back up all the paper money, and there would be no reason for gold to go higher than that, unless the government continued insolvent spending practices that led to the inflation in the first place.
 
REGARDING:  There is about $15 trillion in the US banking system, and only about $0.35 trillion worth of gold to back it up, if the gold even exists, and has not been sold or leased into the market to try to manipulate the market and contain gold's price rise in dollars.
RESPONSE:  Do you have any idea of the intrinsic value of gold.  The "price" of gold may be higher or lower than its intrinsic value.
Further, gold does not back the wealth in the U.S.

Jason Explains:  Of course I have an idea of the intrinsic value of gold, that's the main point I'm making, as it should be much higher than it is today.  Yes, indeed, the price of anything in the market may be higher or lower than the perceived intrinsic value of the item, which is why people trade based on those opinions.  I understand that gold does not back the wealth of the US, as wealth is in many forms; peace, children, roads, houses, intelligence, health, friendships, etc.  But US gold can back US paper money, an US paper money can, and ultimately will, flow into real money when trust in that paper money is lost.
 
REGARDING:  (261 million oz. of "official" U.S. gold x $1350/oz. = $0.35 trillion)  This is gold leveraged 42 to 1.  This implies that gold could rise 42 times.  That's 42 x $1350 = $56,700/oz.
RESPONSE:  Whereas I don't mean to be rude, but do you realize that the incremental cost to produce an ounce of gold is around $350??  Thus, you feel that the "intrinsic" value of gold is about 160 times its COST to produce??????  Please, please, get some perspective and rational "thinking".

Jason Explains:  I don't mean to be rude either, but I think your numbers are wrong, as I've studied the mining industry for many years.  What do you mean by "incremental cost" to produce an oz. of gold?  Do you realize that prices are made on the margin?  That means that there is some gold produced today that costs more than $1300 to produce, since not all gold miners always make money, some lose money and destroy capital for their shareholders.  That implies that the world cannot produce more gold at $350/oz. incrementally, and explains why world annual gold production is declining, and has been declining for years now.

In fact, many professionals have argued that it costs far more than $1000/oz., on average, to produce gold, because most costs are not included in "cash costs" that the miners claim in their annual reports.  They do not include the capital costs to build the mines, which can run as high as $5 billion or more.  They do not include exploration costs, acquisition costs, development costs, administration costs, promotion costs, share listing costs, litigation costs, environmental impact report costs, mine reclamation costs, etc.  All of those costs add up to far more than the "operating cash costs". 

Furthermore, your reasoning is flawed.  If you mean to imply that things should cost no more than production cost, then you are making my case for me that paper money is fraud.  According to your theory of value, a $100 bill should be worth no more than the 4 cents that it takes to print one up.  That's 2500 times more than it's COST to produce, but you don't seem to have a problem with that, but you have a problem with gold being valued 80 times more than it's cost to produce?  How is it that your thinking an example of perspective and rational thinking, but somehow, mine is not? 
 
REGARDING:  If you count all the unfunded liabilities of the US government, the leverage is hundreds to one.
So, to sum up, the popular myth correctly assumes that inflation will pour into gold, and on a one to one basis.  But it incorrectly assumes that paper money is fully backed by gold, but it's not.
RESPONSE:  Who has "assumed" that our currency is backed by gold?  Do you understand the concept of "currency"?

Jason Explains:  All pundits who assume that gold prices should gain no more in an annual percentage, no more than the current inflation rate, are making the underlying assumption that all of our currency is 100% backed by gold, because that's the only situation in which that kind of analysis would be valid.  But nobody actually believes that today, which is why their analysis is wrong.  Yes, I understand the concept of currency that's when a thing is used as a current medium of exchange.  Money is also a store of value, and a unit of account, and a source of anonymous wealth, and many other things.
 
REGARDING:  And the myth also fails to account for all the prior inflation of previous years, which will also pour into gold and silver.
Here's a bit more math that more clearly shows why the myth is wrong.
The US government's budget now exceeds $3.5 trillion, but only collects $2 trillion, and thus, is printing/creating/borrowing $1.5 trillion of new money to pay the bills.  With M3 at about $15 trillion, the money creation inflation may be said to be about 10%.
This is the true inflation, the money creation, and this is only in the US; but the rest of the world is inflating, too.  The US is regarded as about 1/4th to 1/5th of the world economy, and the rest of the world's paper money systems are not in much better shape, and often worse, so the world's paper money inflation rate can be roughly estimated at 4-5 times bigger, or perhaps $6 trillion per year.
The world annual production of gold is about 2300 tonnes, which, at 32,151oz./tonne, is 74 million ounces.  At $1350/oz., that's $100 billion dollars worth of new annual world gold production.
See the problem?  How can $6 trillion ($6000 billion) of new money annually, buy only $100 billion of new gold annually, without a massive increase in the price of gold?
Gold prices would have to rise about 60 times, just to balance out the new money creation of the world.  That implies a gold price of $81,000.
RESPONSE:  I hate saying this, but, "are you nuts?"

