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Hello, Subscriber!
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The Monetary System is Unstable
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The Federal Reserve has been integral to our banking system since 1913, and it's no secret that the effect has been negative. The chart at right illustrates that the basket of consistent goods tracked for "consumer price index" levels for $9.80 in 1913 would run nearly $300 today. The Federal Reserve version of the "U.S. Dollar" has lost 96.5% of it's purchase power by those numbers. Sadly, inflation is just a symptom of a much larger problem.
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In order to understand this week's article by Ted Butler, you need to understand a few things about trading stocks and commodities. First, commodities are traded on the exchanges both physically and by contract, which are called "derivatives". If I have a contract for 10,000 tons of anything, the contract may be a valuable consideration, but only if the person who wrote me the contract can deliver the "goods" when it matters. That's a position referred to often as "short"; you hold a claim on considerable value, but you don't own the actual commodity or security yet.
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Stocks are often "borrowed" to be sold short, and must be returned to their rightful owner. IF they can be bought later at a cheaper price than the price at which you sold the borrowed stock, you can pocket the difference; with a good deal of risk. It may be calculable for a talented and experienced trader, but it is still risk.
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The opposite position, being "long" means you have bought and paid for that which you hold, commodity tons or shares of stock, and you have rights of ownership and can trade it freely. Our markets today are saturated with "derivatives" that keep being traded rather than "filled" as delivery of the contract goods, and it's a situation and at levels that have become very unstable.
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What has happened recently is one major investor was influential enough to hold 6% of the market's nickel (150,000 tons) and it nearly collapsed the London Metals Exchange (LME). The short positions of silver on the commodities exchanges are 10 to 20 times that at given points. Ted Butler, the man considered the "silver guru" for decades is concerned that market is in danger. When the market cannot deliver, how valuable do the goods you hold in hand, your "long-position", become?
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The reason I find this article critical is I believe the monetary system of "printed paper backed by nothing", a fiat currency, will eventually implode and fall to its inherent value of zero as all other fiat currencies in world history have done. This is the system that the Federal Reserve and all it's member banks support. How many federal banks will fail when this system collapses? Where do you hold you money at present? I don't hold my long-term savings in a bank; at this point, it's financial revolver-roulette with at least five rounds chambered.
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It is why I pay attention to the gold and silver discussions. When the currency in use fails, man will need and look for a form of money that can be used in its absence; one of many reasons Bitcoin and thousands of other cryptocurrencies have been popular in recent years. Many crypto currencies are backed by nothing of value; but to their credit some are. Crypto currencies, however, rely heavily on energy and technology to be useful. How do you use crypto when the internet is down? When the power is out?
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The metals, by comparison, have been money and used in trade for over 5000 years. We may again need to return to an "honest" system of trade, value for value, rather than using "bills of credit" in the form of Federal Reserve Notes, which are prohibited in the U.S. Constitution.
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If the presence of silver to gold in the Earth averages 15:1, what might the market value of an ounce of silver become if gold today is trading at $1944 per ounce?
[see end of email for the answer]
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If you find this interesting or helpful, please share it.
Here's some more worthwhile information:
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The Real Lesson of LME Nickel
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"If short positions at 6% in nickel caused prices to double and triple in a matter of days, what will be the reaction in silver with short positions from ten to twenty times larger?" (paraphrased)
Ted Butler, Silver Seek [LINK]
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The failure of fiat currencies and the implications for gold and silver
A rather heady Master Class, but packed with historical reference and foundation, tied to current events. I've been beating that same drum, but, hear it from those who are millionaires and billionaires, people proven to understand how to manage and grow wealth.
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April 14, Alasdair Macleod, Goldmoney Insights [LINK]
April 21, Alasdair Macleod, Goldmoney Insights [LINK]
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More than two dozen Republican governors are promising to secure the southern border with a coordinated strike force. The group’s mission is to stop illegal drug and human smuggling at the southern border. Doug Ducey might be good for something yet. Only time will tell.
One America News: [LINK]
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"the SEC should be there to protect small investors, but in his view, it actually protects bigger investors – unless they are critical of the government... SEC Attacked Elon Musk Due To His Criticism Of The Government"
Marc Faber with Adam Taggart #1: [LINK]
Marc Faber with Adam Taggart #2: [LINK]
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MoneySmart Chapter Tours
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Having more money to manage is matter of the habits you use to manage the money you have! Check out the MoneySmart online chapter tours here:
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Trading Time-for-Dollars has it's Limits!
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Historically, the price of gold makes an account of all available fiat currency when currencies crash. If gold is expected to become priced between $20,000 and $30,000 USD per ounce to cover, to what level might the price of silver advance?
[see end of email for the answer]
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A few handy financial literacy tools:
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xls: MS Ch2: Monthly Budget Sheet Expanded
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Make your monthly budget and financial planning easier with a spreadsheet. 500 line capacity for records, 25 user-defined categories, sort by source, date, or category with one-touch buttons, and plan for long-term expenses with two figures: the total amount, and how many months until it’s due! Simple!
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$35.00
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xls: MS Custom Invoice
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A self-calculating spreadsheet formatted as an invoice that subtotals, totals, and calculates a tax rate automatically. Personalize with a logo and your company contact information; buy it once, use it forever!
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$15.00
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