Category: Good Money

Hi ho Silver, away.

And we are not talking about the Lone Ranger’s horse.


For the past 3 years we have been great advocates of silver. And with good reason. It is arguably the most amazing metal on Earth.

Silver is the best conductor of electricity of all the metal elements – making it a modern necessity for the myriad of electronic devices we have. Smart phones, computers, LED monitors and televisions.

Silver is an excellent conductor of heat and has a particular light sensitivity making it ideal for photovoltaic cells and photography, including radiography.

Silver has antibacterial properties. In seafaring days of old, two silver coins would be placed in a water barrel to keep the water fresh and microbe free. These days it is used for surgical bandages and in advanced antimicrobial nanotechnologies. Plus, it gets added into sports clothing to keep athletes smelling nice.

Silver is highly malleable and ductile and it does not rust. As such silver has been used a monetary metal for going on 3,000 years.

And as you can’t print silver – silver is indeed ‘Good Money’.

So why the excitement?

Image credit

For many a Silver Stacker it has seemed a very long time for the market to again recognise the true value of this amazing metal.

Three months ago the silver spot price was a mere $US15 per ounce and this was the middle of a pandemic. We say ‘mere’ as silver was trading at $US50 back in 2012 and even back in the 80s.

There were many reasons put forth on why the price of silver was so low – which we will not go into now. More importantly for the silver investor and stacker however, the silver price is now flying.

Between May and mid-July the price saw a steady rise to $US19. Over the past month it has really taken to the sky. Just 12 hours ago it looked as though it would break $US28. As I type this post now it has broken $US29 and is tapping on resistance at $US30.

In the midst of a global pandemic, geopolitical uncertainty and unprecedented levels of currency printing – investors are once again turning to the tried and tested safe haven that is SILVER.

GOLDSMITH.


To get your head around the current silver story and the physical silver shortage we are seeing – we suggest you start here.

https://goldsmith.money/2020/03/20/the-run-on-gold-and-silver-has-begun/

Silver is shining

Over $US20 a troy ounce and rising!


Long before silver was being used in your smartphones, television sets and ipads – silver was money, just like gold.



Countries over the world have implemented various types of silver monetary standards, at various stages throughout their history. In fact, the US was still using 90% silver coins up until 1964 and 40% silver in their coins until 1970.

Today silver seems to be used for everything but money. Electronics. Solar Cells. Jewellery. Antibacterial clothing and medical equipment. Water purifiers.

However, there is a devoted group of conservatives, called Silver Stackers. Us Stackers believe that one day the world will return to ‘Good Money’ and that silver will have a large roll to play in this. Because unlike paper currency –

You can’t print silver!

And it is relatively scarce – just as money is meant to be.

Today us stackers have cause for celebration. The spot price of silver has finally broken $US20 – the first time since 2016.

Of course, if you are wanting to buy physical silver, expect to pay a lot more than $US20. However, it is certainly nice to see the futures price catching up to reality.

As a part of your Financial Awakening – I suggest you learn all you can about silver.

Goldsmith


The Gold Factor

A hedge against the printing press!


We borrow the following chart from a Money Management article by Russel Chesler titled ‘The Gold Factor‘. The link to the article is here.

The article begins –

With the world mired in debt and economic despair, the price of gold precious metal has rallied to nine-year highs and could soon surpass its all-time high as systemic financial risk grows with every dollar spent by governments trying to stimulate economies.

Russel Chesler – Head of Investments at VanEck

And here at Goldsmith Money, we are seeing the world the exact same way.

Previously we have discussed Good Money and the Dollar. We concluded that dollars are not good money, because they could be printed at the will of Central Banks and Governments.

The following chart from abovenoted article is an example of this exact behaviour.

In the past 4-5 months the US Federal Reserve (FED) has printed 3 trillion dollars and flushed it into financial markets. This is $3,000,000,000,000.00!

