Click the play button above to listen to the interview.

Greg Canavan discusses:

• How the global financial system is built on debt
• Why the US and effectively the world came off the gold standard
• Why gold has all of the characteristics of sound money
• The key criteria in assessing gold stocks
• How China’s slowdown will effect Australia

Click the play button above to listen to the interview, or you can read the transcript below

D: Hi this is David Duffield from Ultimate Money and I have a very interesting guest on the line today. Richard Carne is the founder and managing editor of the emerging trends report. Thanks for joining me Richard.

R: I’m glad to be here.

D: Great to have you. Firstly can you tell my listeners what it was about Australia that attracted you to come here a couple of years ago and research our resource industry?

R: Uh sure. The Emerging Trends Report writes about long term investment trends. We started publication in 2004 and since that time we have written about 9 trends. One of the primary trends that we are writing about is the non-stop printing of money by central banks and our contention is if you want to save money in a negative real interest rate environment, the only way you can really do that is with physical metal because any other vehicle that you purchase whether it’s a treasury bond or even a tip is actually losing value through currency depreciation and loss of purchasing power faster than whatever income you are earning from that. As well as your getting a tax on that privilege of being defrauded. So we decided in 2006 I think it was… the later part of 2006 that history showed that in the aftermath of every global economic crisis in history there have been incidents of resources nationally going through the roof. And we limited…started limiting our investment horizon to North America and Australia. So we made that decision in 2006. In 2007…actually 2005, 2006 we did quite a bit of research on specialty metals on a contract basis for B.S Ingleheart and a number of other people and one of the things that came to light was that specialty metals was a market that nobody understands and we wrote a report on that we couldn’t publish until January 2008 because we kind of blocked by non-disclosure agreements and confidentially agreements. But in the course of our research it came to our attention that of the… what is… a list now grown to 49 specialty metals, 40 of them are or will be produced in Australia. So with our fondness of gold and silver as a defensive saving money approach as well as an investment…speculative investment we could use both stocks as a derivative of the metal itself and these specialty metal things. When President Obama was elected we decided that we would let the dust settle down in the United States and we would come down here and look at these projects. We have been doing that since November 2009.

D: Ok. And could you just explain to everyone why all the money printing … excessive money printing in the United States effects Australia and probably all the other currencies.

R: Well the… somewhat controversially we believe that all currencies on the planet today are derivatives of the US dollar. The reason for this is that the global reserve…you know the global reserve currency. Every country has significant motivation to make sure that the dollar does not fail. Now this is the exorbitant privilege, that’s what the French call it, the exorbitant privilege that the US has had since 1971 since Nixon closed the gold window and ended convertibility to the dollar from a….as far as I’m concerned from a moral and ethical point of view the behavior of the Federal Reserve Bank is utterly reprehensible but it’s important to remember that every currency on the planet today, even the Australian dollar, fiat currency and the simple truth history says that of the more that 2000 fiat currencies that have failed in the last few thousand years they always fail from the periphery towards the center meaning the reserve currency at the time is not the first to fail despite the obvious implications that are going to be the most abusive its actually their frontier economies and there currencies that fail first on the way to the ultimate failure of the reserve currency. And it doesn’t matter whether you back to the guilder, the peso, the pound, the whatever that has been historically consistent through out. So while a certain amount of people are on the right track calling for the demise of the dollar and we agree 100% just like every fiat currency in history the US dollar…indeed all fiat currency will fail it only a matter of time.

D: Ok. I was going to say is it fair to say that what we are going through or what you expect we will be going through isn’t new, but what is new is that it’s the first time its going to happen on a global scale ?

R:Yes that a very fair assessment.  Anyone who looks at the…anyone who looks at the federal reserve system of the United States has probably at some point realized that the system is broken and that its gonna fail. However at least in our case and numerous other cases we can talk about I can not tell you how much money we have lost over the years betting that this stuff is going to fail because of this policy or that policy. They are just brilliant at keeping the balls in the air. And on a global basis there are just literally trillions of trillions of dollars out there that people don’t want to see become worthless. And so…yea… I don’t mean to sound like Mark Faber and be all gloom or anything it… the simple truth is that we are in the end game of another bout of fiat currency abuse. The debts that have been run up are consistent which are consistent historically by the way you know if you have a gold standard. One of the things about a gold standard that is good for an economy it limits how much money people can spend specially politicians. I’m not saying we need to return to an old standard I think some type of modified gold standard is probably in the works I’m sure certain people are thinking about it. But we have the better part of 7billion people on the planet and a lot of economic activity that wasn’t there even 50 years ago I don’t know whether or not it feasible. I’m not enough of an economist to be able to say yes we can go to that standard. All I know is the currency system we are currently operation on is utterly broken and has been utterly broken for at least 20 years. And the Federal Reserve and other central bank systems are simply propping it up. And in the course of propping it up they have made the situation just one step after another worse and worse and worse. Now I like to remind readers that…as I said were students of history and I like to remind people that since we have gone of the gold…since the US has gone off the gold standard this is not the first end of the world banking crisis the US has had. The first was only for 400 million dollars in the 70’s and the second one was I think 800 million dollars right at the end of the 70s and then continental. And then I think continental Illinois was 1.2 billion dollars and nobody eve care about that any more. We had the saving and loan crisis there was 1 and a half trillion dollars all up. Ever crisis gets bigger because the powers that be the monitoring authorities are not solving any problems. There only answer is to further increase the supply of money in this case in the form of debt and kick the can down the road. What is happening as a lot of people have pointed out we are just running out of road. And the very interesting thing to me is in the course of kicking this can down the road the politicians should really be doubly damned for… in the case of the United States for example…they should be doubly damned for how little of this money they created has gone to provide the infrastructure and services and preparedness that the American economy warrants and is capable of utilizing to its advantage to work its way out of this problem. Instead every social welfare program you can think of has been funded and has literally run muck. We’ve go Mr. Obama has up to it think 30 or 40 of these Zars who are unelected, unvested by congress running around with these massive multi-billion dollar budgets doing all kinds of thins which I don’t really think were designed to be done on presidential order. And these are all just signs of the time which we call ad global pandemic of corruption. And that is also consistent towards the end of a fiat currency reserve. It’s like rat deserting a sinking ship. Everybody and there brother is trying to get a much as they can as fast as they can and get the hell out before everything blow up on them. And this is a real big problem right now.

