David Morgan Explains Why Silver Is Catching Up, Why It's Broken Out and Where It Goes From Here
The Daily Bell is pleased to present an exclusive interview with David Morgan.
Introduction: David Morgan is a widely recognized analyst in the precious metals industry and consults for hedge funds, high net worth investors, mining companies, depositories and bullion dealers. He is the publisher of The Morgan Report on precious metals, author of "Get the Skinny On Silver Investing" (Morgan James Publishing, 2009), and featured speaker at investment conferences in North America, Europe and Asia.
Daily Bell: David, welcome back and thank you for sitting down with us today. Remind us about the difference between silver and gold both as precious metals and money metals.
David Morgan: "The major monetary metal in history is silver, not gold." – Nobel Laureate Milton Friedman in an interview with James Blanchard at the New Orleans Investment Conference. November 7, 1993. The above quote is fact of monetary history but few in the West study or know silver's history. Yes, gold is money but silver has been used as money more often, in more places, by more people than gold ever has.
Daily Bell: Why has silver been known as the peoples' metal?
David Morgan: Because of value per unit, as this interview takes place gold is about $1400 US per ounce and silver is about $25 per ounce. Since most transactions are small daily transactions by all people it is known as the peoples' money. Silver buys your small items—food, water, energy, and clothes for example. Large settlement purchases would be done in gold.
Daily Bell: What is the gold/silver ratio and where is it today? Has it closed the gap since we last spoke?
David Morgan: It is the price of gold in dollars divided by the price of silver in dollars. As of this interview that would be 1400/25, which is 56. The ratio has moved from 68 to 56 in the past six weeks and it has moved in favor of silver since our last interview.
Daily Bell: Since the historical range is said to be 15/16 to one (silver versus gold) it sounds like there's a long way to go. Does price manipulation continue?
David Morgan: Yes, but a spokesperson for the CFTC has finally come out after three years and I expect some formal announcement soon. Bart Chilton's statements so far are straight to the heart of the matter and our readers are encouraged to look at his statement on the CFTC website.
Daily Bell: Let's return to the previous question. Has silver broken out?
David Morgan: Yes, both gold and silver broke out in early September 2010. Silver has now achieved a new nominal high over the March 2008 high of $21 and this has sent many investors to take another look at the silver market.
Daily Bell: What countries are most hospitable to silver mining today? Mexico and Peru you mentioned last time we interviewed you.
David Morgan: Those two countries are normally fighting for first and second place as leading silver producing countries. As the global economic picture continues under stress all investors need to consider that what might be hospitable today may not be so tomorrow.
Daily Bell: Any important silver mining companies you want to mention?
David Morgan: I prefer to leave that to my paid membership service The Morgan Report that can be accessed at my website: Silver-Investor.com. We do look at more than the silver market; for example we were the first to begin reporting on Rare Earth Elements.
Daily Bell: Let's ask some technical questions. Where does silver go from here? What are the best investments to make throughout the business cycle, and do they change over time?
David Morgan: On a very short term basis gold and silver are overextended on a technical basis and could pullback. On a longer term basis silver and gold are going far higher in paper terms in any currency you wish to name. Addressing the second question, I will make the assumption you are restricting this to the precious metals. On that presupposition, the best investments very early in the cycle are penny mining exploration companies, in the middle part of the cycle the best is mid tier producers to top producers, favoring the mid tier as they as a group are taken out at premiums by larger companies. At the end of the cycle the mania/panic phase almost anything with gold and or silver in the name will fly like crazy and fundamental worth means very little. This is the very dangerous part of the cycle but can be very rewarding.
I wish to add that this is based on previous cycles of all markets, but with the currency crisis that is now being experienced globally it may not be prudent to sell physical gold or silver for your local currency until the financial system is on firm ground.
Finally, after the financial system does stabilize there could be a time when your gold (silver) would be able to purchase well run businesses (like the Dow?) for very favorable prices.
Daily Bell: Is there more recycling? Is silver uneconomic to recover?
David Morgan: There are two main studies on the silver market and they disagree on this point. According to one silver recycled in 2009 was the highest ever, while the other study claimed it was off noticeably. I am bias to the bullish case because almost all recycling was a result of silver halide (film) processing and that has fallen off dramatically the past several years. Many applications that MUST use silver have such a small but necessary amount that it is uneconomic to recover. This is why silver is "consumed" because this type of silver usage does end up in landfills.
Daily Bell: How much is the industrial demand for silver?
David Morgan: Basically 50% of the market or slightly more. It continues to increase as silver's use in solar, water purification, and food processing/preservation will increase dramatically over the next decade.
Daily Bell: Is the silver market in a deficit situation?
David Morgan: No, the deficit ended in 2007.
Daily Bell: From 1990 to 2007, according to the best recognized studies on the silver market, about 1.5 billion ounces of silver were eaten out of stockpiles. You agree?
