Former US Mint director Ed Moy appeared on Fox Business this week to talk about the popularity of gold as a safe-haven investment. Moy noted that in spite of ongoing negative sentiment toward the yellow metal, people in both the East and West continue to buy it. In fact, the US Mint’s gold bullion coin sales doubled in September versus August, showing that investors see gold’s depressed price as a buying opportunity.
Euro Pacific Precious Metals is now SchiffGold. Below you will find a personal message from our Chairman Peter Schiff.
We’re proud to announce this new responsive website and a new brand that is clear and simple, just like our business philosophy. We are committed to bringing you the lowest prices on investment-grade gold and silver, along with the highest quality customer service in the industry. Call and speak with one of our Precious Metals Specialists to learn more: 1-888-GOLD-160 (1-888-465-3160).
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Switzerland is ranked as the freest economy in Europe in the 2014 Index of Economic Freedom, published by the Heritage Foundation in partnership with the Wall Street Journal. In the world rankings, Switzerland is the 4th most economic free country. While the United States Federal Reserve argues that inflation is necessary for economic stability, it should be noted that Switzerland has achieved its economic freedom with a current inflation rate of negative 0.7%. That means consumer goods are getting cheaper for the average Swiss citizen every year. Try to wrap your head around that, Janet Yellen. And while you’re at it, explain why the United States isn’t even in the top 10 freest economies in the world.
Yet in spite of this relative prosperity, the Swiss populace is not satisfied. They want more freedom and are getting ready to demand more economic responsibility from their central bank, the Swiss National Bank (SNB). This fall, the citizens of Switzerland will be voting on a referendum that would dramatically alter the SNB’s gold bullion allocations and holding policy.
A recent article on the Wall Street Journal’s blog draws attention to the high cost of producing a single penny – 1.6 cents each, to be exact. They blame this unsustainable price on the high cost of zinc, which makes up 97.5% of every American penny. The online publication Quartz ran with this story, giving it a new headline: “It costs 1.6 cents to make one penny because of the rising price of zinc”. Time for a short economics lesson.
An alternate, more accurate headline for this story would be, “It cost 1.6 cents to make a penny because of currency debasement.” Rather than pondering whether or not the United States should simply stop producing pennies to save money, Americans should really be thinking about the long-term effects of currency debasement that has been going on for generations.
Listening to the financial media, you might be convinced that the precious metals – gold in particular – are simply not considered reliable investments anymore. This is a viewpoint peculiar to the West, as Peter Schiff has repeatedly emphasized. However, every now and then, the mainstream media shares some news reminding us that while Americans and Europeans might be disenchanted with the yellow metal, other countries are still very concerned with protecting their savings with the hard asset that has served as a safe-haven for thousands of years. Often that news comes from countries that have a much longer history of troubled economies, and therefore a greater understanding of what assets carry real value in this world.
Today, for instance, Bloomberg published two stories about central bank and Chinese gold demand. In the first, “China May Boost Gold Reserves Amid Imbalances in Holdings“, Bloomberg reports on research from the London-based Official Monetary and Financial Institutions Forum. David Marsh, managing director of the Forum, reminds us that while China hasn’t officially announced an increase in its gold reserves since 2009, there is a good chance that it will very soon. Marsh vaguely suggests that China has been adding to its reserves since 2009 “in different ways.”
This week, Chuck Jeannes announced that either this year or next, miners will have reached “peak gold.” Peak gold means that the amount of gold being pulled out of the earth will begin to shrink every year, rather than increase, which has been the case since the 1970s. Jeannes is the chief executive of the world’s largest gold mining company, Goldcorp, so it’s probably safe to assume he knows a thing or two about mining the yellow metal.
Let’s put this into context. Central banks continue to stockpile gold (even Scotland is wondering how much of the United Kingdom’s gold it will get if it becomes an independent country). Nobody knows how much gold China is hoarding, but pretty much everyone assumes it’s a lot more than the official reports. Smart economists like Peter Schiff and Jim Rickards have been pointing out for a year now that gold buyers throughout Asia are accumulating more and more gold from Western investors, and they have almost no intention of selling it.
For physical precious metals investors, all of this news should hit home. What happens when this robust demand for gold runs up against the hard limits of the mining industry? This is simple supply and demand – prices go up.