D: And the general public’s pretty much unaware of what’s going on. In terms of gold and silver you have described it as the ‘ultimate anti-fiat currency’ which is a very fair description. Where do you think we are at in the cycle of gold and silver being recognized sound money again? Not for the first time but again. I know time frame is impossible to predict there are just too many variables. How do you expect it to play out lets say in the next 12-24 months

R:I think a better way to think of it and the metaphor that we used for what’s going on in golf and silver mine is a land mine. The metaphor that we use is the lane mine. The old and silver mine right now for central banks are literally land mines. It doesn’t matter whether you subscribe to the notion of central banks sort of corrupting the market or whether it’s J.P Morgan. The gold and silver markets are the only commodity markets on the planet that are interfered with to this extent anywhere. And we liken it to a gold mine because the explosion in a land mine…we liken it to a land mine because the explosion in gold and silver prices will happen not when the central bank are stepping on the price its when they step off the price and the land mine goes off that the explosion in price will, However its also very important to point out, we are very quick to point out.. You have to be careful what you are wishing for. Because if we get 5 or 10,000 dollar we are talking about $20 liters of milk and $40 per liter of gasoline. I mean the increase in the price of gold does nothing more than reflect the decrease in the purchasing power of your currency. If there is one thing we try to bang into people’s head, you’re not really investing in bullion to make money you are trying to preserve the money you have saved over time so we liken the purchase of bullion like a financial snap shot of what the fold price was that day you bought it. Now if you keep your receipt and look at it in 10 years I guarantee you the price will be much higher than on the day you bought it.

D: So you mentioned gold and physical silver a way of protecting your wealth but also a lot of your work involves looking resource companies. How do you measure and calculate the risk involved with those resource companies and all the stuff they have to deal with whether its government regulation or possible taxes in the future all that sovereign risks.

R: Well I as I said risk not withstanding we have forsaken tolerating any sovereign risk whatsoever we only invest from Mexico north, North America and in Australia  We don’t even invest in Europe anymore. And again this is just a choice that we are making because the horrible thing about mines is that that they are very easy targets for people with agendas and people intent on enriching themselves for there political agenda point at these resources when they were in government and they had the money and choose not to take the chance to develop these mines. They let somebody else develop them and they suddenly are claiming other people’s resources and the benefits of that should go to your country and blah blah blah. If that were true that’s a very specious rhetoric because if that were true why weren’t these governments out developing these mines themselves. So the whole sovereign risk thing we think is going to continue to worsen and we have been saying this for probably 5 years now and I don’t we are anywhere near a crest of the wave here we are very very concerned about what’s going on in Africa especially the southern part as you know Mali just blew up and who knows what going to come of that but the policies in Neiva South Africa are very worrisome trends developing. And now even with Australia’s neighbor Indonesia there’s some worrying things happening. I just don’t see… if you can’t sleep …there are a lot of reasons to be worried about mining investments. It’s a very very difficult business. It’s very very difficult to find, develop and bring a mining production properly. And these guys work very very hard at it. And they have to go where the ore is but in some cases it doesn’t matter how good they are some leftist government just wants to step in and take the resource. So as far as Australia companies are concerned… Australia has the luxury as it were as being the most geologically stable in terms tectonics…continent of the planet. This has allowed a tremendous amount of natural weathering of these millions and millions of years and that give a lot of Australian resource deposits an incredible le up in terms of global competitions. That’s one of the reasons you can afford the high labor and high development costs and apex cost. So when we go and look at thing were looking at management first and foremost and were also looking tat the resource itself. Were also looking at how much upside there is on the expiration there. We like a lot of upside of the expiration. We also like the idea to take a position and be very patient with it. It’s not very unusual for some of our recommendations to go down 40 or even 50% before they run around and come back up. We would not maintain those positions if did not have the confidence from first hand dealings with the management as well as going out and spending time on sight getting to know people out there. If we were not confident we would not recommend or hold on to these positions. We buy them and hold on to them. Now because the market is so squirrely and we do high frequency trading we’re now starting to infiltrate the Australian market. We certainly broached the subject with our sponsors and our subscribers and it may not be a bad idea to develop yourself a position in a company a core position and then trade around it because there are so many vaguer and so much instability in the market right now that anything you can do to lower your cost bases is utterly to your advantage. So to finish this line of thought we have talked to 220 companies now in the last 2 years and we’ve done about 80 site visits and we have only written up about 20 companies, And with the exception of one company that blew up on…that had…well that’s a whole other story. With one exception all the companies we bought we would have no question recommending right now regardless of how they performed. Some are up 4, 5, 800% some are down 50, 60% because as far as the trend is concerned the precious and specialty metals…the trend is in tact. Period.

D: Ok. Australia has benefited a lot obviously from the boom in China, but there are plenty of bears around at the moment on the future of exactly what’s happening in China. Will it be a soft landing or something a bit worse? What are you expecting? What are your thoughts there?

R: Uhm my thoughts on China are that I know enough to know I’m ignorant about it consequently I don’t base any of my investment decisions based on what China tells the world. If I don’t trust American statistics and the government, which is supposedly transparent and democratic I’m certainly not going to give any credence to a communist regime. At the end of the day whether or not  the bricks…oh now they’ve added South Africa to it so know its Brazil, Russia, India, China and South Africa. Whether or not the bricks are indeed slowing or not isn’t really a critical concern to me because coming up behind the bricks are a whole another generation of countries I think they are called the N-11and they are countries like Indonesia and Turkey and Egypt, Nigeria and Pakistan and Bangladesh and South Vietnam, I mean Vietnam and South Korea and Mexico. There’s 11 of them all together. The Philippines that’s 10… I’m missing one but I’ve forgot which one, which have significant population as well as a rapidly growing economy and there drive for infrastructures phenomenal and there are just not getting as much press as you know the bricks. They still want the same thing everybody else does. These are developing economies with a growing middle class And by in large they are more “debt free” or should I ay less “debt burdened” than our… most of the developed countries in the word so they are in a better position to push and continue to boom going forward than for example Europe is.

D: Very interesting.  Alright thanks for your time today. If you get a chance take a look at your site AmericanTrendsReport.com. Thanks again Richard.

R: Thank you.

Click the play button above to listen to the interview with Andy Hoffman of Miles Franklin, or you can read the transcript below as we discuss:

• The global economic situation explained in layman’s terms
• The important difference between currency and money
• How gold and silver are not investments, but are money
• Why unbacked currency systems are doomed to fail
• Real US debt is much, much greater than what is officially published
• The Federal Reserve is the root cause of the problems we’re facing today
• Why governments and central banks want their currencies to fall
• The Euro must collapse at some point and that’s likely to be quite soon
• China will suffer mass inflation as long as the yuan is pegged to the US dollar.
• Gold and silver are money and have been the best performing asset class since 2012.
• Andy’s $20,000 price target for gold and $1300 for silver

David: Hi this is David Duffield from ultimatemoney.com and it’s great to have a special guest on the line today. ‘Ranting’ Andy Hoffman writes a blog and newsletter for Miles Franklin and he’s very passionate and very opinionated, and most of all very knowledgeable about what’s going on in the precious metals market. Thanks for joining us today Andy.

Andy:  Thanks for having me and I hope you mean that all in a positive way.

David: People may soon find out why you’re called ‘Ranting’ Andy, but we’ll get right into it. What I wanted to start with was basically if you have a couple of minutes where you’ve probably met someone for the first time and you’re at a social gathering, and they ask what you do and you explain that you’re involved with gold and silver. How do you get your message across about the global economic situation and the role gold and silver plays in a pretty short space of time and in terms they can understand? How do you explain it?