David Morgan: Yes, it is pretty apparent by looking at the above ground supplies in the public domain.
Daily Bell: How much is silver increasing? Two percent per-year increase?
David Morgan: On a net average basis from roughly the year 2000 all mining activity (base metal and silver) has increased between 2-3 percent per year.
Daily Bell: Was there a slump in global silver production in the 1990s?
David Morgan: I would state it as the mining industry was fairly flat through the 1990 to 2000 time frame. Once the commodity cycle bottomed around 2000 we have seen a general increase since that time until present.
Daily Bell: What about future production?
David Morgan: Future production will peak at some point and due to several factors, energy costs, environmental considerations, and protectionist attitudes in the future.
Daily Bell: What do you think of the current economic crisis? Are Western countries handling it well?
David Morgan: This is the financial crisis that I and several others in my field have predicted for so long. It is proceeding pretty close to how I have expected it to proceed and the Western countries have handled it to the best of their ability. Which means they have ignored the fundamental flaw in the system and pretended they know what they are doing.
The world is swimming in debt and so far the solution is to borrow more money, or increase the debt even further. That is saying you can borrow yourself rich, and that can be done until you cannot make the payments anymore. All indebted nations are holding interest rates low so their debt servicing is "manageable" but in reality it is mathematically impossible to service the debt but very few in official roles (government) will ever admit this startling fact.
Daily Bell: How well have the bailouts worked?
David Morgan: From a psychological level fairly well, meaning the masses of people globally still think government can solve these problems but we reached the point of no return in August 2007. That is when trust in the entire system broke down to the point where banks and brokerage houses would not accept "paper promises" from each other. From a practical standpoint they have not worked and continue to stress the system.
Daily Bell: You have written, "According to the USGS (United States Geological Survey), there is more or less nine years' worth of economic silver in the ground; in other words, peak silver is roughly a decade away." Can you elaborate?
David Morgan: Yes, that is based upon a silver price of perhaps $12 to $15 per ounce, so as the price of silver increases there is by definition more silver that becomes economic (profitable) to mine. Also, new mining techniques became available where open pit operations of rather low grade material is economic when it the past in was not. There is nothing to say that another breakthrough could take place and extend the mining of minerals further into the future.
Daily Bell: Has gold mining peaked, and what does this mean for silver?
David Morgan: Gold mining has peaked by all indications and since 13% of the silver supply comes as a result of gold mining it will have some effect, but very minor at this point.
Daily Bell: How does silver fit into solar energy demand?
David Morgan: Almost all governments globally are looking for green energy and that means solar energy primarily. Silver is used in several ways for solar – from mirrors to reflect to sun, to solar panels and electrical distribution.
Daily Bell: Do India and China play into this equation?
David Morgan: To the extent that they will use solar and more importantly to the extent that they will increase their electrical distribution networks. A decade ago the average Chinese used 1/70th the amount of silver that the average North American used. As China continues to move toward a high technology society the use per person will increase dramatically. Just think of how many cell phones and laptops are in China today compared to a decade ago.
Daily Bell: Is silver the money of last resort?
David Morgan: As I wrote in the Ten Rules of Silver Investing (Click here now for a FREE copy), I had this to say:
"No one likes to be a prophet of doom, but the simple truth is that silver is the world's money of last resort. Should a severe economic collapse occur, leaving paper assets worthless, silver will be the primary currency for purchase of goods and services. (Gold will be a store of major wealth, but will be priced too high for day-to-day use.) Thus, every investor should own some physical silver-and store a portion of it where it's accessible in an emergency."
Daily Bell: How should people invest in silver?
David Morgan: Too many investors, upon deciding to beef up the metals portion of their portfolio, buy too much physical silver at once-and in the wrong forms. Beginning metals investors should concentrate on pure bullion bars or coins, in smaller sizes, looking to pay a minimum premium over the actual metal value. Avoid commemorative coins, decorative items, jewelry and other collectibles, all of which carry large premiums and have limited resale markets.
Daily Bell: Should people buy mining stocks?
David Morgan: If you are a typical investor, you cannot expect to be an expert on silver and the silver market- but you can invest in the people who are. Once you have established a core holding of physical silver, leverage both your knowledge and your buying power by purchasing the stocks of mining companies. These shares are highly responsive to changes in silver prices, frequently producing much higher percentage returns than the metal itself.
Daily Bell: Should people dollar-cost average?
David Morgan: Dollar-cost averaging is an ideal way to implement Rule 2. By making same-dollar purchases at regular time intervals, you wind up buying more metal when prices are low and less when they are high. This approach helps you develop discipline, erasing the "trader' mentality that infects many market participants and instead fostering an "investment" philosophy. Dollar-cost averaging also eases some of the sting when prices move against you, allowing you to view the downturn as an improved buying opportunity rather than a disappointing loss. There is a dollar cost averaging program that I am favorable to and it can be viewed here: www.Silver123.net.