As gold production declines, the miner’s job becomes harder, as companies compete for increasingly rare deposits. Discoveries have already tapered off. In 1995, 22 gold deposits with at least two million ounces of gold each were discovered, according to SNL Metals Economics Group. In 2010, there were six such discoveries, and in 2011 there was one. In 2012: nothing.”
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The Silver Institute’s August edition of Silver News is now available. This issue explains the fundamentals behind the surging growth in demand for industrial silver, which is expected to exceed global GDP growth through 2016. The constantly evolving industry for silver technology is largely to thank for this increasing demand. August’s Silver News highlights some of the fascinating new applications of silver, including:
- Two forms of 3D printing with silver
- Using heated nanosilver to treat cancer
- Screen-printed silver circuits that cure in UV light
- Antibacterial silver on home hardware products
You’ll also find an explanation of how silver is used as an essential chemical catalyst in the production of ethylene oxide (EO), which in turn is needed to create ethylene glycol. Ethylene glycol is one of the most important substances in our modern world.
Ethylene glycol, in turn, is used to produce many products including polyester fibers for clothes and carpets, plastics, solvents and other chemicals, and even antifreeze formulations. By itself, EO is used to sterilize many health-care products and medical instruments, including delicate electronic or optical tools, which would be harmed by the high heat or radiation sterilization processes. EO is also used to accelerate the aging of tobacco leaves, as a fungicide, and even as a preservative for spices.”
Image: Tanaka’s printed silver circuit board.
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The financial media regularly plays down reports of consumer price inflation that are much higher than the official numbers. Even worse, analysts generally argue that more inflation is needed for the health of the US economy. Pippa Malmgren, author of a new book, Signals: The Breakdown of the Social Contract and the Rise of Geopolitics, has been studying price inflation that is cleverly hidden – she calls it “shrinkflation.”
Shrinkflation occurs when consumer products cost the same, but contain less. For instance, Malmgren points to Cadbury chocolate bars that were reduced in size in 2011, while the price remained the same. Nestle’s Shredded Wheat and Carlsberg beer are two other major companies that are practicing shrinkflation. Haagen-Dazs shrunk its “pint” of ice cream by 20% in 2011. Here’s an entire list of shrinkflation products published by CNN Money three years ago. Peter Schiff has talked about this very phenomenon in his videos and podcasts for years.
The financial media will likely downplay this trend in favor of broader, “official” measures of inflation that show prices are well under control. However, they’d be missing one of Melmgren’s most important insights: “Shrinking the size of goods is exactly what happened in the 1970s just before inflation proper set in.” At a certain point, a company can’t just keep lopping squares off of the chocolate bar – they’re going to have to raise the price.
Remember, if there’s one thing you want to be holding when inflation really hits hard, it’s physical gold and silver bullion.
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The John J. Heldrich Center for Workforce Development at Rutgers University released its latest Work Trends report. The national survey found that Americans are extremely pessimistic about the state of the US economy in spite of the financial media’s claims that a strong economic recovery is underway. The report is titled “Unhappy, Worried and Pessimistic: Americans in the Aftermath of the Great Recession”. Some of its major findings include:
- One-quarter of the public says they’ve experience a major decline in quality of life.
- Only one-sixth of Americans believe the next generation will have better opportunities than the current generation.
- Most Americans don’t think the economy improved last year or will in the next.
- Four in five Americans don’t have any faith that the government will be able to improve conditions in the next year.
The report paints a bleak picture of the American workforce and economy coming from the direct experience of American laborers. Cliff Zukin, co-director of the surveys, said:
“Looking at the aftermath of the recession, it is clear that the American landscape has been significantly rearranged. With the passage of time, the public has become convinced that they are at a new normal of a lower, poorer quality of life. The human cost is truly staggering.”
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Stocks continue to soar to record highs and the media breathlessly touts the economic recovery. But the Fed-fueled bull market for stocks can’t last forever. Some renowned experts are issuing ominous warnings:
- Nobel Prize-winning economist Robert Shiller says the stock market is looking very expensive. By his metric, stocks have only been at their current level three other times: 1929, 1999, and 2007.
- Hedge fund king Carl Ichan says, “We are in an asset bubble.” He describes a “dangerous financial situation” dependent on the Federal Reserve continuously refilling the punchbowl to stimulate the economy.
- Ex-Treasury Secretary Robert Rubin says that extremely low interest rates have caused major instability and could lead to another financial crisis. When the bubble pops and hedge funds all head for the doors at the same time there is a risk of a “contagion and snowballing effect.”
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