Andy:  It’s difficult because as you say we’ve been brainwashed not as a nation, but as world, for the past forty years that currency is money. There’s a big difference between currency and money and in the United States we’re told that money is the dollar as you are, and the Euro in Europe, but the problem is there’s a definition of money, which all these fiat currencies don’t meet. Primarily that it’s not a good store of value and the US dollar has lost 98% of its value since the Federal Reserve came into being. I’m sure the numbers for the Australian bank and for the all the other central banks in the world are the same. What I need to do when I speak to people is make them start to realise that there’s a difference between money and currency. The oldest and only true real money that’s ever survived in history has been physical gold and silver. Once you get people to start to realise that they are not investments, but money, then you have the basis of further discussions.

David: How do you explain the problems what we’re in at the moment? If you can get the message across that gold and silver are in fact money, how do you explain why that’s important and why they shouldn’t just go on about their normal life?

Andy:  Well the problem that we have today is too much debt. In a gold standard that kind of debt wouldn’t be allowed to build up because in a gold standard you can only print as much money as you have gold, and gold hasn’t increased in production in ten years. The problem is central banks around the world are free to print as much money as they want and as a result a) you have inflation, which reduces the standard of living for everybody, and b) you have debt because when they’re printing money they call the dollar a Federal Reserve note for a reason. It is simply backed by debt and when you have unconstrained fiat monetary systems it defines a Ponzi scheme and I don’t mean that lightly because people get the term Ponzi scheme and they think that’s just some generic term for something bad. A Ponzi scheme is something that builds on itself like a pyramid and the only way you can keep a Ponzi scheme going is by making that pyramid bigger and also preventing confidence in the scheme from failing. That’s the problem we have right now with fiat currency systems that can only get bigger or die, and that’s why they say inflate or die, why they say QE to infinity because that’s what we’re going through right now.

David: Okay so can you just explain fiat currency to my listeners?

Andy:  Sure. Fiat simply means by decree so the point is the fact that the dollar whether it’s US dollar, Australian dollar or otherwise is ‘money’ simply because the government says it’s money. It’s not backed by anything and if you want one word that defines fiat is it’s unbacked because there are absolutely utterly no assets behind any of the dollars that are minted; they are printed out of thin air. Whereas gold for instance has its own intrinsic value so even if you go off the gold standard as we did in the United States in 1971, gold still trades at an intrinsic value. If we stopped using dollars today they would be worthless and they’re going to be worthless in due time. They’ve already like I said lost 98% of the value they’ve had and they continue to lose inflation every year and because they’re backed by nothing they will do what every single fiat currency in history has done, which is to collapse to zero. That includes, and sorry you may have an Australian-centric audience, but in the United States alone we’ve already lost two currencies to hyperinflation and almost a third currency, which was created by Abe Lincoln of all people. It’s going to happen, it’s happening as we speak, and it’s just a matter of how long the powers can be can keep the ultimate inevitable scenario from occurring.

David: So with fiat currency and the fact that governments can just digitally or run the printing presses, I suppose the problem is that it’s unlimited in supply and anything that’s unlimited like that has to lose its value, and it’s just a matter of how quickly that happens?

Andy:  Right and that again comes back to the definition of money, which I put front and centre in my presentation. There are really four things: it has to be fungible, which means every dollar has to be the same like if you go into a store with a dollar it’s going to be the same dollar as someone else who goes in. It has to be a unit of exchange that you can actually go buy things with it. It has to be a store of value and actually whatever the fourth thing you just said was – I’ve lost my train of thought.

David: I mentioned it was unlimited in supply.

Andy:  Right! You have to know how much is out there. Not only is it unlimited in supply and the government can print as much as it wants, but at the same time you don’t even know how much is out there because they lie to you about what’s out there. Just last year we found out that the Fed had lent out 16 trillion dollars during the global crisis in 2008 without telling anyone. Not only can they print as much as they want they don’t even tell you so you can’t even gauge how much money is out there versus the goods they’re chasing.

David: So just to get back to basics, we’ve already run through a few words or a few terms and you can just tell us briefly what you associate with that word or how you’d explain it in straightforward layman terms. Firstly, just Wall Street itself.

Andy:  Wall Street historically its job is to raise capital for companies that need it. It’s always kind of been a mediator between the investing public and the companies. I was an analyst on Wall Street for ten years, buy side and sell side, but that business died when the economy rolled over in 2000 when we had the tech wreck. As a result, Wall Street has had to find different means to make profit and unfortunately those means for the most part are illegal or unsavoury. Right now most of their profits have been generated from – they get this zero interest rate money from the Federal Reserve and they have been able to buy treasury bonds with it and make a spread and that’s what they call a carry trade. They’re not doing anything and they’re basically being given free profits and that of course high frequency trading’s taking over Wall Street where they have these computers, which front run orders on the New York Stock Exchange for instance, and they are now three quarters of all the trade in New York Stock Exchange if you could believe it. If you take them out we’re actually at volumes that are back to 15 or 20 years ago so between the carry trade and the high frequency trading, which is unsavoury at the least and illegal at the worst, and of course the insider trading because some of these banks such as Goldman Sachs and JP Morgan have half of their board seats within government posts and government organisations. That’s what they’re doing and Wall Street is not what it used to be.

David: United States debt?

Andy:  Right well the United States debt as you know back in August of last year, the S&P, Standard & Poor’s , downgraded their credit rating from AAA to AA+, and they did so because the national debt is exploding. By the way right after that happened the President of S&P was fired and even though they said in their statements that if the US doesn’t get their stuff together immediately they’re going to downgrade it again. They’ve been extremely quiet in the last six months considering the US has added another two trillion dollars of debt since that time to the debt ceiling. The nominal debt that’s outstanding that you see all the time in the media is 15.5 trillion dollars, but that doesn’t include what they call ‘off balance sheet’ debt. Fanny Mae and Freddie Mac did some other things which I have no idea why they’re off balance sheet, but that’s another five trillion so they’re really at 20 trillion, which is a debt to GDP ratio of about the same as Greece. Of course then there’s what they call unfunded liabilities, which also doesn’t show up on the official calculations such as the money that’s ultimately going to be owed to Medicare, Medicaid, and social security, and some people calculate that number as another 100 trillion. Again, we’re at the rate that the US is now accumulating debt at the rate of 100 billion dollars per month. Right now we’re increasing debt at the parabolic stage and it’s very close to becoming hyperbolic and that will happen sometime in the next year or two.

David: Some of those numbers are so large that I’m sure people don’t even quite grasp them and they are pretty scary. Another one I’d like you to run through is The Federal Reserve if you could just explain their role.

