My name is Shawn Ozbun, and our goal is to keep you up to date with what’s going on in the world of Gold and Silver by providing you with current news and precious metals pricing.
The Silvertowne Vault Cast is brought to you by www.Silvertowne.com
Hello and welcome back to the SilverTowne Vault Cast! I’ve been getting a lot more feedback, questions and comments here as of late and I wanted to say thank you for your support and ask you to please continue to support this show. Share these shows, and get them out to your friends and family. This show normal only runs about 15 minutes so just about anyone can find time to listen.
Today’s show may run a bit over our normal time frame but I will do my best to get through the information quickly.
Today we are going to be disusing how the middle class seems to be disappearing, we are going to be asking the question “are you prepared for Hyperinflation?” and finally I’m going to give you a small history lesson on the Weimer Republic and their financial collapse.
Now the reason I use Weimer as my example is because it’s one of the most recent historical events that is well documented. I could just as easily use Rome but I think the Weimer example really drives the point home.
Before we get into all this let’s take a look at today's precious metals pricing.
Gold - $1577.40 down $1.55
Silver - $28.73 down $.24
Platinum - $1591.00 down $6.50
Palladium - $773.00 down $5.00
Middle class disappearing from economic collapse, higher prices, stagnating wages
Middle-class Americans are struggling to make ends meet: prices are going up at the grocery store, wages have been stagnant and the United States dollar’s purchasing power doesn’t buy as much as it used to. Are middle-class Americans being left behind in the collapse of the U.S. economy?
Despite the federal government spending hundreds of billions of dollars in an attempt to restart the economy, most Americans aren’t seeing any improvements and studies have suggested that they aren’t very optimistic about the future of the country.
Can anyone blame them, though? The unemployment rate remains relatively the same, most of the workers’ mid-wage occupations that were held prior to the Great Recession have been transitioned in to low-wage employment opportunities and more Americans are working part-time rather than full-time. Even debt remains an issue as a significant percentage of Americans rely on their credit cards to stay afloat – 44 percent of U.S. households are one financial emergency away from ruin.
For those who have been able to garner a raise at their job, it has become superfluous because this year led to the expiration of the two percent payroll tax cut (4.2 percent back up to 6.2 percent). Therefore, a worker earning $50,000 this year will take home $1,000 less.
Not only do Americans have to deal with less money, the cost of living continues to soar: grocery prices are projected to jump four percent this year, healthcare premiums are increasing by an average of 6.3 percent across the country, shipping costs are seeing hikes of at least 4.5 percent and the rates of tuition are spiking by 4.8 percent.
Even if Federal Reserve Chairman Ben Bernanke likes to insist that inflation and the effects are inflation have been rather tepid, the old Chico Marx joke would suffice in this case, “Who are you going to believe? Me or your own eyes?” Read More...
Are You Prepared for Hyperinflation?
The Gold Report interviewed a man named Lenard Melman author of The Melman Report. I'm going to read a couple of the questions and answers of this interview and then Ill leave a link in the notes on SilverTowne.com and on YouTube so you can read this entire article.
Leonard Melman: When prices are going up, you wouldn't want to be in housing stocks or auto financing, but you would certainly want to be in precious metals. You also might want to short the bond market. That is why you have to be aware of the direction of inflation. It is important to the concept of precious metals pricing.
If you've been around for a few years, as I've been lucky enough to be, then you can easily recall a time when high inflation was the absolute key ingredient in massive previous bull markets. That is why I thoroughly look at what has led to past inflation and hyperinflation. I use four examples: the Roman Empire, the French Revolution in the late 1700s, the German hyperinflation in the 1920s and the recent catastrophe of hyperinflation in Zimbabwe. I examine whether America and other countries in the world are perhaps following the same paths that led to those previous hyperinflations.
TGR: Do you think investors are going to see hyperinflation in the foreseeable future?
LM: Not immediately. It's like a doctor looking at a patient who is showing all the early signs of cancer, but the actual tumor hasn't yet developed. It would be unwise to ignore those developing symptoms. That's where I think we are. We don't have hyperinflation yet, but many of the pathways that led to previous hyperinflations are present, and I think it would be very foolish to ignore them.
TGR: In a recent edition of The Melman Report, you quoted Patrick Armstrong, head of investment selection at Armstrong Investment Managers, as saying, "We think a currency war will be the biggest story of 2013." How is that likely to affect precious metals equities?