Jason Explains.  No.  Again, insults become valid if they are accompanied by reason.  I fail to see much of it in your responses so far.
 
REGARDING:  The US budget deficit alone, the $1500 billion, is 15 times larger than the $100 billion world annual gold production.
Thus, when the pile of paper money is already so very large, then small increases in the very large pile are relatively huge to the underlying tiny gold market.
Remember there is a bit of truth about the myth, and it's that all paper money creation will flow into gold on a 1 to 1 basis, as it eventually must.  Remember, all paper money will flow into real money, since all paper money represents a potential claim on real money, and can potentially be spent on gold, and this has implications far beyond what most analysts are capable of thinking about, or writing about.
RESPONSE:  I, truly, feel empathy for you (that is, unless you realize you are spewing nonsense) and those who read your convolutions.

Jason Explains:  Again, I see no reason in your comments.
 
REGARDING:  Therefore, there is no reason to think that gold is in a bubble.  Did gold increase 15 times this year from $1000 to $15,000?  No?  Then gold has not yet "kept pace" with the inflation.
RESPONSE:  What?????????   LOL

Jason Explains:  Again, I see no reason in your comments.

REGARDING:  Paper money is the bubble, it's the bubble that created the housing bubble, and paper money will remain a bubble for years to come, until it all comes crashing down, and flows into gold.
RESPONSE:  Jason, paper money wasn't the cause of the RE bubble.  Mr. Alan Greenspan and the Fed stimulated the RE bubble by, precipitously, reducing interest rates in 2001.  The Fed created "funny money", which was used to bid up the prices of RE and enabled the economy to grow.

Jason Explains:  Ah, you are technically correct.  I'm painting the picture here with broad strokes when I say that paper money is the cause, as clearly, it's the easy money from lending that is more technically correct cause.  But that kind of easy lending only takes place when there is paper money, it does not take place if the lenders had to part with physical gold.  So, in a greater sense, I'm more techically correct. 
 
REGARDING:  The thing to remember about gold is that it is like a magnet that attracts and devours fake money.  It will draw into itself all the fake money in the entire world until the paper money fraud is extinguished from the system, and it will do this naturally, all on its own.
RESPONSE:  It is quite conceivable that there is, absolutely, no hope for you. You are so confused, it will take a good deal of work to bring you back into the realm of reality.

Jason Explains:  If I'm confusesd, you don't give me any reasons why.  I'm merely providing a visual example of how gold can act, whether you appreciate the example of gold as a magnet for paper money, well, that's up to your ability to perceive the reality of the historical failures of paper money.
 
REGARDING:  The reason is that any fool can see the truth of the situation today, and more and more people are buying gold.  As more and more people buy gold, the gold price will continue to rise.  As more and more people see gold prices rise, even the most foolish of fools will naturally and simply follow the trend, and buy gold for the obvious gains they are seeing.
RESPONSE:  WOW!!! You do understand!!  When the "powers" believe that most of the "retail" buyers are in, the slide will commence!
All will be saying, "why didn't we see this bubble, and why didn't someone do something to mitigate it?"

Jason Explains:  Gold will be in a bubble when you can get a government backed loan, based on unverified income reports, to buy options on gold to help participate in the American Dream of leveraged gold ownership.  Gold will be in a bubble when the government buys more than all the gold produced in the USA at the top of the market, and makes coins with all of it, and issues those coins at a value that is 5-10 times higher than the real cost to buy that gold.  Gold will be in a bubble when the government will buy 10 oz. of "raw" .999 fine gold from a refiner with one "official" gold coin that contains only 1 oz. of gold.  Gold will be in a bubble when the government fails to print value on paper, and resorts to printing value on gold.  It's called Seigniorage.  Look it up.  http://en.wikipedia.org/wiki/Seigniorage
 
REGARDING:  This is why the "powers that be" are manipulating the gold prices, trying to keep them down, or contain the rise, with a vengeance.
RESPONSE:  Jason, you are 100% backwards in your "thinking" or lack thereof.  Prices are being manipulated higher.  Think about how they got crude to rise to $147 and then dropped it to under $40 in a very, very short period.