Andy:  The Federal Reserve is the central bank of America and it’s the same basically as the Australian Reserve Bank. They are theoretically owned private, meaning theoretically they are not a government agency and they are actually by charter owned by banks such as Goldman Sachs and JP Morgan and that is a fact. It’s such a murky situation that no one truly understands how it works, but the fact is Wall Street and Washington have become one and the same because Wall Street has been for the last decade by far the largest contributor to congressional and presidential campaigns. Obama’s been fully paid by Wall Street and so has Bush, and right now it looks like Mitt Romney has most of that money. It’s really as far as I’m concerned the government agency and they came about the Federal Reserve in 1913. Even though it’s illegal, the US Constitution says only gold and silver should be legal tender, but they somehow finagled their way into creating the Federal Reserve in a Christmas Eve vote where most of the people didn’t even show up. Since that time in 1913 when they created it, it’s devalued the dollar by 98%. They are the root cause of all the problems of the world because again when the US went off the gold standard, the whole world went off the gold standard. The US dollar is the reserve currency meaning it’s the currency that most countries have their reserves in and do their transactions in. They basically created inflation for the whole world and any time the dollar gets printed or the countries have been printing their currencies as well in this competitive currency war to keep the values down so that their manufacturing businesses will not suffer.

David: Can you just expand on that for a moment because Currency Wars is obviously James Rickard’s book, but here in Australia we tend to cheer the Aussie dollar on like we’re proud we’re above parity against the US and for some reason it’s a little parochial, but when you look at the currency wars a lot of these countries want the opposite effect and they want their currencies to go down. Can you just explain that briefly for us?

Andy:  Actually the Australian and the Canadian dollar have the exact same issue where they always right up around parity and recently the Australian dollar was above parity and right now Canadian dollars are at parity, which from a nationalistic perspective is encouraging because people always feel like the US feel they’re so much superior so look at our currency. It’s completely different what goes on in newspapers as behind the corporate doors as I assure you especially in a commodity country like Australia and Canada is the same way that it’s devastating for industry when their currencies rise because their cost bases goes up and of course they report lower profits. Now the silly thing about all of this is if you have a lower Australian dollar and your companies report ‘more profits’ they’re worth less because of the inflation caused by the lower dollar, but that’s not how companies look at it. They don’t understand the true nature of economics. This currency war is more a political thing than anything else and since the businesses that are paying our bonuses in these countries want to report higher profits they don’t really care about the inflation impact. They’ll continue to competitively devalue their currencies.

David: So just to get an idea of the global picture we’ll run through say Greece in the Eurozone. What’s your take on what’s happening there?

Andy:  Well my take is that the Euro must collapse at some point and probably soon, and the collapse doesn’t necessarily mean falling to a million fragments – I mean there are countries that are either going to be kicked out or are going to voluntarily leave. I have been very vocal about how this Greek bailout would never happen and basically I’ve been right because it’s failed and Greece is at default and yes they will put some money into Greece, but basically the net of this bailout is Greece’s debt is going to go up because they’ve forgiven some debt but they’ve just given them more. They are really suffering from all fronts and they also have been the poster child of how quantitative easing or money printing does not work because they’ve at zero interest rates for close to 15 years and things at the worse that they’ve ever been.

David: What about China? Are they the miracle some people believe or do you see a hard landing coming from them?

Andy:  Well China is as they say the growth engine of the world and they’ve taken the largest percentage of manufacturing in the world, but that said they have by far the largest population up there with India. Even with all the manufacturing they still have problems feeding its people and they also have a government, which is centrally run and they’ve had a central bank that has been pegging the Chinese currency to the dollar so the same reasons we talked about before to remain competitive. As a result they bought in all the inflation from the printed dollar. What I’m saying is by pegging the Yuan to the dollar, every time the Federal Reserve prints a Dollar they’re required to print the Yuan. They’ve had worse inflation in China than anywhere else plus the government has taken a lot of that money and misallocated it into construction so that they’ve had a massive construction and housing boom, which is bursting as we speak. When I say bursting I don’t necessarily mean it’s going to be as bad as the United States is right now, but the fact is they have lots and lots of social problems and economic problems as a result of misallocation. I think that the Chinese are going to continue to be the largest economy in the world and grow in that aspect, but they’re also going to have massive inflation that will only stop when they stop pegging the Yuan to the Dollar.

David: Alright so it’s a pretty compelling case that it’s a global issue on our hands so if you can just explain the role you expect gold and silver to play in obviously the deterioration in just the overall situation and longer term as well.

Andy:  Well for the past 12 years gold and silver have been the best performing assets on earth hands down and nothing’s even close. That’s because that’s what gold and silver do; they respond to loose monetary policy and they are money. People don’t realise that living in this day and age that this is a very very brief look history where you’ve had this global fiat currency system. So basically from 1970 to 2000 there was a period where countries went off of the gold standard and thus they had very low debt and we were able to build debt without it hurting their economies. For some time it almost looked like that was a good thing, but then about ten years ago we hit the point of saturation where increasing debt first it just reduced the amount of positive impact, but now it’s actually at the point where it’s gone negative where the more debt they add the more economy goes down. I think you’re going to see an accelerating movement into physical assets as people realise that the debt is growing exponentially, and as I said earlier, fiat currencies are a Ponzi scheme, which will only make things worse and it’s going to be a global scenario. It’s been going on and it’s going to accelerate, and just think of it as going from parabolic to hyperbolic. My target for gold just based on the money printed by the Federal Reserve, just what they’ve told you, is close to $20,000 an ounce and for silver I think the gold to silver ratio had at some point returned to at least the 15 to 1 ratio, its historic average over time.

David: So it’s a scary scenario in some ways, but obviously if you’re prepared for this it’s actually an opportunity. How do people find out more about what’s going on and possibly get in touch with you?

Andy:  Well if you want to subscribe to my daily blog, actually milesfranklin.com is my company and we’re one of the biggest bullion dealers in America, just go to milesfranklin.com and you could sign up for free to get my piece, and we actually have two pieces every day. You can call me on 800-822-8080 at any time.

David: Excellent. Alright thanks very much for your time today, I really appreciate it and all the best.

Andy:  Great thanks Dave.

Click the play button above to listen to the interview, or you can read the transcript below

David Duffield: Hi it’s David Duffield here and I’m very excited to have a special guest on the line today. We’ve got David Morgan who’s a precious metals author and speaker, and he’s consulted with bullion banks, mints, mining companies, hedge funds, and pretty much anyone who’s anyone in the industry. He’s the founder of the website silver-investor.com and he publishes a monthly newsletter called the Morgan Report. Thanks for joining us today David.

David Morgan: Well my pleasure thank you.

DD: So just before we get started on the overall picture of money and metals, can you give us a quick snapshot of your background for those listeners who aren’t familiar with your work?

DM: Oh certainly. In my book I point out that I was 11 years old when the monetary currency or coinage changed in the United States. Up until and through 1964 we had 90% silver coins circulating as the money of course. We also had silver certificates, and in 1965 under the Johnson administration they stopped producing 90% silver coins and started producing what I call the Johnson slug, which were quarters, dimes, halves, all minted with basically copper and coated with nickel plating. Cupro-nickel is how we referred to them.