Since 2002 the amount of currency digitally printed onto the FED balance sheet has risen from $1 trillion to $7 trillion. A 700% increase in the circulating currency supply (stemming from the FED), over a mere 18 year time frame.

Worse still – this is just one nation’s Central Bank. Consider that there are many other central banks around the world dong the exact same thing.

Worried? Well you should be!

All this new currency are new claims on the limited land, resources, products and services around the world. Effectively diluting the current claim of every person who has been saving dollars (or any other paper currency), for their own future economic benefit.

So how might one combat currency expansion of this magnitude? Might we suggest saving in assets which can’t be printed.

Gold – as the article suggests.

Starts July 1972 with initial investment of $10,000

Silver?

Land?

A business selling products or services with an inelastic demand. Primary production perhaps?

Cryptocurrency? With consideration to specific blockchains, their network security and adoption – perhaps?

Let us know what you think in the comments below.

Mass currency printing in various forms has been attempted the world over for 2-3 millenia – and the outcome has always been a disaster. Perhaps this time it will be different though. Perhaps?

However… we at Goldsmith Money, will not be taking any chances.

Goldsmith.



Gold chart thanks to Gold Hub and Silicon Cloud Technologies.



Money is Time!

Which is why everyone should build a website…?


We have all heard the saying –

‘Time is money!’

The catch phase of every businessman and woman since the birth of money as a medium of exchange.

Accountants, butchers, bakers, builders, doctors, lawyers all understand the value of their time, in the production of a good and service. They also understand that they must charge for their time through the sale of their goods and services.

Seldom discussed however, is that the equation is equally true in reverse.

‘Money equals time!’

Let’s examine.


Photo by Jordan Benton on Pexels.com

We know from the Financial Awakening page Our Money that the first characteristic of good money is that it must be a ‘Store of Value’.

When you transact with another party, you are in effect, exchanging your time for theirs. Money is merely the medium which allows the exchange of time to take place instantaneously.

You may have 1 dollar in your pocket which you have earned from time spent working. You then call into the a grocer to buy an apple. In this one transaction you have compensated the farmer, the wholesaler, the truck drivers and the grocer for their time in bringing this apple to you.

You spend many hours working and exchanging your time for money. So it is very important that at the moment of your choosing, you are able to exchange this money back for the time of others. In other words – money must store the value of your time forever.

As mentioned in previous posts – inflation devalues your money. As such, inflation is devaluing your time. Given enough inflation – your time will be regardless as worthless. So be sure you are exchanging your time for Good Money.


So why should everyone build themselves their own (WordPress) website?

Until I started building the Goldsmith Money blog, I never realised what a valuable store of time it could be.

First, I enjoy blogging – however, without a website of my own I was not investing time into my own asset, which I may be able to monetise in time. Instead I was investing my time into someone else’s. Reddit, Medium, Steem, Facebook. Twitter – all owned by others.

Second, through a personal website an individual is able to capture their skills and talents and put them on display for the world. Importantly though, they need only do it once! If you are continually and repetitively promoting your abilities on many different forums, you are doubling, perhaps tripling up on time – and therefore you are losing money.

Third, by building a website around your personal skills and talents you will no doubt discover methods to speed up your work. Creating efficiencies.

On this site I am building a comprehensive News Feed, along with a readily accessible Quick Links page. The News Feed allows me to access many of the Twitter feeds I like to track. The Quick Links page provides me with links to all pages I access frequently in my work and business. The time I am already be saving, would more than cover the moderate costs of maintaining the site.

Four, readily accessible data and information storage. No matter who you are, you should have some need to keep information handy for easy reference. This might include instructions, recipes, guides, manuals, catalogues and charts. All of which should save you time and money – especially if you are prone to misplacing information.

In conclusion.

Investing your time in your own website may allow you to monetise it the future – allowing you to exchange your time invested now, for the future time of others.

In the meantime, the time savings your are making now, are covering the monetary cost of maintaining the site.


Finally, if you are anything like me – the time you spend drafting posts and building your site, keeps you from spending your money on entertainment, dining and drinks. And these are the savings that really add up.

