We’ve established that gold in the ground, is a long way from gold coins in one’s hand. Also, that increased demand, in the case of gold and silver, will increase prices, because of limited supplies. As gold and silver go up in dollars, more and more mines will re-open, as their cost per ounce will be met, and a profit can be made. Some mines can produce gold for under $200, and some can produce gold at $300. Some can produce it at $400, some at $500, etc. As prices rise, in both silver and gold, those with lowest production costs, will make a lot of money, and their stocks may go up proportionately. Those with “reserves” in the ground, may begin mining, because the price per ounce, makes this permissible. No one wants to do anything at no profit.
As dollar numbers increase, everything costs more in dollars. The Financial Times of Nov 22, 2003 says that the dollar supply has increased 1300 percent since 1975. If this is true, things now cost 13 times as much as they did in 1975. Considering homes, bread, and cars, this might be about right. We’ve examined how leased gold must be replaced, and when this happens, the demand for gold will be huge, causing prices to probably escalate wildly. All of these conditions cause gold and silver prices to go up in dollars. Repayment of leased gold, not nearly enough supply to meet demands, COMEX having only half of the physical silver they have contracts for, plus inflation, causes gold and silver to go up in dollars, and I know of nothing to stop it. More and more people are beginning to wake up, are converting their paper money into physical gold and silver, and word is getting around.
What would happen, if the dollar got ’valuable,’ and gold and silver went down in these dollar denominations? Deflation? Not much, because even if it were possible, a buyer and holder of gold and silver, would still be in good condition, as the dollar would buy more, while gold and silver would sell for less an equalizing equation. The chances of this happening are about as probable as Niagara ceasing to flow, but we must consider all options. Once a paper currency begins to go down, due to presses turning out millions of them per day, the chances of stopping it are virtually impossible. Government depends on inflation. Without inflating its currency, it couldn’t pay its bills. The chances of the presses stopping, and value being re-gained, would defy history and logic, and will not happen. Politicians cannot stop spending, and government cannot stop growing. Neither ever have in history, short of total collapse. Am I predicting economic collapse? Do I have to predict, when a responsible, respected financial newspaper informs us that the dollar supply has increased 1300 percent in 28 years? Hasn’t it all but happened already? If the dollar is worth but perhaps 1% of its value and purchasing power of half century ago, aren’t we kidding ourselves when we save in it, or defend it? I know, the above is a classic solecism, but I believe it. We bought a medium size pizza last week, and it was fourteen bucks! Has the pizza gone up, or the dollar gone down? We had lunch at a restaurant Wednesday, and with water to drink, and no dessert, including tip, it was $22. Have restaurant meals gone up, or the dollar gone down?
It’s the New Year, and everyone seems to have grand hopes for it. Wags predict the Dow will go to 12000, and on my side, some predict 3000. I say that in this year, gold will go to at least $1,000 per ounce, and silver $15. We will see. I look about me, and see that now it is admitted we have close to 10% unemployment. I remember the apologists saying that we lost our manufacturing jobs, but that’s OK, because we are now a “service economy.” Oh yeah? Our “service economy,” has migrated to India, and thousands of white collar jobs leave America monthly. So do we survive by washing each other’s cars? How can a nation be prosperous, when it not only doesn’t make what it consumes, but when even the paperwork is done elsewhere? We make a few things, but not many. We grow a lot, but 90% of our beef exports are gone, thanks to Mad Cow.
Think about this “service economy,” for a minute. Downstairs in my 1887 home, right now, as I write this, a couple of guys are sanding the hall floors. Their equipment is only partially made in America, and that is the old stuff. The sanding belts and discs are made in China, as are their new equipment and the urethane they will coat the floors with. The stain is American made. The electricity is made in America. I will pay them $887 for their trouble. Of the wages paid to the workers, how much will go to DC for Social Security, Income Tax, Medicare, etc? Depending on their income, from 25% to 50%. 5% will go to the State of Colorado, and when they go shopping, they will pay 7% sales tax. They will pay close to 50 cents a gallon in federal and state taxes, plus taxes on their phone, electricity, and natural gas. They’ll pay taxes on admissions, tags for their cars and trucks, and a dozen other taxes on a daily basis. And we wonder why the jobs have gone overseas? It isn’t all the CEO’s fault, or that nasty corporation. It is mostly government’s fault, plain and clear, and those who are in elected office, who do the evil deeds.
California has $15 billion in “debts.” DC has “deficits.” One is an extremely difficult thing to overcome, and the other is simple. One requires cutting, scavenging, economizing, and scrutinizing every purchase and employee’s salary. The other merely requires pushing a “start” button on the presses, which results in every single dollar in our pockets, in banks, or in cookie jars, to lose purchasing power. Everything “goes up.” For goodness sakes stop using that phraseology. Say instead, “Has the dollar gone down again?” Will gold and silver “go up” in dollars? Of course, and probably much faster than other commodities, because they will become ever more in demand, and this assures their dollar price increase. Will carrots “go up” also? Yes, but at a much slower pace.
Here’s another thing to consider. America is hooked on Wal Mart’s low prices. Low prices, because their employees are poorly paid, and most of the stuff comes from China, it seems. America pumps its own gas too, and both happen because we need to for survival. Wal Mart’s stock is going down, but few are shopping elsewhere. They are simply buying less, because they HAVE TO BUY LESS. They have to buy less, because they are being decapitalized, thanks to outrageous, inefficient, all comprehensive government. When we can’t buy at Wal Mart, because we are too poor, where do we go now?
Admittedly, I do not deal with poor people. Poor people cannot buy gold and silver, because they live from paycheck to paycheck, and have little or none left. This is why credit cards are at record late payments, and bankruptcies are at all time highs. States are in the hole, and the fed keeps printing. Iraq isn’t going well, and is costing a fortune, not counting the dead bodies. The stock market is blowing up for itself a huge bubble, which will burst. More and more Americans, who can afford it, are realizing that all is not well, and are getting into tangibles. Old homes are being restored, as are autos. E-Bay is doing a land office business in collectibles, and gradually, Americans are becoming wise to the utter futility of the US dollar. Gold and silver’s ratio is going down slowly, meaning that silver is going up in price faster than gold, but both will do you well, if you protect yourself.