I was getting paid 25¢ a week allowance and I was way out in the country and there wasn’t any place to buy candy, which as an 11 year old probably was my motivation. So I was saving these coins and I had a pretty good stack, maybe $10 worth or something, and all of a sudden I get paid by my dad and there’s this odd looking, different looking quarter.

Now it struck me and I didn’t know at that point in time where my life would lead or anything else, but what it did do was sparked a question in me. The question was very obvious even to an 11 year old, but very few adults asked the same question and that was how can these be equal in worth? One is silver and one is not. I didn’t hold that question and I didn’t obsess about it, but it did affect me.

So moving forward I basically moved into the sciences, and my first degree is actually in Engineering, but I was always fascinated by money. I did a lot of self- study all the way through school, particularly in my later years meaning my junior, seniors in high school all through college and when we got out and started working. I was very much enamored with the financial system and predictably the gold and silver markets and I started trading in the futures market in my early twenties. Fast forward to several years I worked in industry, not in the financial industry, and actually in the aircraft industry, which I don’t point out often, but I’m going to let your listeners know that. I finally was let go and started working as a consultant on my own and actually for a short time starting in a field that I really am passionate about and that’s the precious metals field and also looking particularly at the macroeconomic picture, which I studied on my own for so long. I had several people that are pretty famous in the last bull market that mentored me. One of them Harry Brown who’s the two time candidate for the Libertarian Party in the United States. He wrote a newsletter and several books about banking and honest money, and many others along that ilk that I’ve met along the road I worked with and studied what they did.

I had a real strong base for what monetary history has shown us when we get in these fiat-only regimes and the outcomes that never come out well at all. In fact in every case the system that’s failed more or less, in some cases the downward pressure has been significant, but not devastating, and in other cases basically wiped out the population for all practical purposes. I knew that, but after getting the website started I started to publish articles that were very basic articles about the big macro picture and what happens under these financial systems. I would encourage your listeners to go to the website and just go into the archive section and start reading some of those early works. Now some of them are inaccurate as far as perhaps price predictions looking back because when I started the website silver was actually under $5 an ounce, and now of course we’re north of $30. But a lot of the principles apply forever and a day, they are sound principles on what happens in these financial situations.

One article that I wrote I said in all history these systems have failed, but what has me the most concerned is it’s never been a global system before. You could argue the Roman Empire was global, it really wasn’t, but it certainly took up a great deal of the population on the planet at the time, but everything is interconnected to US dollar, which is the reserve currency of the world no matter what currency system you’re on, be it the Australian dollar, the Canadian dollar, whatever. Everyone is tied to the US dollar and as the dollar goes so goes everyone else. This concerned me a great deal and still does because with the inability to rectify the problem at this point, something’s got to give sooner or later and there are two things that can happen. One is you can default on your promises, which in a way the United States did in ’65 by stopping minting  the coins officially in August 15th 1971 when Nixon closed the gold win so they were no longer offered a contract with all of our international trading partners that you can paid in gold. You’re only going to get paid in these pieces of paper from now on and we’re going to float the currency and the currency is worth whatever the market says it’s worth. We go into today and the default would be on the United States bond that you Mr Bondholder be it China that holds massive amounts of our debt or Japan or some people in the Middle East or Europeans or whomever’s holding US bonds or debt instruments be it short, long, or mid-term. The truth would be that we cannot pay these back and we’re defaulting on them. You’re only going to get 50¢ on the dollar, which is what recently happened in Greece. That would be one way to rectify the problem. In other words there’d be a huge contraction in money supply, but let’s be honest, we borrowed more than we could pay back and you’re going to have to take what we can give you.

That’s very unlikely to happen in the United States and the more likely scenario is you default in a different way and that’s to default on the currency. The way you default on the currency is you just keep printing it and printing it and printing it until it becomes worthless. As we’ve all heard, it’s becoming worth less and worth less and eventually it becomes worthless or near worthless, and worthless to the point where your people don’t accept it and would rather own anything but a US dollar.

We’re not at that point right now even if you though if you look at the Federal Reserve’s own data they’ll tell you that the 1930 dollar, which is when the Federal Reserve was started in the United States, it’s now worth about 3.5¢, It has lost about 96, 97% if its value, which is a miserable failure when your mandate is to keep a stable currency. I mean it should be the same – a stable currency would be within a few percentage points of where it started, but it’s not. It’s lost almost all of it. At the current time the velocity of money, the amount of money that’s in the system, is huge, but it’s not moving and that’s called the velocity of money. Because of that we’re seeing basically a contraction and lots of talk about depressions and deflation, and actually that’s accurate at this point in time. What we don’t know is which way it’s going to go. It’s more likely to go into a default and debasement of the currency, but in certain periods of time as we get to that point, we certainly get these areas that we’re in now where you’re seeing sluggishness in the economy and very slow turnover of money.

DD: Okay so there are two scenarios: one is to default and the other is hyperinflation. How do you think silver will respond in either of those scenarios?

DM: Okay so well first of all you’re right at default and I don’t like to say hyperinflation in the US because I don’t think it’ll get there and I don’t think we’re going to see the Zimbabwe situation here. I think if you just doubled the prices of gas for example, which is certainly high inflation, it’s 100%, but if you doubled the price of gas I think that would be enough to bring this country to its knees. Silver in an inflationary environment does better than anything in past history. There is nothing that gets even close to what silver can do for the investor in that type of scenario and that’s all the data we have up until now.

Does that guarantee that it’ll happen this time? No, but it’s highly highly likely that it would. In that kind of environment silver outperforms gold, it outperforms wheat, and it outperforms just about anything you can name. But remember history rhymes and it doesn’t repeat exactly. If there are food shortages or other factors, which probably will be in this one, there could be something that does better, but I’m very confident that silver will be one of the top assets to hold. The thing about how you can’t eat silver and you can’t eat gold is very true, but it’s also true that you can’t store food for a long period of time and you can’t put $40,000 worth of food in a small briefcase or that type of thing. There are advantages to both and I really think you just have to use some common sense here.

I think you should really plan out if you’re new to this material and certainly I’d encourage you before you make any moves to study and not just study my websites, but study others that have written about this, get some monetary history underneath your belt (in other words study it somewhat),  and then make a decision.

When you make a decision don’t jump in with both feet; go ahead and accumulate some gold, go ahead and accumulate some silver, and do it over time. I believe there’s still time left before things get worse and again no one knows exactly how it’s going to play out. There will be areas on the planet that are probably relatively not going to change very much and there will be others on the planet that will be very very different so that’s something to bear in mind as well.

DD: The scenario as you see it playing out seems pretty clear cut right now, but what was it about silver so many years ago that made you want to set up the website and obviously at that time silver was pretty much unloved I think you mentioned under $5 an ounce. What made you want to get into it at that stage?