Daily Bell: Should people be wary of bullion dealers?
David Morgan: Because of the specialized nature of the physical metals markets, selection of a well established dealer with a quality reputation is essential. A good dealer will provide timely execution of your trades at fair prices with reasonable fees. Note, as well, that the lowest price is not necessarily the best price. In the past, some dealers who squeezed their price margins too low in order to attract clients were unable to make delivery, leaving those clients holding the bag.
Daily Bell: Where should people take delivery of silver?
David Morgan: While it is wise to keep some of your silver where you can get to it easily, it is also important to keep the bulk of your metal in a safe place – especially as you holdings increase. However, if you establish an account with a brokerage warehouse or other public storage facility, you should make sure your holdings are kept segregated and that you can inspect them when you wish.
Daily Bell: Should people speculate?
David Morgan: Depending on your individual goals and our personal tolerance for risk, a small portion of the assets you commit to silver can be used for speculation, perhaps in futures contracts or options on futures. Never forget, however, that this type of trading is speculation, NOT investment.
Daily Bell: Where can people find out more information?
David Morgan: You do not need to be a student of the silver market to profit from your metals investments. However, you will greatly increase your chances of success-and the size of your potential profits-if you understand the fundamental factors that drive silver prices and pay regular attention to current supply and demand considerations. There now are many writing in the silver space, when I started over a decade ago it was probably only three of us. Certainly you can visit many websites these days and find all kinds of differing view on the silver market.
The readers can find my work at the following sources:
YouTube – silverguru
To find my speaking schedule is it best to get on our free mailing list.
Daily Bell: Should one invest in silver or collect it?
David Morgan: Owning fine silver items – including rare coins – can provide great enjoyment and personal satisfaction. Like paintings and other artworks, they are beautiful and often quite valuable – and, if you are astute at buying and selling, they can generate large profits. In spite of this, however, always view such holdings as collectibles, NOT as investments. When you need your silver – or simply want to cash in – you do not want to have difficulty selling or be forced to forfeit a large aesthetic premium, both of which are likely with silver rarities.
Daily Bell: Should one stop at 10 percent of one's portfolio?
David Morgan: No matter how good the market looks – or how worried you are about the future of civilized society – you must always remember that silver should make up only a small portion of a well-diversified portfolio. I recommend committing no more than 25 percent under the current economic conditions.
Daily Bell: David, your time is most appreciated. Thank you again.
David Morgan: It is my pleasure. I really enjoy the great work you are doing. Keep it up.
We want to use this commentary not just to reinforce David Morgan's idea of silver as money but also to clarify why silver (and gold) are stores of value. The reason we want to reinforce the idea of silver and gold as money is because there is a good deal of controversy right now over money, and what it is. The Bell carried an article just the other day called "Debriefing a Sovereign Money Hater."
This article was about the contention of a friend of ours that the swelling sovereign money movement is actually an Anglo-American dominant social theme – a US fear-based promotion using COINTEL and military disinformation specialists coming out of nowhere and posing as "enlightened" investment types. He claims that even the rhetoric of these sites is somehow similar to that of some of the Tea Party sites and that the language used by the sites is all very similar. We weren't convinced by this argument, but he was so emphatic that he finally wrote about it – even though we couldn't help throwing cold water on it. It seems a little "far out."
Why would US military intel, which has helped with many promotions in the past such as Operations Paperclip, Gladio and Mockingbird want to become involved in the sovereign money movement? He believes it is because Austrian economics and free-market thinking are gaining a great deal of ground thanks to the failure of Keynesian economics, the unraveling of the economy and the truth-telling of the Internet. As a result the central banking promotion that is fundamental to the cash flow of the Anglo-American elite is coming under pressure.
He who controls the national money supply controls the nation, a famous banker once said. The elite is fearful it is losing control of its ability to print money-from-nothing via central banks. The intel-industrial complex, which basically enforces the will of the Anglo-American elite domestically and around the world, was called on to create another false flag event. Call it Operation Sovereign Currency.
His point: If central banking should fail, due to push back and revelations of manipulation and corruption, the elite needs something to fall back on. This is now being provided for. As we've said, we are not sure we buy it.
But there IS a bigger point to be made regarding the blossoming sovereign money movement – one that we here at the Bell want to make ourselves. It has to do with the fundamental nature of money. As we wrote above, the sovereign money movement is confusing what money is.
Sure, as Murray Rothbard point out, it is whatever society decides it is. But he also pointed out that gold and silver were overwhelming chosen as "money" by competitive processes. Silver and gold are malleable, portable, beautiful (rare) and durable. It is no accident that the modern world has settled on gold and silver as money, and did so through the democracy of the marketplace in pre-history.
The reason we want to mention this is because of the modern founder of the sovereign money movement, Ellen Brown (we call her acolytes Brownians) has come out with a very interesting new article about money called Time for a New Theory of Money. In it she makes the point that the "the original (money) unit of measure was a weight of grain."