LM: There has been a lot of coverage about currency wars recently. So far the main participants have been countries like Japan and the European community, which are very concerned that strength in their currencies is going to limit their ability to export goods at a profitable rate. Japan has recently done everything it can to lower the value of its currency and the euro is now entering a new period of weakness. So far, the one currency that hasn't played this game is the U.S. dollar. The other currencies look weak compared to the U.S. dollar. When the U.S. dollar looks strong, usually gold and silver perform poorly, which we are seeing now. As the year progresses, the dollars' immunity will soften, which should spill over into higher precious metals prices.
TGR: Gold has fallen below the $1,600 per ounce ($1,600/oz) support level. What is your macro picture for gold?
LM: I'm not one to ignore charting. I'm a member of the Canadian Society of Technical Analysts. I can't ignore the weakness that gold is showing. However, I believe powerful forces, such as inflation and currency devaluation, are going to appear stronger in the future. That should lead to higher gold prices over the second half of the year.
Another factor is that countries are now repatriating their gold holdings. Germany just announced it is going to be bringing back much of the gold now held in foreign storage, particularly in France and in America. Venezuela just repatriated all its foreign gold holdings and Switzerland is now moving forward with a referendum on whether it should reform or repatriate all its gold holdings held in foreign lands. A lot of underlying pressures will be positive for gold and silver ultimately.
Read More...
The Weimar Republic Collapse. What we can learn from history.
Now I’m just going to be going over a few bullet points here. I have included a link were you can read all these bullet points and really get yourself a wealth of information. I highly recommend you take the time to educate yourself about all the issues that are listed in the article.
• The inflation's roots were in World War One, which Germany financed with outsized budget deficits
• During the war, the German government used extensive propaganda to hide the inflation from the population
The German government appealed to patriotism to fund the conflict, using slogans like "I gave gold for iron," and "Invest in War Loan."
Furthermore, it censored information heavily:
• By September 1920, prices were 12 times as high as they had been before the war
• In March 1921, France occupied German ports because they couldn't make reparations payments
Lord D'Abernon, the British ambassador to Berlin, warned the Allies that Germany would not be able to repay, but France insisted, and then occupied German ports:
• Meanwhile, amid the economic gloom of the lower and middle classes, the rich were spending money like crazy
To avoid high taxes, the rich instead spent as much money that they could. However, it highlighted the class divide in Germany, where lower income earners were having trouble getting by:
• Meanwhile, anyone who could get their hands on foreign currency was selling the mark
• Meanwhile, goods were flying off the shelves of shops as people tried to protect themselves against the falling value of the currency
• But regardless of the politics, by Christmas 1921 ordinary Germans were feeling the squeeze of inflation
By the end of 1921, workers had lost so much faith in the government that many just stopped voting. The economic hardships brought about by inflation were evident in everyday prices:
• by the autumn of 1922, inflation started to outpace wages once again, and everyone felt the pain
• And in September of 1922, prices for basic goods soared
A litre of milk, which had cost 7 marks in April 1922 and 16 in August, by mid-September cost 26 marks. Beer had climbed from 5.60 marks a litre to 18, to 30. A single egg, 3.60 in April, now cost 9 marks.
• In only nine months... [the] weekly bill for an identical food basket had risen from 370 marks to 2,615.
• by the summer of 1923, food shortages were hitting Germany hard
The domestic situation in Germany resulting from the French occupation led to a full-blown food emergency by August of 1923:
• At the end of September of 1923, the German Chancellor declared a state of emergency and put Germany under military rule
Seeing the waning confidence of German workers in the Ruhr and Hitler's rise to power in the Bavarian region, the German chancellor took decisive action to maintain control of the situation. Read More...
Ok so I gave you a mini history lesson, but what does this have to do with Gold and Silver. After all this show is about using precious metals to protect your wealth right?
Jan. 1919
Silver 12
Gold 170
Nov. 30, 1923
Silver 543,750,000,000
Gold 87,000,000,000,000
So what happened here? What happened is Gold and Silver maintained its value against the mark. Now I've said it before and Ill say it again. You wouldn't be able to eat your gold or cloth your body with it to keep warm. What it does do is maintain your wealth. Weather you use it to barter or use to buy into whatever new currency follows the currency that just collapsed.
Obviously if there is an economic collapse your not going to be living large just because you own something of value. Everyone would feel tremendous pain from something like that. I do believe it will at least help protect your wealth. Those who had millions of marks ended up having nothing but paper during that collapse. Would you rather have paper or precious metals?
For the best source for acquiring gold and silver please contact Silvertowne at 1-877-477- coin, that’s 1-877-477-2646 or you can visit us at www.silvertowne.com. Silvertowne has been a trusted precious metals and numismatics dealer since 1949.
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[Disclaimer] Shawn Ozbun is not a licensed financial adviser, there is risk associated with all investment including gold and silver. You should seek advise from a licensed financial expert before making a purchase.