Treasure your time.

GOLDSMITH



Just throw money at it!

Will currency printing re-inflate stock markets?


There is an expression – 

‘There is no problem which can’t be fixed by throwing money at it.’

And during these times of viral contagion, this is exactly the course of action that the Governments of the world are taking, to keep their economies alive.

Over the past 4 weeks the Australian Government has announced a range of Covid19 stimulus initiatives worth $214 billion

In the US, a huge $US2.2 trillion stimulus package has just been passed by US Congress to keep their economy alive. 

And the story is the same in most countries around the world.

There is much debate going on as to whether this currency printing is right or wrong. Regardless, the massive quantities of currency flooding into the world economy, is a macroeconomic factor which the Financially Awakened must consider when making investment decisions.


Photo by Burak K from Pexels

Consider the stock markets of the world – they are down circa 30% off February highs. And nobody knows when the bottom will be. All one can do is analyse the information and hand and make strategic decisions accordingly.

Consider present circumstances. There are a number of macroeconomic factors which are stock market negative. These factors could drive stock prices down further. They include:

  1. Falling production levels.
  2. Substantially reduced domestic and international trade.
  3. Rapidly rising unemployment rates.
  4. Uncertainty around Coronavirus containment.

However, a greater impact may be felt from two positive countermeasures now in play:

  1. Currency printing (discussed previously).
  2. Low and negative interest rates – meaning negative real returns for holding cash.

Huge amounts of currency are being injected into the world economy with virtually nowhere for it to go but back into stocks – either through expense support, sales revenue or direct share purchasing. And fortunately for financial markets, currency can be ‘printed to infinity.’

I take the view that these countermeasures could succeed in re-inflating stock markets… along with most other asset prices.

What do you think?


Furthermore, previously in our Good Money posts, we have mentioned how currency printing has the effect of devaluing cash savings. 

There are finite resources in the world and currency represents a claim over those resources. Printing currency does not increase the resources, it merely creates new claims over those same resources.

Historically, the result of excessive currency printing has been always been high inflation.

Will it be different this time?


GOLDSMITH


Why pay taxes…

when they can just print money?


Day 1 in Coronavirus Home Isolation, we are thankful that the governments of the world are printing trillions of dollars to keep us fed and paying our bills.

Day 2 we start to wonder… if the governments of the world can simply print money… why have I been paying taxes for all these years?


Image credit

The taxes we have paid all our working lives pales into insignificance to the amount of currency printed by governments over the past month.

If you have been reading this blog and other similar blogs, you are part of the Financial Awakening. You understand that there is a finite amount of resources in the world. You also understand that currency is a claim over these resources.

When currency is printed by banks and governments, it is creating new claims on the finite resources. In effect, it is stealing resources from those who had been saving their currency and allocating those resources to others.

Once the panic of coronavirus is over, the reality of what we have done will set in and the inflation will begin.

Pay attention to how different countries attempt to combat this inflation. There will be:

  • price fixing;
  • rent fixing;
  • wage fixing;
  • loan fixing;
  • more printing; and,

many combinations of the above.

Of course this has all been tried before and by potentially every failed civilization in human history.

The Financially Awakened (especially those in the US) will be on the lookout for a currency reset. A reset to a gold or silver standard would be a reset back to good money. However, a reset to a new fiat currency, would be simply be starting a debt based system over again.

There has been some talk about a new Digital Dollar. This is not a cryptocurrency. This is simply another fiat currency, which will be electronically printed and issued at the discretion of those in control.

Regardless of many good intentions at this time, we must remember that no country has ever printed itself into prosperity.

To finish I would like to say – citizens paying taxes can be a wonderful thing. Taxes can build great nations. Just as important however is the Golden Rule – Governments should be spending less than they earn. Additionally, well managed countries with plenty of savings, would have no trouble managing pandemics, without the need to print.