Now Ms. Brown is a very intelligent and literate person and a wonderful writer as well; also, a caretaker of her lovely, aged mother in a retirement village. We have a hard time believing she is a US intelligence operative (!) but she is certainly an energetic and convincing proponent of her views that the state ought to be in charge of money "on behalf of we the people."
We have argued in the past in fact that this is a misreading of history. Free markets created money, circulated it and if we want unmanipulated money – gold and silver via free-banking – then money should be DIVORCED from the state not welded to it as Ms. Brown is arguing.
In her latest article, (well written as always) she uses Sumer to make her case that the state has always been in charge of money and that the Sumerians used grain as money. But how old was Sumer? It had its beginnings "as a collection of farming villages before 5000 BC through its conquest by Sargon (Sharrukin) ..." according to AncientNearEastTripod.com.
In fact, we believe gold and probably silver were likely in use as repositories of value long before Sumer arose. Here we have a potential date for the use of gold: "Process Metallurgy is one of the oldest applied sciences. Its history can be traced back to 6000 BC," explains Neon.Mems.Cmu.
Thus, we can see from this quick research on the 'Net that we come up with a date for the appearance of gold (used for purposes of metallurgy) which is at least 1,000 years older than the use of grain-as-money as Ellen Brown represents it.
Ellen Brown apparently (we are certainly willing to be corrected) wants us to believe that ancient humanity did not use metals as a store of value until the Neolithic age around 5000 BC. But this seems highly unlikely. Gold is to be found via placer mining around stream beds and the most likely hypothesis in our view was that gold was utilized as an adornment and for other uses not just 8,000 years ago when metallurgy was invented but 10,000 years ago or 12,000 years ago or even 15,000 years ago or earlier. Silver may have come onto the scene somewhat later, but not much.
The mysterious Cro-Magnon were making deeply hued paints and using them splendidly on cave walls 30,000 years ago. Is it possible that such advanced humans (who wore hats and even sewn clothes) were not familiar with gold nor silver? This begs comprehension. No, the chances are that gold (and silver) were stores of value long before either the advent of Sumer or the Neolithic.
It is much the same with farming. There is evidence that humans gathered wild grain LONG BEFORE farming (and the Neolithic) came to pass. Probably many thousands of years. Investigations of pre-history bear out that humans used the basic building blocks of the Neolithic long before city states came into being.
For Ms. Brown, to continue to insist that gold and silver as stores-of-value somehow arose with Sumer or even later flies in the face of human history. It breaks the rules of human tool-kit evolution. Long before cities were erected, human beings were utilizing sophisticated hunting and building tool kits. Here is a strong statement: There is, in fact, NOTHING in Sumer or any other great Neolithic civilization that was not in a sense anticipated by human technology THOUSANDS OF YEARS earlier – and that includes the value of money metals.
In all of recorded history, the state NEVER invents anything. It merely appropriates what seems to work in the private market. Money evolved in the tribal marketplace. Gold (and perhaps silver) were recognized as repositories of value long before there was Sumer, or grain banks or weights and tallies of municipal grain. Throughout history and with increasing emphasis, human beings have chosen gold and silver as money because of the properties mentioned above.
Ellen Brown DOES NOT WANT THIS TO BE, in our humble opinion. No, she doesn't wish to acknowledge this because it would interfere with her determination to advocate for the primacy of the STATE in all money matters. She cannot insist on state solutions if money is seen to have evolved privately. But it did evolve in private, tribal settings, in tribal trading and tribal "marketplaces." History shows us this pattern clearly. To present anything else is sophistry.
Ms. Brown is a most brilliant person. We always retain the hope she will come over "from the dark side" and argue for freedom and free-market money with the passion she now argues for state control of money. In fact, we have even written that her municipal solutions (especially if they are presented competitively) are probably better than the horrible monetary situation we have now. (We try not to be close-minded.)
But think of all the good she would do if she argued for free markets instead of what we call regulatory democracy. With all her brilliance, she is confusing people! It does not help to distort the true evolution of money, which arose within the context of the private tribal marketplace. The sooner that money is privatized once again (hopefully via free banking) the better off, freer and more prosperous people shall be – not only in the West but around the world.
Come over to the light, Ms. Brown! We stand on the other side and see there – right there – David Morgan himself is beckoning to you. He is a big man and will see you safely ashore ...
Posted by Pjritch@gmail.com on 11/20/10 05:14 AM
First, you guys are great. What a lot of thoughts on one page! I ask the following questions with full sincerity.
I have a question: if EFTs are trading in metals, and you and I can buy into non- EFT propositions that "store" for us our metals, won't this also lead to some "FIAT" market in metals? Especially in light of the possible development of governmental takeover of metals? Unless in physical possession of said metals, certificate ownership can be abridged.