Jason Explains:  I agree that oil is overvalued, especially compared to gold, even at $40/barrel, but oil is now $80/barrel.  At $40, the world produces $1.2 trillion of oil per year, and at $1350/oz., the world produces $100 billion of gold.  To me, that shows the intrinsic value of gold is very undervalued, and that these prices are only sustainable as long as the world, particularly the oil producers, continue to trust paper money.

See http://silverstockreport.com/2009/oil-not-money.html
 
Jason, I have attempted to offer rational responses to your "interesting" commentary.  Please read with some form of objectivity.

Jason Retorts:  I see you have attempted.  I see you have failed.  Thank you for the attempt.  I think it shows who is objective and rational very well.
 
In late 1974, I wrote to William Simon, the then Secretary of the Treasury, and to Alan Cranston, one of California's Senators, suggesting that legalizing American ownership of gold was bad for our Nation, as it would stimulate people to invest in a metal that is non-productive and ships our wealth to South Africa and the Soviet Union.  Although, both agreed, Cranston said that it should create a few hundred jobs in the gold mining areas of California and Simon suggested that it was a "freedom" that Americans should have.

Jason Explains:  I understand that many people do not understand the productivity of gold, nor do they respect or understand the productivity of free market prices that are not the result of government distortions.  Please feel free to educate yourself as to why gold is so productive, and not a "dead" asset.  In sum, gold keeps men honest.  Honesty is good.  If you think honesty is bad, I'm sorry, I cannot help you.   

http://silverstockreport.com/2009/gold-is-good.html
 
Good luck....
 
michael z

=====

Other readers instantly appreciated my letter.

 
=====  My responses are below, in bold italics. =====

Jason,
 
Thank you for addressing a few of the major objections to the metals bull market in your most recent report. I think though that there are three OTHER objections to the metal bull market that you need to respond to- because I am hearing these objections more and more all the time. The first argument goes somthing like this:
 
"The indebtedness of the people and the very high unemployment PREVENT the metals bull market from growing much larger and or at an increased rate."

Jason Responds:  50% of the people are always in debt, or have no money.  But it only would take 1% of the wealth of paper money to flow into silver in a year in order for silver prices to exceed about $300/oz.  Remember, the other 50% have plenty of wealth, on average, it's about $150,000!  And the top 1% of wealth holders have over 25% of the wealth of the USA.

As for the unemployed, they are maybe only 20% of the population.  The other 80% are employed, or are investors, living off of savings or investments.  There are still probably about 3 million millionaires in the USA, and perhaps over 150,000 people who have over $30 million net worth.  Poor people almost never drive markets, except that they recently drove up the housing market as lenders went crazy lending to people who had nothing.
 
That is to say that as the US faces stagflation and deflation in some business sectors the investment capital that can go into the metals should hit a wall and fall off. This also can be seen as a possible catalyst for a pull back in what skeptics see as a metals bubble.

Jason Responds.  Yes, investment capital can "hit a wall".  But not when only 2% of 1% of paper money is flowing into silver, it's not yet even taken off yet! 
 
The second argument as to what the metals are possible in a bubble usually goes like this:
 
The US government is in such high debt and trade deficit that new spending will have to decrease greatly in the future if not come to a dead stop all together. This in theory would reduce inflation and or bring about real deflation. In this case it is the inflated indebtedness of the nation that actually starts a deflationary period through higher taxes less spending etc- which could bring skepticism to the metals and burst their upward trend. This theory in the extreme says that the spending game comes to an end and we hit a depressionary scenario.

Jason Responds.  So far, deflation only takes place in the USA when there are bank failures, and only when the banks are not bailed out.  But bail outs are inflationary.  And why do they bail?  Because if they do not, then people will not trust banks, and people will turn to the only asset that does not depend on bailouts, which is gold and silver.  They bail out to prevent people from buying gold! 

Furthermore, all government activity is, by nature, non free market, and thus, by nature, not rational, and thus, by nature, a form of theft.  As theft is reduced, the economy will flourish.  The economy does not need more theft to prosper, that's totally backwards.
 
