Political Metals

Submitted by: Richard (Rick) Mills | Ahead of the Herd

-

As a general rule, the most successful man in life is the man who has the best information

In World War I severe material shortages played havoc with production schedules and caused lengthy delays in implementing programs. This led to development of the Harbord List – a list of 42 materials deemed critical to the military.

After World War II the United States created the National Defense Stockpile (NDS) to acquire and store critical strategic materials for national defense purposes. The Defense Logistics Agency Strategic Materials (DLA Strategic Materials) oversees operations of the NDS and their primary mission is to “protect the nation against a dangerous and costly dependence upon foreign sources of supply for critical materials in times of national emergency.”

The NDS was intended for all essential civilian and military uses in times of emergencies. In 1992, Congress directed that the bulk of these stored commodities be sold. Revenues from the sales went to the Treasury General Fund and a variety of defense programs - the Foreign Military Sales program, military personnel benefits, and the buyback of broadband frequencies for military use.

American Silver Eagle

The American Silver Eagle is the official silver bullion coin of the United States. It was first released by the United States Mint on November 24, 1986 and is struck only in the one troy ounce size.

The Bullion American Silver Eagle sales program ultimately came about because the US government wanted, during the 1970s and early 1980s, to sell off what it considered excess silver from the Defense National Stockpile.

“Several administrations had sought unsuccessfully to sell silver from the stockpile, arguing that domestic production of silver far exceeds strategic needs. But mining-state interests had opposed any sale, as had pro-military legislators who wanted assurances that the proceeds would be used to buy materials more urgently needed for the stockpile rather than merely to reduce the federal deficit.” Wall Street Journal

The authorizing legislation for the American Silver Eagle bullion sales program required that the silver used for the coins had to be from the Defense National Stockpile. By 2002 the DNS stockpile was so depleted of silver that if the American Silver Eagle bullion sales program was to continue further legislation was required.

On June 6, 2002, Senator Harry Reid (D-Nevada) introduced the Support of American Eagle Silver Bullion Program Act to “authorize the Secretary of the Treasury to purchase silver on the open market when the silver stockpile is depleted.”

2002 - 10,539,026 Bullion American Silver Eagles were sold.

2003 - 8,495,008 Bullion American Silver Eagles were sold, silver averaged $4.88 an ounce for the year.

2004 - 8,882,754 Bullion American Silver Eagles were sold. For 2004 the average cost of an ounce of silver was $6.67.

2005 - 8,891,025 Bullion American Silver Eagles were sold. Silver averaged $7.32 an ounce.

2006 - 10,676,522 Bullion American Silver Eagles were sold. Silver averaged $11.55 an ounce

2007 - 9,028,036 Bullion American Silver Eagles were sold.

2008 - 20,583,000 Bullion American Silver Eagles were sold. Silver averaged $14.99 an ounce and almost 80% more Bullion American Silver Eagles were sold then in any previous year.

The US Mint suspended sales of the silver bullion coins to its network of authorized purchasers twice during the year.

In March 2008, sales increased nine times over the month before - 200,000 to 1,855,000.

In April 2008, the United States Mint had to start an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to “unprecedented demand.”

On June 6, 2008, the Mint announced that all incoming silver planchets were being used to produce only bullion issues of the Silver Eagle and not proof or uncirculated collectible issues.

The 2008 Proof Silver Eagle became unavailable for purchase from the United States Mint in August 2008.

2009 - 30,459,000 Bullion American Silver Eagles were sold

On March 5, 2009, the United States Mint announced that the proof and uncirculated versions of the Silver Eagle coin for that year were temporarily suspended due to continuing high demand for the bullion version.

On October 6, 2009, the Mint announced that the collectible versions of the Silver Eagle coin would not be produced for 2009.

The sale of 2009 Silver Eagle bullion coins was suspended from November 24 to December 6 and the allocation program was re-instituted on December 7.

Silver Eagle bullion coins sold out on January 12, 2010.

The average cost of an ounce of silver in 2009 was $14.67

2010

No proof Silver Eagles were released through the first ten months of the year, and there was a complete cancellation of the uncirculated Silver Eagles.

Production of the 2010 Silver Eagle bullion coins began in January instead of  December as usual. The coins were distributed to authorized dealers under an allocation program until September 3.

In 2010 the US Mint sold 34,700,000 Bullion American Silver Eagle Coins.

2011

According to the USGS’s most recent Silver Mineral Industry Survey, silver production fell to 37 tonnes in October - compared to 53 tonnes year over year (yoy).

In 2011, the United States produced approximately 1,054 tonnes of silver – down from 2010’s production of 1,154 tonnes and down from 2007’s production of 1,163 tonnes.

The US imported 6,600,000 oz of silver for consumption in 2011 – up from 2007’s imports of 4,830,000 oz.

In 2011 the US Mint sold 39,868,500 Bullion American Silver Eagle Coins.

2011 was the first year in which official coin sales will surpass domestic silver production.

Jeff Clark of Casey Research writes“For the first time in history, sales of silver Eagle and Maple Leaf coins surpassed domestic production in both the US and Canada. Throw in the fact that by most estimates less than 5% of the US population owns any gold or silver and you can see how precarious the situation is. A supply squeeze is not out of the question – rather it is coming to look more and more likely with each passing month.”

The US Mint is required by law to mint the bullion Silver Eagles to meet public demand for precious metal coins as an investment option. The numismatic versions of the coin (proof and uncirculated) were added by the Mint solely for collectors.