Another question on turning "trade money" into "gold-backed" money. Are there enough metals on the planet to ensure my "dollars" in North Carolina, USA can be backed as well as my brother's whatever he uses in Nairobi? Could this be a creation of a "new elite", even if it wiped out the old PE of whom we're so fatigued?
If I earned $100 today and it was backed by say, gold, I earned 0.074 oz of gold 11/19/10. Multiply that performance by 30 years and I earn 809 ounces lifetime. Multiply me by how many million people? Billion people? How many do we expect to be a part of this pie? I know I'm over- simplifying. Just: Can it work?
Comment on grain vs. coin: Trade was more local and coin seldom passed as it wasn't a "needed item"-it fed no one, cleared no fields, inappropriate to burn for cooking or heat. A lot like gold today. Trade for production or services are well-suited for an agrarian society, for which we no longer have the mentality. Agrarian societies produced something. Even in the early coinage years, a significant population came in to contact with coinage rarely. Did they trade in metals? I'd say definately.
Also, a discounting of the "explosion" of sudden humanity as "suddenly man became the artist, etc." That ability has marked our species to this day. Cave-wall drawings were a quantum leap in technology and you can't tell me some guy didn't run as fast as he could to the next village and be Mr. Badass Showoff, with improvements. We're measuring their "explosion" in years in the thousands. 50 years ago we were not in space. 25 years ago we weren't on computers. 14.5 years ago we did not own cell phones. I can grant to them their explosion of humanity sans extraterrestrials that I myself have witnessed in one lifetime. One day we might be measured by the same yardstick and found wanting of the ability to produce our achievements alone, given our other achievements so dubious.
Posted by Alan on 11/12/10 08:18 AM
Benjamin Disraeli stated early last century ......" in Politics nothing happens by chance ", 99 % of the population in the so called civilised countries around the world never understand this, hence few see George Orwell's book 1984 as relevant today, most fools ( including the current crop of world leaders) think they know better.
Disraeli was right, there are very few major decisions that are 'chance ' question is will be ever get to money being backed on Silver and Gold ? I don't see the Chinese and Russians playing along at the moment, because they both ( especially the Chinese ) have so bought so many billions of US T Bills, the only way out would be to collapse the US backed currency and start again.
In the mean time, it would be wise to buy plain Silver coins and put them away, my 80plus mother told me it was common in Frankfurt and Berlin in 1945 to buy a block of apartments for a 1 ounce gold coin, I think we will come to that.
Posted by Syed on 11/04/10 09:48 PM
I would like to add one important fact from Islamic stand point. We believe that Islam comes from God (Allah, The Almighty) and He created everything which include Gold and Silver.
We are ordered to pay Alms if we possess 3 Ounces of Gold or 21 Ounces of Silver. This tells me the real ratio between the value of Gold and Silver is ONE TO SEVEN:
Gold:Silver :: 3:21
I believe we might witness this ration very soon.
Reply from The Daily Bell
Very good. The ratio, historically, in the West is supposedly 15/16 to one.
Posted by Syed on 11/04/10 09:40 PM
Islam, perhaps the ony regligion in the world, only recognizes Comodities to be used a money with Gold and Silver being the top.
The Alms are determined in terms of Gold / Silver which is supposed to be a measure of being rich or poor. How natural?
Reply from The Daily Bell
Yes, Islam has much to recommend it - though in America especially you would never know it, currently.
Posted by Merle A. Peabody on 11/02/10 02:05 PM
I find this all quite interesting, but am not entirely sure as to the processing of all of it. I was a very bad student of Math and Economics ideas. However, that material that I do understand(the historical and political aspects) are quite interesting. Mr. M.A.Peabody
Posted by Jb Johnson on 11/01/10 09:44 PM
Perhaps God put silver/gold in the earth to serve as measures of value as in "this hamburger costs 4 silver dollars" or 4.2 paper silver certificates(5% more if paid in paper money) rather than real money---silver or gold. In the late 1800's, in some parts of Texas, this actually took place. If someone wanted to purchase something the price was (example) 10$ in silver or gold coin but it was $10.50 in paper dollars.
You see, gold and silver will establish their own level just as a body of water seeks its own level. This is because of supply and demand in that as more gold/silver is offered the price will decline. As less gold/silver is mined, the price will go up. In the end (absent government interference) , gold/silver will be sold by the most efficient miners at a modest profit and the less efficient mines will not operate until the price increases at which time more silver/gold will be produced
Posted by Roy T. Pirhala on 11/01/10 12:57 PM
A brilliant and comprehensible essay of silver factors present and past. Well done. I have invested in Silver Eagles and plan to hold for a long term major upswing, certainly well into the next decade.
Posted by Sharon on 11/01/10 11:10 AM
Great article. You just can't argue with the truth. Money of any kind should never be held and controlled by the state or the banks as we have it today. Just look around to see the disaster we have in this country and others around the world because the money is in the hands of the bankers instead of the people. Simple facts.
