Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
I am writing this article for the gold and silver bullion purchaser who wants the comfort, the insurance of owning some gold and silver in what are very troubling times.
There’s a lot going on in the world – from Trump being elected in the U.S. to turmoil in the middle east, the China Sea and Turkey, Russia is flexing it’s still considerable might, North Korea’s flinging it’s nukes helter skelter, Japan’s rearming, disease runs rampant and fear escalates about virus mutation, there’s shortages of fresh water with many rivers not reaching their former endpoint and of course climate change is rearing its head to destabilize natural rhythms or cycles. Add in out of control population growth, the divide between races, religion and wage inequality – the have and have not’s – and a coming major economic collapse caused by interest rate increases on the trillions and trillions of dollars of global debt and it’d be hard to go back in history and pick a period of time when things weren’t so combustible.
Of course the natural degenerative process, the creeping Fascism, of a capitalistic society might not be on your radar screen.
Run for cash
Commission dependent brokers, analysts, politicians, special interest groups and fund managers are all currently telling us the U.S. and global economy is rock solid. They were telling you, us, the same thing in late 2007…
Just a few months later the world was on the verge of global economic collapse, staring into the abyss of the Great Recession and a stock market crash. That same kind of misguided optimism prevails today.
Unfortunately the pillars (use this link to know what they are) supporting the U.S. and global (especially the Chinese and European) economy are actually more fragile than they were before the Great Recession.
In any kind of disaster situation – say an economic crash caused by interest rate increases on totally unsupportable global debt levels that can never be paid back – the first thing that would happen is a run on the banks for cash.
Panicking people will want every penny they can lay their hands on to buy supplies. When the banks run out of cash, when there’s a forced ‘bank holiday,’ when your grocery store runs out of food and bottled water then chaos, in the form of weeks and weeks of widespread looting and rioting hits the streets.
The Rodney King riots, the Ferguson riots etc will be a pale ghost compared to the levels of looting, stealing and killing when the new normal is a permanent state of anarchy.
Think what your life would be like if a Carrington style event took place next week. Try to imagine living without electricity for a minimum of four years. No running water, no sewage disposal, no heat, no A/C, no refrigeration, no cars or buses, no internet, no banking, no stores with shelves stocked for your browsing pleasure. Consider the fact it isn’t if this is going to happen, it’s when it happens. Life would be very hard, impossible for most.
Cash, water, food, gun. Doesn’t it make more sense to be prepared and stock up now? At least have a couple of months worth of food and water, a shotgun to keep your supplies, and some cash laying around to get a last minute stock up done.
Your author believes the buying and owning of gold and silver bullion has never been a more prudent move. Inflation, world events, diversification – gold and silver bullion do offer investors leverage.
A supply of different size/value gold and silver coins and smaller bars kept close to home is the best way to ease the mind and navigate through troubled times.
If things do go to hell – war, economic collapse, disease, famine, climate change, loss of electricity – and you need to buy food, water or medicines with your gold/silver stash you need to have the appropriate coin values in order to trade safely and in a timely manner.
When all your money is nothing more than a bunch of ones and zeros in an account you can’t access, when grocery store shelves and the cupboards are bare, when the kids are starving, YOU, the owner of gold and silver bullion, have something that is going to be wanted by the people who have what you want, anything from water, fuel, blankets, protection, first aid to safe passage to freeze dried meals and condensed milk to bullets and a gun.
What you’ll need is a stash of smaller gold and silver bars and different denomination coins easily stored, transported, sold and traded.
The slight premiums for buying these smaller sizes are more than offset by the convenience of having different products of different denominations when you need to use them. Hopefully you never will. 
The advantages of owning the smaller denomination coins/bars include:
1. Easy transportation. Slip a couple quarter or half-ounce coins into your pocket when you need to go barter for an item(s) you need.
2. Everyone recognizes the value of gold; in wartime pilots are given gold so if they have to bail out over enemy territory they have a bargaining tool to use with the locals to help them escape. Who hasn’t heard of people fleeing from tyranny and with the help of gold crossing borders to freedom?
3. Coins/wafers/bars are easy to store.
4. If you want to sell or trade some of your gold it’s easy to do.
5. Gold and silver are actually very easy to buy, look in the phone book for a dealer (Gold, Silver & Platinum Buyers & Sellers in my Yellow Pages) that’s close, drive over and buy some, it really is that easy.
No bank or dealer selling gold in your town? Go online and use Google, you’ll find many companies selling the appropriate size and denomination products that will be the most use to you.
There have recently been some shortages in the more popular one-ounce gold/silver coins but other smaller sizes are readily available as are the smaller bars. My personal preference is for the smaller than one-ounce gold coins, coins in a range of sizes from 1/10, 1/4 to 1/2 of an ounce.
As for silver I like one oz coins and the 5 to 10 oz bars.
I’d have more gold then silver, a 60/40 mix.
Getting a secure storage place for your precious metal stash should not be difficult or expensive. Buy a good safe, keep it out of sight and live by the old saw ‘loose lips sink ships.’
Confiscation
A simple recession was turned into the Great Depression by the Federal Reserve of the day not doing enough while the money supply contracted 31 percent between 1929 and 1933.
This reduction in the money supply was caused by no less than three bank runs between late 1930 and March 1933. Bank deposits formed 92 percent of the money in circulation at the time and 10,000 banks failed with the loss of $2 billion in deposits.