DM: As I said earlier, I didn’t go into detail, but I was sort of what you’d call a newsletter junkie. I was on this path to learn as much as I could outside the economic mainstream about how finance really worked and what happened through monetary history and that type of thing. One of the best writers in the field was called Economic Research Counsellors, and they were based in Vancouver, British Columbia, and the head of that was Jerome Smith and Harry Brown, who I mentioned earlier who actually worked for Jerome. I read all of the gold guys and Smith was more or less a silver guy and pointed out silver was actually a better investment than gold was and I studied everything that he wrote. I subscribed to his newsletter service and I talked to the Economic Research Counsellors because you could get them on the phone. I really felt that of everybody that was in the field, they were the best and that was personal opinion and of course opinions vary.

When I saw this new bull market going to start, I just knew that it would and it would at the bottom. Silver was at the lowest point it’d ever been on an inflation adjusted basis. It was cheaper than it was during the Great Depression; yes it was 22¢ in the Great Depression, but at $4 when I started on the website, on an inflation adjusted basis it was less expensive than 25¢ represented in the Great Depression so it was an all-time historical low. Whenever you can buy any commodity and I don’t care if it’s wheat, I don’t care if it’s rice, I don’t care if it’s any cotton, cocoa, it doesn’t matter. If you can buy a commodity under the cost of production and be patient, you are guaranteed to make money. I knew the production costs of silver, the real true cost was probably around $6 or $7 and here you’re finding it at $4 so I was pounding the table for free.

My site was really a non-member site for quite some time and telling everybody to buy silver, buy silver. Silver just had better dynamics and it wasn’t very well understood and no one really studied it. It was only really one or two other writers on silver and really only one on the internet and that was Ted Butler. Ted had a few articles out there on silver before I started my site. Ted didn’t really have a site and he’d just would write articles and have them posted on other sites, but he does have a website now.

In my heart of hearts I felt silver was as important if not more important than gold and somebody’s got to tell the story and when I was getting my degree in finance I talked about my Engineering degree and I went on after some time I went back to school and went to mainstream school. I didn’t go to the Mises Institute, but looking back I probably wish I had. Regardless, I got my degree in Economics Finance and so I just went full circle and said it’s going to happen and it’s up to me. I really didn’t have that kind of attitude although somewhat I started as a research site. I started as a webpage, built it myself, and said everything about silver that I can gather, and I’ll stick it on this page so don’t have to hunt for it all the time. Then slowly – not too slowly – it actually happened pretty rapidly and developed into Silver-Investor, and that’s the long story.

DD: Okay. So from here, silver going up substantially in price looks to be a no-brainer, but how much volatility do you expect? Silver’s renowned for being pretty volatile so how much volatility do you expect and are you like other people that believe the market’s manipulated to the downside?

DM: Right I have to be honest here. First of all, how much upside is left? The answer’s a great deal, but we’ve already gone from let’s call it five dollars, which is more like four-ish, but five into 30 so it’s up six fold. For silver to from 30 to 180 would be another six fold increase. Will it get that high? Possibly it will, but it’s really hard to pick a dollar price when you’re in a debased currency system like we are.

That’s a good question, but I think an even better way to refine the question is how do you think it’ll respond for purchasing power for me? The answer to that is I think it’s going to at least maintain your purchasing power and probably increase it substantially. And substantially to me is like a threefold increase. I think that’s a question that gets people a little more comfortable with buying at this level.

If you believe what I believe that this system is a train wreck unfolding before us in slow motion, then you’re motivated to take some kind of action, and taking some action would be to prepare, and to prepare you need precious metals and that’s only to preserve purchasing power for the future so you can trade silver for some other good or service that you may want in the future. That’s the best way I can relate it, don’t get too hung up on the paper price, but it’s important because everyone thinks so, but really you need to do a paradigm shift to your thinking.

Once you catch on to what’s going on with the financial system and you understand why precious metals are important, what you need to think about is how many silver coins do I have today versus what I had a year ago. If you have more then you’re obviously wealthier by definition. If you have 20 coins and a year ago you had 10 then you’re twice as wealthy. I don’t care what the paper price is because what you really need to focus on and it’s hard for me to even do it at times, is to focus on what am I doing? I’m accumulating real wealth that’s preserved purchasing power for all of recorded history. Yes the price fluctuates, but the ounce of silver never changes. I have 20 ounces now, I had 10 before so those things have not changed and they’re still sitting in my shoebox or whatever, but what has changed is the amount of paper that it will trade for, but that paper eventually becomes worthless – at least it always has in the past. I think that’s a better way to fix the paradigm, again very few people can do that because we’re brainwashed into thinking my net worth is how many Australian dollars do I have? I sell my house, I sell my car, I cash out my bank account, and I turn in my five Krugerrands. How many Aussie dollars do I have, and that’s my net worth. Well in reality you have a bunch of paper that at some point probably won’t buy anything.

There hasn’t been a paper currency in the history of the world that has ever survived more than about 200 years. I’m not saying it’s worthless now; I don’t want to misconstrue anything. Certainly we need to do our transactions in these currencies and we all do and I understand that, but the point I’m trying to make is for long term planning, especially under today’s conditions, you need to factor in that these things don’t last forever and I don’t think we’re going to see this whole system hold on much longer than perhaps five years, I’d say ten at the most. There could be other things that could come up and they may issue a new currency, they may issue a global currency, and it’s hard to predict which way it’s going to go, but I do know that the precious metals are probably the best place to park some of your wealth until things get straightened out one way or the other.

DD: Okay. There’s some good advice there because silver is definitely volatile so it’s just a different mind-set really, and a really different way of looking at it the way you suggested.

DM: Exactly.

DD: For someone just becoming aware of this and doing their research is the entry level point buying physical silver because there’s a lot of controversy around the exchange traded funds and other paper representations of silver. What’s your advice to people brand new to this?

DM: Absolutely. I am not a bullion dealer, but I have from the very beginning and will to the end, whatever that means, advocate buying physical metal first. That is absolutely the place anyone should start with a precious metals portfolio is with precious metals. It’s that simple.

There are several ways to do it and anyone listening can go to the website silver-investor.com and get on our free email list. This is totally free and what you’ll get for the first couple of weeks or so is ten rules of silver investing. These are for beginners primarily, but they work well for even seasoned investors, but they’ll definitely keep you out of trouble. The reason being is a lot of people get excited about the markets after they start to learn about them and again jump in with everything they’ve got savings-wise all they’ve decided they want to buy. The price goes against them and they end up upset and perhaps it’s a long consolidation period and they sell up and other things happen.