Posted by Ellen Brown on 11/01/10 10:38 AM
P.S. I just read the other comments here. I'm a firm believer in gold and silver as investments, and practically all my invested money is in them (except for one good Canadian oil stock). And I'm totally opposed to war. I thought about writing a book called "Men go to war, women go to lunch" but never got farther than the title.
Reply from The Daily Bell
"Men go to war, women go to lunch"
Ellen, are woman REALLY less aggressive than men within the political arena? Merkel, Thatcher, Clinton, Pelosi, for example - in your view these are peaceable people who are qualitatively different in terms of how they lead? Ms. Pelosi has been called the most authoritarian House Speaker who ever lived. Ms. Clinton has had opprobrium heaped upon her for her innate aggressiveness and focused vituperation. Thatcher went to war and Merkel is doing what she can to foist an authoritarian EU on her German citizens - who don't want it. From our point of view, there seems little difference as to how men and women function at the top. It is the system itself that poisons the well.
Posted by Ellen Brown on 11/01/10 10:28 AM
Dear Daily Bell, I'm honored to be considered the founder of a movement, but as Mike Whitney says, I'm really just a writer in search of a good subject. Banking and where it has gone wrong are the most interesting subjects around these days! As for being "energetic" in pursuing them, if you lived with your 91 year old mother in a senior village, you too would spend your days buried in your computer. (Actually my mother was in the hospital yesterday ' she fell off her scooter ' but she seems to be okay.)
On to the subject at hand: which came first, gold and silver coins or money as a unit-of-account? The fact that "metallurgy" can be traced to 6000 BC does not mean that metal coins go back that far. Metallurgy is the extraction of metal from ore. It was necessary, for example, in order to create metal weapons and metal tools. The first known metal coins used as money, according to the British Museum website, date only to 600 BC and were found in Turkey. The Sumerians did NOT use metal coins as money. According to Bernard Lietaer, they did have a bronze coin, which the British Museum seems to have missed; but it was used only for religious purposes. It was the ticket of the farmer to get in to see the vestal prostitute in order to insure the fertility of the harvest. (She wasn't considered a prostitute; it was all very lofty and ceremonial.) What they used for trade was an accounting system based on weight, in which MANY commodities were all given a value. Prices were fixed and could be compared to each other: so many shekels of wheat equaled so many shekels of barley equaled so many shekels of silver, etc. (I can dig up the citations if you doubt this; I'm currently working on a book that will be heavily footnoted.) Sumeria lasted 1600 years as a stable and peaceful civilization, and its accounting system was continued after that by the Babylonians (including Hammurabi) and others. Correct me if I'm wrong, but I believe that 1600 years is far longer than any nation has lasted that has used gold or silver as a currency.
I agree that the governments we have now tend to be on the "dark side," but my whole point is that we have LOST our government; we need to get it back as an institution serving the people collectively rather than private bankers. Government today has been largely taken over by the mafia. The U.S. Constitution presupposes a nation of laws overseen by a government operating in the interests of the people and the "Common Wealth." That government remains powerless so long as its money supply is issued and controlled by a cartel of private international bankers. Like you, I want to see it pried loose from that cartel.
I suppose I'll take no end of grief for bringing this up, but Zechariah Sitchin suggests that the Sumerian and Egyptian civilizations actually WERE directed by extraterrestrial "gods," as their literature claims. How else to explain the amazing feats they achieved, including the Egyptian pyramids and Sphinx, which emerged full-blown in a desert populated before that by quite primitive cultures? According to their hieroglyphics, the early Egyptian pharaohs had their third eyes opened. Unfortunately, we don't have any such enlightened leaders today.
Reply from The Daily Bell
Dear Ms. Brown ...
Gold and silver do not need to appear as "coins" to have been used as a store of value! Bits of gold and silver by weight may have been used WITHOUT coinage. Jewelry could have been traded. Who knows? They just found a city drowned off the coast of India the size of Manhattan that is dated to something like 7000 BC - 9,000 years old. Are you suggesting that such civilizations did not use gold and silver money? In India?
You write ... "Correct me if I'm wrong, but I believe that 1600 years is far longer than any nation has lasted that has used gold or silver as a currency." Well ... how about Ancient Egypt? Egypt waxed (and waned) for 3,000 years didn't it? And ancient China too, in various formulations, has continued culturally for some 9,000 years (at least) using gold and silver as money alongside of bouts of "flying" fiat money as well. Actually, almost any "civilization" you can name used gold and silver as a store of value at some point in its history in our view.
But in fact "civilization" is a funny term. "Civilization" is composed of individuals involved in INDIVIDUAL human action. Sumer was initially a series of city-states, which is how all "nations" begin. The "greatness" of the culture is established during the time when the city states (and amorphous municipalities) compete against one another and despotism is held in check because no one city state can oppress its citizens for fear they will migrate to a similar city state with the same language next door.