So tell me…

  1. What would you do if you were the leader of a country, which was tens of $ trillions in debt?
  2. How will you protect yourself against consumer price inflation?

Please stay healthy… and wealthy.

GOLDSMITH



The run on Gold and Silver has begun

The rush for Good Money will soon be a stampede


According to those in the know – being those speaking with bullion dealers, wholesalers and the mints daily…

‘The shelves are now empty!’

Much like the toilet paper and grocery runs we are seeing at the supermarkets, demand for physical gold and silver is up 10 fold in the past 7 days.

Speaking with a dealer yesterday – they claimed they were experiencing ‘unprecedented account registrations’ as people sought to buy physical. Unfortunately for these new comers, this dealer had no stock on hand and the orders they would take – expect an 8 week delivery time-frame.  

Tuesday night the Perth Mint sent out a message to distributors – they were no longer taking orders for their 100 ounce and 10 ounce silver bars due to ‘unprecedented demand’. Yesterday their website was updated to indicate that they had no silver bullion in stock at all.

There is still gold available, however be prepared to pay $AU2,700+ per ounce plus delivery costs.

Photo by Tim Mossholder on Pexels.com

At this time the gold and silver paper spot prices continue to be the prices quoted by the media.  These paper prices are down. However, there is now a huge disconnect between the physical prices being charged. 

Customers are reporting that dealers who do have stock on hand are charging 25%+ premiums over the spot price for gold, with anything from 50-100% on silver.  As one industry observer put it – ‘the dealers aren’t even looking at the spot prices anymore.’

At present the silver spot price is $US12.50 per ounce. Single ounce Liberty Eagles however are now selling for around $20+ on ebay.

I expect that the news of this surging demand will go mainstream within a week.  At this stage the only discussion is taking place is on Twitter and in other social media sites. 

There have now been a couple of industry articles published explaining current conditions in more detail than I will here – excerpts and links follow.


FXStreet

The disconnect between paper prices for precious metals and demand in the bullion markets has never been clearer. Nervous investors are frantically buying coins, rounds, and bars. Dealer shelves quickly emptied of more popular products and delays are now being quoted on many products – especially in silver.  

https://www.fxstreet.com/analysis/bullion-demand-surges-mostly-cleaning-out-dealer-inventories-202003171653

TEX Metals

The demand experienced industry-wide over the past 5 days has been unprecedented. This is worse than Y2K, 9/11, or the Great Financial Crisis. It is the speed at which demand spiked (seemingly overnight) that has crippled the industry. Volume is up over 10x (in some cases much more) in a matter of days. This has strained customer service, logistics, and – relevant to this article – supply. The industry is built for elasticity. We are used to big spikes in demand. We can handle a 1 or 2 standard deviation move. We can’t handle a 5 standard deviation move in 5 days.

Distributors sold out of stockpiles in 48 hours. Dealer inventory disappeared immediately. Precious metals are the toilet paper rolls of the financial markets – under appreciated until there isn’t much left

https://www.texmetals.com/news/demand-shock-the-forces-behind-rising-premiums/

MarketWatch

Sales of the one-ounce American Silver Eagle coins were at 3.1 million so far this month, as of Wednesday, compared with total sales of 650,000 in the month of February, according to data from the Mint.

https://www.marketwatch.com/story/physical-demand-for-silver-spikes-as-price-drops-to-an-11-year-low-2020-03-19

As discussed previously, it is important to hold ‘Good Money’ – not the paper promises which are currently being printed by the trillions. Some people are waking up to this and a new trend is forming. Perhaps for most however, it is already too late.

GOLDSMITH


Good Money and the Dollar 3

Part 3 – Dollars are not trustless!


Our analysis of the ‘dollar’ in respect to the ‘8 characteristics of good money‘ detailed at Good Money continues. In this post we ask – are dollars trustless?


Photo by maitree rimthong on Pexels.com

The only reason a paper currency has any type of value is because a government says it does – not for any other reason. So we start by trusting the government to protect the value of these dollars.