These ten rules are written with my experience in this market so I suggest you start slowly, I suggest you accumulate, I suggest if you’ve never bought before start with a small amount so you see how you’re treated and see how long it takes to get your coins. All this is pointed out, and I’m not going to go through all of them because they’re fairly detailed, but you’ll get that for free. If you look at those, maybe even print them out and study them which will give you a really good in this market and give you some very good comfort about how to approach this market. There are all these little booklets out now and there weren’t many ten years ago knocking about in the gold and silver market or how to begin or how to purchase and all that. I kind of chuckle a little to myself because I’ve been giving this stuff out for free for a long time and glad to do so. I’m here to make a living and make money of course, but I’m also here to help others and I think one of the best ways I can is to let everyone have this information for free and let them determine the best to approach these markets. The methodologies that I outline are one of the most common sense sound ways to go about it.

DD: So physical silver for the entry level people makes a lot of sense, but I know you spend a lot of your time analyzing stocks and gold and silver stocks have underperformed compared to physical in recent years so just wondering what your outlook is for those. I believe it’s quite bullish so I’m wondering why that is that case and why you think they will hit their straps soon?

DM: Yes and a good introduction there. Once you’ve accumulated a fair amount of physical, then if you’re willing to increase the risk reward profile, the best thing you could do is give them the underlying equities and they come in the three basic classifications: top tier, mid-tier, and speculative stocks. I believe from my experience of being through one bull market myself that you’re going to see the biggest bull market in these equities and mining shares that you’ve ever seen in the history of mankind. That’s an extremely bold statement, but I base it on what I know. What I know is the last time we had a bull market and it peaked January 21^st 1980, in the last few months and carried on past the peak in gold actually, the mining shares went absolutely ballistic. People were buying them hand over first, and at that time it really was a one entity market. It really was a US only phenomenon. There wasn’t really anybody in Europe or South America or China or Russia or any of the places that are now deeply involved in the precious metals buying.

The second thing is the internet. Almost everybody in the United States and really it applies globally, has got some wealth. I’m not talking about everyone, I’m talking about people that are on the internet have some type of trading platform. They’ve got an Ameritrade, E*Trade, Scottrade, I don’t what the equivalents are in Australia, but everyone’s got a trading platform. Excuse my arrogance, but most people are not that motivated until they are running on an emotion of greed and fear. Once that emotion kicks in, they will be motivated strongly to buy, and they’ll buy gold and silver, but most people will not buy physical gold and silver. They’ll feel it’s too late so people will rush off and start looking at any stock that has gold or silver in its name, especially cheap stocks, and most of these aren’t worth purchasing by the way. They will buy them because they’ve missed the party and feel that the retirement isn’t going to carry them though, they haven’t saved enough, there will be thousands of scenarios that boil down to one thing. If I don’t get in the gold and silver markets, I am screwed. I see what’s happening now so I’ve got to get in. I think that’s going to be a global phenomenon, people are going to much rather click a mouse from their home and buy a mining share than they will to get in a car, call somebody over the phone, and buy physical metal, especially when these metals get higher priced. These small stocks, particularly all of them across the board because the same thought pattern will be going on in some of the institutions and these intuitions can’t buy penny stocks, they’ve got to buy the Pan Americans, the Gold Corps, the Agnico Eagles, and the Newmont Minings. They have to buy these huge billion dollar companies because they can’t move millions of dollars into a penny stock then sell out of it because they’d own the whole company. Even the large stocks will move like penny stocks when this thing takes off. That’s my belief system, and does that guarantee it’ll happen again? No. It is what happened in the late ’79, 1980 time frame, and again since we’ve got the internet and everyone’s got a trading platform and people’s nature doesn’t really change, they’re going to do what’s the easiest for them. They’re going to be all over the chat rooms and talking about ‘Oh this mining company down in Australia, they said …’ and people get really emotional about them and this one’s going to discover all this gold and I’m going to be richer than rich and on and on. These things just build on themselves and gets into a buying frenzy.

The thing that’s really tough in those situations for someone like me is to pick a top or try to get some money out of these things because they will get overvalued even in paper terms. It’s going to be tough, but I’ve already thought about it and I’m not really that concerned. I’ll do my best and I’m certain that we can make it profitable for membership, but that’s the way I see it. We’ll have to wait and see, and it could be different this time, but I doubt it.

DD: If picking a top is your biggest problem then you’re doing okay. Can you just explain to the guys how stocks are leveraged to the price of silver?

DM: Sure. It’s in my book and there are several articles on the internet so if what I’m about to say confuses you just look it up on Google, ‘leverage mining companies’, or something like that. Basically if you take the cost of gold as being at a fixed price – well the price of producing gold is pretty much a fixed price, at least on an annual basis, and sure prices change, but let’s just make it real simple. So it costs $1000 to produce an ounce of gold, I’m just producing a random number. In most cases it’s much less than that. If the price of gold is $1000 an ounce, obviously you’re not making any money at all, but if the price goes up to $1200 an ounce, you’re making 20% profit on that mining company. They leverage because as the price goes up and the cost of mining is fixed, there’s a huge leveraging factor. Generally speaking, the result of gold companies is usually about 3 to 1. So if gold goes up 10%, a mining company will go up 30%, but the reverse is also true, which means that if gold goes down 10%, the mining company can go down as much as 30%, so leverage works in both directions.

The other factor is one I mentioned before and I won’t belabor it, but there’s so much emotion around money, particularly the precious metals once this market gets in the final leg of the mania phase, the panic phase, the ‘I’ve got to own silver and gold or my financial life is ruined’. You can take all of that out of the equation because what happens then is a parabolic move beyond belief, and I believe this time it’s going to be something for the record books.

DD: Okay so if mining stocks do make that parabolic move, do you see much risk of government intervention whether that’s a super tax or any other legislation that you can see?

DM: I don’t rule that out, but governments usually move very slowly and those types of parabolic moves usually don’t last very long and that’s the hardest thing because you said my biggest problem is picking a top, when this happens – if it happens, it’s a nice problem to have. The other problem is that knowing human nature of what kind of blow back I’ll get. ‘You’re a traitor’, ‘Oh you were an insider’, ‘Oh you were part of the establishment’, ‘Oh I knew I shouldn’t have trusted you’. All this hate mail will be coming my way for just telling people to take some money off the table. What I’m trying to do is to help them, but they get so emotional about money – a lot of things, but particularly money. Nothing seems to motivate people like money does. This belief system, a lot of people will be new to it, and these are people that have studied my work for more than a decade and trust me and whatever and they’ll be seeing me as something being wrong with me. Don’t you realize that silver’s not going from 200, it’s going into a thousand or whatever comes up at the time. But regardless, I’ve got to keep my cool and keep my head and do my best. Not do good, but do my best and say, ‘Look, here’s my reasoning, agree or disagree, but here’s what I’m doing’.

I think there’s nothing better about my service than me telling people that our members what I do because right or wrong at least it’s honest. It’s like he’s taking a profit here and I don’t think he’s right, but at least it’s up on the record so to speak so people can see how I’m approaching the market and that type of thing. Right or wrong I have to live with it. I think it’s a real benefit and not many in the industry that I’m in do that. I think it’s a good way to go about it. My plan basically is as this goes parabolic, if it goes parabolic; this is scale out on the way up because no one can pick an exact top. If you think you can that’s an amateur’s attitude, get over it. If you get can within 20% of a bottom or top you’re going to do extremely well and that’s good as any professional can ever do.