The last objection I am hearing all the time is that metals prices actually DO NOT directly corrolate with the rate of inflation.
 
The evidence that skeptics use to support this theory is that metals prices through the 80s and 90s went down in value relative to the Dow despite increased inflation- thus the reason for this was that interest rates were at an all tme low (like they are now) and the budget spending was being ballanced with also a higher tax rate- before the Bush tax cuts. This theory seems in imply from historical data that the metals prices are only a hedge against a fearful un predictible market. Which is perhaps why they piked in the early 80s and not again through the 2000s (albiet this time the bull market has been more gradual and consistent). In this scenario the devil's advocate might say that inflation can be a sign of increased wealth and quality of life in that it reflects economic growth- since (as the argument goes) inflation through the 90s kept the economy growing strong, made many millionaires, increased the quality of life for most people, and kept the price of metals low.

Jason Responds.  It seems people have forgotten the history of the 1980's.  In 1980, several things changed to stop the bull market in gold.  Income taxes were reduced from about 77% under Carter to about 35% under Reagan.  That made business attractive again, so capital did not need to remain "on strike" by being parked in gold.  Second, interest rates went to near 20%, and over 20% for private loans.  Third, you could buy gold on leverage with futures contracts which also helped to divert demand away from physical.  Higher taxes will not stop the bull market in gold, they will accelerate it.  Higher interest rates may help to stop gold, but interest rates need to go higher than gold is going up, or higher than about 30% today!
 
I hear these objections being raised all the time. I take them all into consideration but I am not convinced by any of them. Let me know what you think and if you can adress them- as they represent questions on the minds of many interested investors.
 
Truly,
 
Ed

=====

Hey Jason,

The world annual production of gold is about 2300 tonnes, which, at 32,151oz./tonne, is 74 million ounces.  At $1350/oz., that's $100 billion dollars worth of new annual world gold production.

See the problem?  How can $6 trillion ($6000 billion) of new money annually, buy only $100 billion of new gold annually, without a massive increase in the price of gold?

Gold prices would have to rise about 60 times, just to balance out the new money creation of the world.  That implies a gold price of $81,000.

    Writings similar to the above;  = my respect for you - - - By no stretch of the imagination am I saying I have no respect for the David Morgans or Ted Butlers (Certainly I respect all the work / research they contribute to making people aware of Au. /Ag. potential) however, I have on so many occasions read your articles and after reading many of your articles I'll say to myself: This guy has Ba11$ !!!! He is not afraid to write; "That implies a gold price of $81,000". I get so tired of hearing the likes of Tom Keene so arrogantly and in a matter of fact tone say, "Just as 1980 taught us, all good things come to an end which is exactly what will happen with a repeat of gold and silver (1980) - - - People like Keene eat their words every time there is a small correction/manipulation by quickly and incorrectly crying it's over for Au./Ag. which has always turned on them with a marginal upside tick - - - I guess there is no shame in the lives of Wall Street's die hards - - -   You never seem to be afraid to point out the obvious and I hope you never quit based on worry of placing your name on the line. NUMBERS don't lie - - - Your research of the market brings out these numbers. NUMBERS of the gov. have proved themselves "TWEAKED"  so let those who choose to see, see !!! The gov. has succeeded in creating an illusion that many Americans feel comfortable with  (so comfortable that many would prefer to buy paper Au./Ag. as opposed to physical Au./Ag.) after all, the gov. won't let anything bad happen with their gold / silver contracts purchased....(go figure). Many cannot understand life without frn's. Keep showing them. Never quit


 The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” – George Bernard Shaw

=====

I strongly advise you to take possession of real gold and silver, at anywhere near today's price, while you still can.  The fundamentals indicate rising prices for decades to come.

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JH MINT & Coin Shop, Grass Valley, CA -- minimum $2000 order for free shipping, USA shipping only.
Kerri: (530) 273-8822
kerri.jhmint@yahoo.com 
(530) 273-8175
www.jhmint.com

See also my Mom's Silver Shop in Sacramento, CA
www.momssilvershop.com
3510 Auburn Blvd., #12
Sacramento, CA 95821
(916) 481 5656
(Mom will ship with no minimum order size, and overseas, and take credit cards and paypal.)

Sincerely,


Jason Hommel
In case you miss an email, check the archives (scroll down) at  www.silverstockreport.com  
For the Biblical case for the benefits of using honest money, see  www.bibleprophesy.org