Eventually city states are merged and the era of greatness and cultural ferment subsides. The era of greatness is subsiding, though according to modern, statist interpretations, it is only the RISE of despotism that presages the "efflorescence" of the municipal enterprise. In fact, tyrants arise and consolidate in the name of efficiency; it is no advancement at all. The "honor of the nation" and its "progress" is a manufactured entity without reality (there is in fact no "nation" only people with various degrees of similar culture gathering together to assist one another via specialization.)
You make the comment that Sumer lasted 1,500 years. No, what lasted 1,500 years was a culture of farming and progressive industry with similar rituals, religion, etc. The greatness was in the people and the culture itself, not in its centralizing influences. The greatness was not "Sumer." The greatness lay in the culture and its people.
In fact, "Sumer" as an forcible agglomeration was usually in a state of war as we understand it, as were and are most nation-states (ancient or modern.) Thus, you are confusing culture and peaceable accomplishments with the "nation state" consolidated and then ripped apart (over and over) by force of arms.
The glory of humanity is its peaceable interactions and free-market thinking within voluntarily, interlinked tribal cultures. The horror of civilization is the constant agglomeration of power and tribal cultures into one large or enlarging "nation" or "world order."
If you intend to enshrine the "nation" as the repository of culture (and money) you will be wrong!. PEOPLE are the repository of culture. PEOPLE organize into tribal cultures and make advancements which help them live better. There is NO NATION which ever did this. A nation is merely a construct of PEOPLE.
Now if you are suggesting that people can only function when they are regulated, incarcerated and otherwise harassed by central authorities, we would suggest you are wrong as well. People function best in tribal groups of up to 150, which is apparently the number of people modern evolution allows an individual to recognize and interact with on a regular basis.
It is PEOPLE who began using stores of value - silver and gold. It is people who doubtless traded gold and silver and acknowledged the value therein. To continually maintain somehow that the value inherent in gold and silver (or anything for that matter) was somehow magically inferred by states, temples or some other organizing, authoritarian force is simply to insist that people can only function when appropriately harassed by their "betters" and "leaders." It is also to ignore the majority of the history of humankind, during which tribal cultures reigned and city-states were not yet established.
Why such an intelligent person as yourself continues to insist on the primacy of the state (versus individual human action) as the motivating force of human greatness and progress is a mystery to us. You yourself are a good example of individual human action, and yet you constantly argue for the forced interactions of large groups of people in an involuntarily, intergenerational agglomeration called "the state." Why?
Posted by Radek on 11/01/10 10:26 AM
Thank you for an interview. David Morgan is a very balanced spoke person for silver/gold. For all people who bash him for being too conservative then you do not understand what does it mean to get hate letters from people whom you have convinced to buy into gold/silver just before the correction. Too many people want to have their lunch prepared for them even in the investment area. As soon as the advice causes them to loose money they look for escape goat. David is just trying to protect weak-hands from overexposure which most of the time results in selling at the worst possible point.
I myself own 66% of my assets in physical gold/silver and I would never attack David Morgan for only advocating 25%. I know sufficiently well the game played by big commercials and will not sell even if there was another 50% correction coming. Many people will not have a stomach to weather the final paper attack on gold/silver (if it is coming).
Great work DB.
Can you do something to reverse the monetary system in Switzerland and go back to honest/private money system? Making gold/silver part of Swiss monetary system would just deal a killing blow to the elite plans to introduce global currency.
Are there any silver/gold mines in Switzerland? I would like to buy some shares as these companies will never be nationalized and I could add to my position some stocks.
Posted by Leonardo Pisano on 11/01/10 05:39 AM
"It is the elves that give us the most problems. Put any two elves together and you end up with THREE opinions. Imagine 1,000 of our Daily Bell elves together in a single conference room ... [DB]
Ha! Please stop, because I love it so much!
Posted by Leonardo Pisano on 11/01/10 05:35 AM
"Why ANYONE would want the the state to control ANYTHING in this day and age is a mystery to us."
Hmmm, you want to return to medieval times? We'll need some rules, although I agree that the amount can be significantly reduced. Not every human being is capable of doing without. The right of the strongest is not just per se. Frankly, I think that the state can be entrusted with infrastructure for the benefit of all (roads, waterways, etc). Some central defense, and a law and order system are convenient too.
Posted by Pat Fields on 11/01/10 04:58 AM
If one makes a distinction (which I believe one must), we're experiencing both financial and monetary crises interleaved. It didn't seem to me as though Mr. Morgan comprehending that into his viewpoint. It delighted me to see, however, that he recognized the impossibility of fully amortizing debt in the current scheme.
For anyone who has been seriously mulling ramifications of my past statements here, I would point out that percentage increase of mine production is accretive, whereas figures on percentage increase of population is a compounding, with short period exponential factors ameliorated by death rates. Though growth of population is approximated at 1.5 to 2 percent, in proper context it exceeds metals extraction, resulting in the natural 'demand factor' value appreciation I've propounded.