So what if this government simply turned around and stated – ‘Those dollars we told you to trustwell sorry, you’re not allowed to use them any longer!’

This was exactly what happened in India. With the stroke of a pen, President Modi banned all 500 rupee and 1,000 rupee denominated notes effective 31 December 2016. 

Under the guise of eliminating cash from the black economy, the plan also had the impact of flushing out savings of law abiding Indian citizens. Those savings were then forced into banking institutions. 

You might think, ‘this is not so bad’. Well not so bad if you trust the banks and you were able to get to one in time to deposit your rupees. However if you were in a village without a bank and lacked the transportation to get to one, this policy change might have been a financial disaster.

Think this can’t happen to our Australian dollars? Wrong! There have been reports for many years now that the Australian Government was looking to abolish the $100 note. There is also talk about getting rid of cash in Australia altogether – thereby forcing everyone to become a creditor of the banks.

Currently being debated in Australian Parliament is a bill banning cash payments of over $10,000, subject to a two year jail sentence. Imagine, two years jail for using your country’s legal tender.

So in India, and probably in Australia – great sums of cash are being forced out of the cash economy and into the banks. So you might now ask – ‘once done, the dollars will now be safe in the banks right?’

‘Wrong!’.

In 2013 the Government of Cyprus simply seized a percentage of all funds sitting in Cyprus bank accounts.  Account holders woke up one morning to find their bank accounts pilfered by the very people they had elected to represent them in parliament.

Other countries are introducing so called ‘bail-in’ provisions. Should a bank experience financial difficulties, the dollars of depositors would be automatically converted to ordinary shares, to ensure that other creditors of the bank can be paid out first.

When it comes to TRUST – you now know that when holding cash you are trusting your government to protect the integrity of those dollars.  You also know that once you deposit the cash with the bank, you are now both reliant on the government to protect the integrity of the dollars and on the bank to remain solvent.

So NO, dollars are NOT trustless!


Of the ‘8 characteristics of good money‘ – modern day fiat currencies fail at least 3, being:

  1. Dollars are not a good store of value due to inflation.
  2. Dollars are not difficult to create, as financial institutions simply create currency with each loan they write.
  3. Dollars are not trustless, as you must either trust the government to honour and protect the currency in circulation; and, you must trust the banks who you deposit these dollars with.

Understanding what constitutes ‘good’ and ‘bad’ money is necessary for your Financial Awakening. This does not mean that we should be avoiding cash and bank deposits – this is not practical or even desired. 

What it does mean is that we need to understand the risks and opportunities associated with holding dollars and we will structure our financial affairs accordingly.

Next time I address the topic of Our Money, I will examine types of money which have all the characteristics to be considered ‘good money’.

GOLDSMITH


Good Money and the Dollar 2

Part 2 – An introduction to inflation.

Following on from the ‘8 characteristics of good money‘ detailed at Good Money let us continue an examination of the ‘Dollar’ with respect to each. In this post we ask the question – Are dollars a good store of value?


Do your dollars buy you what they used to?

One hundred years ago $US20 dollars could buy you a single, one ounce, gold coin.  Now that same single, one ounce gold coin, would cost you $US1,600 dollars. 

Over the past 100 years gold has managed to retain its value, being its purchasing power.  The $20 in currency however has lost 99% of its purchasing power.

Another way to think about it is like this.  The $20 in cash and a 1 ounce gold coin could buy you the exact same thing in 1920 – let’s say a simple 5 day holiday at the beach for the family. Roll around 2020, the 1 ounce gold coin still buys you your 5 day holiday to the beach. As for the $20, well this is lucky to even buy the family dinner.

Time has clearly demonstrated that dollars are not a good store of value.

This loss in purchasing power for the dollars is called ‘Inflation’. A very important concept in your Financial Awakening.

We will examine inflation in more detail in an upcoming post. In the meantime however, if you have any examples of the inflation you are experiencing year to year. Please share in the comments below.