“The Fed failed to inject enough money into the system to sustain the desired minimum level of monetary aggregates. Because it failed to do this, the public run on banks resulted in a contraction in the money supply, which caused the Great Depression.” Milton Friedman
Friedman believed if the Fed had provided enough money to the large banks and bought US securities then these banks would never of fallen.
So why didn’t the Feds of the time simply increase the money supply by turning on the printing presses? Well, at that time the US was on the gold standard and the amount of credit the Federal Reserve could issue was limited by the Federal Reserve Act which required 40% gold backing of Federal Reserve Notes, paper money, issued. Back then if you had $10 in your pocket, you knew, that somewhere, there was $4 worth of gold backing that “promise to pay” in your wallet.
But the Fed’s back was up against the wall, they were running out of room to issue more notes. They had almost hit their issue limit on credit that could be backed by the gold in their possession – they needed more gold to issue more credit.
Their need was made worse because during the bank runs Federal Reserve paper money had been exchanged for Federal Reserve gold. Since the Federal Reserve was already hitting its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. Something had to be done.
On April 5, 1933, President Roosevelt signed Executive Order 6102 making the hoarding of gold certificates, coins and bullion illegal. This order, by confiscating Americans gold, increased the amount of Federal Reserve owned gold thereby making an increase in the availability of Federal Reserve Notes or credit possible.
The reason gold was confiscated back then doesn’t exist today. Today no country is on the gold standard (the US cut the last ties to gold in 1971) and the US Federal Reserve’s ability, or any countries ability, to create credit, print money, is no longer tied to how many ounces of gold a country has.
There is also something else potential gold and silver bullion buyers need to be aware of.
The Scam
Its true gold was confiscated in 1933 – but now you know the why and you also know that the reason for confiscation back then doesn’t exist today.
So the next time you read an article about how your government is going to confiscate your gold – all of it except rare collector numismatic coins – track it back to its original source. Too many times you will find that it has, as its originator, a gold numismatics merchant. The patter is always the same – “Your gold is going to be confiscated, buy rare collector coins because they won’t be confiscated.”
Gold numismatics were not confiscated in 1933. Order 6102 specifically exempted “customary use in industry, profession or art.” The same paragraph also exempted “gold coins having recognized special value to collectors of rare and unusual coins.”
The US Constitution’s Eminent Domain Clause says – “nor shall private property be taken for public use, without just compensation.” When gold bullion was confiscated compensation payment at the official gold price of $20.67 an oz was considered just, after all that was the price of an oz of gold.
But the confiscation of rare gold coins, called numismatics, would have been stealing private property. Legally just compensation would have had to been paid but for that to happen each gold numismatic would have had to been individually graded and priced – a huge and expensive time consuming task the government was unwilling to take considering the small amount of gold that would have been recovered.
So let’s revisit – “Your gold is going to be confiscated, buy rare collector coins because they won’t be confiscated.” We know the reasons Americans gold bullion coins were confiscated but gold numismatics weren’t. For today’s gold buyers, who still fear confiscation, the problem is: are the coins some gold dealers want to sell you actually gold numismatics and for a gold bullion investor – versus a coin collector – are they worth buying? Unfortunately the answers are maybe not and no.
Gold numismatics are rare collectors gold coins that trade at high premiums to their intrinsic gold content value. These coins are extremely rare, or one-of-a-kind, that collectors (there’s that qualification again) purchase for their historical and aesthetic qualities.
Gold merchants can sell rare gold coins for a healthy markup, sometimes as much as 25 percent and more. The fierce competition in the gold bullion coin market often limits profit margins to maybe 3% over the spot price of gold.
American Gold Eagles, the Canadian Maple Leaf and South Africa’s Krugerrand are all examples of gold bullion coins. Their value is 
derived entirely from their gold content. They are universally recognized and the value of these coins is easily verifiable. The reality is that too many coins sold as “numismatic” or “collectible” are ordinary gold bullion coins sold at high mark-ups to make fear mongering dealers extra profits.
Gold numismatics are not a store of value nor a better safe haven in a meltdown situation than gold bullion. If social order breaks down and a collector needs to trade one of his collectables he’s going to receive the exact same amount of goods that I would receive using gold bullion. That’s because the transaction will be valued based on gold content and purity, not historical and aesthetic qualities.
Investors buy physical gold because it is a store of value – a way to protect your wealth from the relentless devaluation of fiat currencies – and a safe haven in times of turmoil. Buying gold numismatics is not the way to do this and buying gold numismatics that aren’t…well that’s being taken advantage of, to put it politely.
King Nothing
I’m the king
I’m the king
I’m the king of nothing
Seals and Crofts
We better stop, hey, what’s that sound
Everybody look what’s going down
Stop, hey, what’s that sound
Everybody look what’s going down
Stop, now, what’s that sound
Everybody look what’s going down
Stop, children, what’s that sound
Everybody look what’s going down
Buffalo Springfield, For What It’s Worth
Conclusion
Being prepared for worst case scenarios, that most pray never happen, should be on all our radar screens. Is a little prep time on your radar screen?
If not, maybe it should be.
Richard (Rick) Mills
aheadoftheherd.com
Richard lives with his family on a 160 acre ranch in northern British Columbia and is the owner of Aheadoftheherd.com.
Richard’s articles have been published on over 400 websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider, Investing.com, MSN.com and the Association of Mining Analysts.
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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.
Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.
Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