Posted by Acudoc on 11/01/10 12:58 AM
I enjoy reading the DB and the comments immensely. In this article there were some very interesting thoughts and speculations on the proto-history of mankind.
One thing is for sure: it has been a long, slow, and plodding slog (for the moment let's just assume that's a word) to get to where we are now as a species. My main beef with fiat money is that it destroys the potential for true capital accumulation and in fact causes capital decumulation in the long term. Fiat money (and fractional-reserve money---a little zing to the DB)is just so disrespectful of true capital and its meaning---someone has foregone direct consumption to make things better in the future.
We take so many things for granted. The realization of mankind's slow and painful path to the present calls to mind JFK's words in his commencement speech at American University on June 10, 1963. I think I may have quoted this before, but to me the words are so moving I want to repeat them---
"...in the final analysis, our most basic common link is that we inhabit this small planet. We all breathe the same air. We all cherish our children's futures. And we are all mortal."
Keep up the great interviews.
Reply from The Daily Bell
Posted by RT Carpenter on 11/01/10 12:02 AM
Thanks for your silver analysis. I have been on the "same page" in the recent past. After 50 years of investing and trying to preserve value, I have learned and relearned a fundamental lesson: Every investment in stocks, bonds, insurance, annuities, CDs, demand deposits, money market funds, and so forth, is at least twice removed from the value represented. They are all Derivatives--and therefore inherently unstable, dependent on institutional trust and continuity. Every saver should have "real" assets, such as agricultural property and precious metals. In the event of upheavels and collapses, which are common in historical time, derivatives can lose all value, where real assets retain their value.
Posted by Wrusssr on 10/31/10 11:23 PM
Thanks for another outstanding interview, afterthoughts, and platform allowing readers to joust and cross swords. What a great discussion. Ought to be mandatory reading for college students.
After the fiat collapse, I'm leaning toward some type of gold and/or silver confiscation attempt.
In the past, one could walk into any reputable metals dealer and purchase just under $10,000 worth of, say, silver eagles, and it was not reported to the IRS.
This hedge against inflation and/or dollar devaluation will no longer be allowed after January 1, 2012. That's when mandatory health care kicks in. Buried in this bill/"law" is the requirement that any gold, silver, fiat money, token, medal, or foreign coin purchases of more than $600 must be reported to the IRS on a 1099 form. This also applies to all other businesses for all purchases as well. . . flea markets, craft shows, independent contractors, hair dressers. http://about.ag/reporting.htm
Question: Why would they want to do this?
Answer: So they'll know who is holding how much of what. In this manner, and with the new technology, the boys behind the curtain will know where to go to if they decide to confiscate. Plus, the IRS can more accurately discover ". . .who's not paying their fair share."
My sense of fairness about these criminals tells me they'll go for the gold and silver after the fiat collapse. Everyone knows what the elite's muscle (the IRS) will do.
Have to give Oz credit for creative thinking, though, and for coming up with another way to shake pocket change from an upside down middle class; many of whom are jobless.
H.R. 5141 has been written to exempt this $600 requirement from the Health Care bill prior to implementation in 2012, but nothing has been voted on to date. I wouldn't count on it.
The DB reader's parents (grandparents?) who held onto their gold back during the Thirties were smart, in my opinion. Those who had their gold in safety deposit boxes and vaults had to give it up to the government reps sitting there when they went to retrieve it.
The Latex trader? Can't see a farmer trading vegetables and meat for it. Could be wrong, though.
The elite somehow managed to move their $25 oz. gold tonnage offshore prior to the Thirties confiscation. When Roosevelt's administration grabbed all they thought they could get from the rest of America, he kicked the set price to $35 oz.
Is this a land of opportunity or what?
Posted by MGN on 10/31/10 10:52 PM
News flash 2013:For Sale:50 acre farmhouse with barn and livestock.Also included:5 Benelli home defense pistol grip 12 gauge shotguns with 5000 rounds 00 buckshot.Price:10 ounces of gold and 50 ounces of silver.
Posted by CompassionateFascist on 10/31/10 09:50 PM
Post-system collapse, silver will get you food. Gold will get you killed.
Posted by Alkibiades on 10/31/10 07:26 PM
"This is a common misperception. Cro magnon had a larger brain than modern humans. They wore hats and sewn clothing from what we can tell from certain cave paintings. They appeared "out of nowhere" some 30,000 years ago and painted some of the most beautiful paintings on rock walls ever seen."
Stan Gooch worked out the theory and collected a lot of evidence for it that the sudden explosion in the complexity and style of paintings and use of tools is due to modern humans originating from interbreeding of cro magnon with neanderthaler, known as 'hybrid vigour'. Thats also why we have such complex souls.
Click to view link
Stan Gooch: "City of Dreams"
Reply from The Daily Bell
Yes, Gooch. We are not sure as he is of the Neanderthaler part. Thanks for the link ...