GOLDSMITH


Image by Olya Adamovich from Pixabay

Good Money and the Dollar

Part 1


Following on from the ‘8 characteristics of good money‘ detailed at Good Money let us begin an examination of the ‘Dollar’ with respect to each. Taking on an Australian perspective, this post asks the question – Are dollars scarce and difficult to create?


Are dollars scarce and difficult to create?


Few Australians actually understand how our dollars, being our national currency, are created. When they finally learn, they are generally shocked.  

Whilst some of our dollars are created by the Reserve Bank of Australia and the Royal Mint, the vast majority of our currency is created by our banks. That’s right, the private banks of Australia. The banks of Australia essentially have a licence to print money… and that’s exactly what they do.

If you are like me, you might have assumed that our banks only lent out the money that people had deposited with them. There have been times in the past when this was the case – but not anymore. 

Banks create currency every time they lend someone money. If the bank lends you currency to buy a home – they create it out of thin air and give it to you.  Then they charge you interest for the next 20-30 years as you pay off the loan.

Think about credit cards.  The bank again waves its magic wand, creates the money out of thin air and pays it to the shopkeeper when you make a purchase.  And for this convenience, they are happy to charge you 20% per annum.

Wouldn’t this be wonderful? You and I could create money out of thin air, lend it to someone else; and, then charge them interest on it.  The perfect business model really.

By now you are probably thinking – ‘this can’t be right?’  There is no way a government would let banks simply create money.  Well don’t take my word for it, the following extract is from a speech made by the Assistant Governor of the Reserve Bank of Australia, Mr Christopher Kent in September 2018, titled ‘Money – born of credit?’

‘Money can be created, however, when financial intermediaries make loans. Accordingly, the concepts of money and credit are closely linked in a modern economy, albeit not one for one. When a bank extends a loan, it makes money available to the borrower, for example, to buy a car, a house or equipment for a business. The bank may credit the deposit account of the borrower, who withdraws the funds to make their purchase. Alternatively, the bank may directly credit the deposit account of the seller on behalf of the borrower. In either case, the loaned funds will tend to find their way into a deposit somewhere in the banking system. This process adds to the supply of money.’

Oh the irony – the recent Royal Commission into Australian financial sector has generally determined that the behaviour of the Australian Financial Institutions has been ‘inappropriate’ for many years. It concluded that the bankers had been acting in their own best interest, not the best interest of the customers.  And yet it is these same banks and financial institutions, which are permissioned to create money as they see fit.

It would be remiss of me not to acknowledge that there are regulations imposed on the banks which do restrict the amount of currency they can create. We must also acknowledge that when a loan is repaid that the amount of currency in circulation is reduced. Nevertheless, our banking institutions are absolutely enormous.  They are bigger than our mining companies. Bigger than our building and construction companies. Bigger than our infrastructure companies.  

Does anyone really believe our banks would be as big as they are now, if they were not able to simply create money?

As far as the world governments, central banks and the private banks are concerned – this revelation on how currency is created, should not surprise anyone. They are very open with the fact that banks print money. They don’t promote it, but they do little to hide it.  Let’s just say they are ‘quietly honest’.

According to these same people this debt-based, non-asset backed currency system (often referred to as ‘fiat currency’) is the pinnacle of modern economic thought, theory and reason. Regardless of the fact that these debt-based, non-asset backed, fiat currencies, created by banks and governments have been attempted many hundreds of times, by countless cities, nations and civilizations, for the past 2-3 thousand years.  Yet each and every time the paper currency failed. They simply assume it will be different this time.

So in answer to the question, are dollars difficult to create? The answer is ‘No’.

Let’s examine ‘Dollars’ again in respect of the other qualities of ‘Good Money’ soon. In the meantime, you might want to read the Assistant Governor’s speech – just hit the link below.

https://www.rba.gov.au/speeches/2018/sp-ag-2018-09-19.html

We are sure to revisit this speech in future posts.

GOLDSMITH


Image by 3D Animation Production Company from Pixabay