But as you scale out and things start to go crazy and Time magazine comes out with ‘The gold rush is here’, and that’s a good clear indicator that mainstream’s catching on. That’s a good time to start exiting because that means you’re getting near the top. There are other indicators that you can use, but again the plan will be to take some profit, some more profit, some more profit along the way and love what you get.

My mission statement is to teach and empower people to understand the benefits of an honest financial system. Gold and silver aren’t even in my mission statement. What we really need is to get back to some honesty in the financial markets again because that’s what benefits everybody. I mean if you make tons of ‘money’ in the gold and silver market, good for you. That’s my plan personally and that’s my plan for my members, but it doesn’t benefit anybody in the long run because what we need is honesty and integrity again because that’s how you’re going to get the global markets moving again. The whole thing’s built around confidence and trust, and the confidence and trust is breaking down rapidly and that’s why we’re in the fix we’re in. My mission is to fix that problem. When you fix it on an individual basis or maybe on an entity basis or your family trust or that type of thing is to hold precious metals for now, but we need to get back on track as a planet of human beings to start having integrity in all of our dealings, especially in our financial affairs because everything’s based on the economy. If your economic system is based on a lie, which it currently is, obviously things are going to break down.

DD: Interesting. I’m sure it’ll be an eye opener for many of the listeners so really appreciate your time today David, and just before I let you go, can you tell our listeners how they can read your reports and get in contact with you?

DM: Absolutely. The easiest way is to go to the website and there are a couple of ways to get there and one is silver-investor.com and the other way is to type in themorganreport.com. Either of those will get you there. If you can’t remember either of those you can just type in David Morgan silver into any search engine like Google and it’ll take you right to the website.

DD: Excellent. I really appreciate your time. Thanks again.

DM: My pleasure, thank you.

But the term fiat currency is defined by businessdictionary.com as ‘the common type of currency issued by official order, and whose value is based on the issuing authority’s guarantee to pay the stated (face) amount on demand, and not on any intrinsic worth or extrinsic backing. All national currencies in circulation, issued and managed by the respective central banks, are fiat currencies.

The Ultimate Money team put together the following video to show you in just two minutes why gold is money and fiat currencies are not:

Gold – meets the basic definition of money since it has intrinsic value.
Fiat currency – Has no intrinsic value other than the paper it’s printed on.

Gold – Rare, valuable and difficult to produce.
Fiat currency – printed or created digitally at no or very low cost.

Gold – Consistent measure of value for 5000 years and has never failed.
Fiat currency – Loses purchasing power over time and thousands of fiat currencies have gone to zero.

Gold – Universally accepted as money.
Fiat currency – Accepted according to agreements that can be breached or voided.

Gold - Tangible asset with full settlement and no counter-party risk or 3rd party liability.
Fiat currency - Debt instrument that remains the outstanding liability of a bank or government.

Gold – Annual rate of supply increase is approximately 2%.
Fiat currency – Supply often increases faster than growth of population or economy.

Gold - Incredibly durable – almost all of the gold ever mined still exists today.
Fiat currency – Throughout history the average lifespan of a fiat currency is 47 years.

Gold - Governments and central banks have little control over its price.
Fiat currency – Centrally controlled and manipulated by banks and governments.

Gold – Distributes wealth and financial power to its holders outside of government reach.
Fiat currency – Financial power is dominated by banks and government who determine its value.

Gold – Hedge against inflation and the collapse of government or financial institutions.
Fiat currency – Can become worthless due to hyperinflation or collapse of governments.

Then as we get older we go from a piggy bank full of coins to a square piece of plastic with your name on it. This card represented the key to the vault, where all your paper and digital money would now be stored. And right then, you became a card carrying member of one of the Big 4 banks and possibly a loyal customer for life.

The large majority of us were content with ‘small print’ assurances that our money was safe; we didn’t question the status quo.

That is, until the global financial crisis of 2008 brought the shady commonplace practices of the international banking industries – and the multinational establishments that bankroll them – firmly into the spotlight.

The collapse of seemingly untouchable banking institutions and the realisation that multi-trillion dollar bail-outs were needed to keep major players in our global economy afloat forced everyday people to wake up to the fiscal foolishness and wonder just how safe their little nest egg was?

Like many other Australians, I too begun to question whether keeping all my money in the bank was the best way to protect my wealth and plan for my families’ future. A little research exposed some uncomfortable truths.

Are Australian Banks A Safe Place to Keep All Your Money?

4 simple facts that indicate they’re not…

1. National Australia Bank, Westpac AND the RBA received emergency funds in excess of 50 Billion USD from the US Federal Reserve. All vital signs indicate Australia is an economy on the rise. With the explosion of our mining industries some might say we’re experiencing an exponential incline. So that begs the question why our big boys were standing in line with their hands out?

2. The banks don’t speculate with their money, they do it with your money. When an entrepreneur takes on a new or risky venture, many do so using someone else’s funds and banks operate in the same way. When they make irresponsible loans and gamble on unstable markets, they like to do it with someone else’s money. Yours!

3. Australian banks aren’t lending to small business owners. As our banks become more cautious against any lending that doesn’t come with a government backed guarantee, small business owners are finding it’s becoming more difficult to access the full portfolio of financial services available from their banks.

With banks preferring to lend to those acquiring large sums of potentially life long debt, like new home owners, multinational corporations and of course other banks, small business owners will find there’s little relief out there if their business hits hard times or needs funding to grow. This is despite the high bank fees, hidden levies, and the fact that it’s our savings which are being used to finance lending to others. Does this seem fair to you?

4. No bank is an island; they’re all in it together. Even if your bank has been one of the few that has operated with some kind of financial integrity it will not escape the global economic mayhem that is only just getting started. The impact of financial derivatives which in actuality have no inherent value, affect the entire banking system and very small changes in asset prices can have very large consequences. And no bank is totally insulated from the actions and consequences of other banks – including yours.

The days of quietly following the chorus line are over. Anyone who wants to protect their hard earned savings and investments needs to start asking difficult questions and researching their options.

And that’s our mission at Ultimate Money: We help everyday Australians protect their long-term financial future and make sure you’re informed of saving and investment opportunities the banks won’t tell you about.

• Debt based currency systems create huge discrepancies of wealth and always fail.
• Don’t fall for conventional ignorance.
• Currency is borrowed into existence and we have to go deeper into debt for the system to keep functioning.
• We must work in the future to pay for dollars that exist today.
• Hard money system is slower, but fairer.
• Only gold and silver is money because they store value, while the paper we call money is actually currency.
• If the US dollar has a problem, every currency in the world has a problem.
• History shows that most monetary systems last around 40 years.
• A financial collapse will be followed by hyperperinflation.
• Gold and silver are in their wealth cycles now and will continue to account for all the currency in circulation.