2012

United States Mint Authorized Purchasers (AP’s) ordered 3,197,000 Bullion American Silver Eagle Coins on January 3rd, the first day they went on sale. That opening day total catapulted January Bullion Eagle sales higher than half of the monthly totals in 2011.

As of January 25th 2012, 5,547,000 Bullion American Silver Eagle Coins had been sold.

Bullion Silver Eagles are guaranteed for weight and purity by the government of the United States and because of this the US government allows bullion Silver Eagles to be added to Individual Retirement Accounts (IRAs).

Conclusion

The twin policies of zero interest rates and the continual creation of money and credit being enacted today, by all governments and central banks, means that the purchase of precious metals is the only way to protect the value of your assets.

“Mark my words, if the interest rates on U.S. government debt truly reflected both the real level of inflation in this country and the rising risk of some form of default, rates would already by sky-high and the U.S. would resemble a massive Greece.”  John Embry, Chief Investment Strategist, Sprott Asset Management

Investors are currently risk adverse and mining stocks are not well understood by the general investing public, but at least one thing is going to become very apparent to most -  the best way to hedge yourself against inflation could be owning silver.

Junior resource companies offer the greatest leverage to increasing demand and rising prices for silver. Junior resource companies are soon going to have their turn under the investment spotlight and should be on every investors radar screen. Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills
[email protected]
www.aheadoftheherd.com

By Jeff Clark | BIG GOLD

While we’re convinced that our gold and silver investments will pay off, they don’t come without risk. What do you suppose is the biggest risk we face? Another 2008-style selloff? Gold stocks never breaking out of their funk? Maybe a depression that slams our standard of living?

Though those things are possible, we at Casey Research don’t see that as your greatest threat:

“Your biggest risk is not that gold or silver may fall in price. Nor is it that gold stocks could take longer to catch fire than we think. Not even the prospect of the Greater Depression. No, your biggest risk is political. As bankrupt governments get increasingly desperate for revenue, any monetary asset held domestically could be a target. It is absolutely essential that every investor diversify themselves politically. In fact, at this point, it is the one action that should be taken before anything else.” - Doug Casey, September 2011

I know many reading this are prudent investors. You own gold and silver as solid protection against currency debasement, inflation, and faltering economies. You set aside cash for emergencies. You have strong exposure to gold stocks, both producers and juniors, positioned ahead of what is likely the next-favored asset class. You feel protected and poised to profit.

Yet, despite all this preparation, you remain exposed to one of the biggest risks.

Similar to holding a diversified portfolio at a bank without checking the institution‘s solvency, many investors keep their entire stash of precious metals inside one political system without considering the potential trap they‘ve set for themselves. While storing some of your gold outside your home country is not a panacea, it does offer one important thing: another layer of protection.

Consider the exposure of the typical US investor:

1. systemic risk, because both the bank and broker are US domiciled
2. currency risk, as virtually every transaction is made in US dollars
3. political risk, because they are left totally exposed to the whims of a single government
4. economic risk, by being vulnerable to the breakdown of a single economy

Viewed in this context, the average US investor has minimal diversification.

The remedy is to internationalize the storage of some of your precious metals. This act reduces four primary risks:

Confiscation: We don‘t know the likelihood of another gold confiscation. But we do know that things are working against us - particularly for US citizens. With $14.7 trillion of debt and $115 trillion of unfunded liabilities, the US government will likely pursue heavy-handed solutions. Under the 1933 FDR “gold confiscation” in the US (the executive order was actually a forced delivery of citizens‘gold in exchange for cash), foreign-held gold was exempted.

Capital Controls: Many Casey editors think some form of capital controls lie ahead, limiting or eliminating a citizen‘s ability to carry or send money abroad. If enacted, all your capital would be trapped inside the US and at the mercy of whatever taxing and regulating schemes the government might concoct. Although you might be able to leave the country, your assets could not travel with you.

Administrative Action: There are plenty of horror stories of asset seizure by a government agency without any notice or due process, possibly leaving the victim without the means to mount a legal defense. Having some gold or silver stored elsewhere provides what could be your only available source of funds in such a scenario.

Lack of Personal Control: Having gold and silver stored elsewhere adds to your options. You will have a source of funds available for business, entrepreneurial pursuits, investment, or pleasure.

Foreign-held assets also require greater awareness and planning:Notice above we said these risks can be reduced, not eliminated. There is no perfect solution; US persons could, for example, be compelled to pay a “wealth tax” on assets held worldwide, or even repatriate them in a worst-case scenario. Absent a crystal ball, the political diversity of asset location is an essential strategy against an uncertain future.

1. Access to your metal or sale proceeds may not be quick. Therefore, this option is for those with some gold and silver stored at or near home. We do not recommend storing all your precious metals overseas; that defeats one of its purposes, to have it handy for an emergency.
2. While we think the US poses the greatest threat, a foreign government could move to control certain assets as well. The risk varies by country and is generally greater within the banking system than with private vaulting facilities.
3. Understanding and complying with reporting requirements is essential.

The bottom line, though, is that foreign-held precious metals can mitigate risk and give you more options. And as your metal holdings grows, diversification becomes more crucial.

Given our current rapacious climate, it‘s likely that simply buying gold won‘t be enough. We strongly suggest every investor diversify one‘s bullion storage outside their current political regime. The option may not be available someday, leaving you vulnerable without a secondary source of bullion.

We advise taking advantage of the opportunity before it is gone.

[One way to internationalize your bullion is to use a safe deposit box in a second country; however, this requires traveling to the institution to handle the paperwork and organizing the transport of your bullion... and the contents of a safe deposit box aren't insured. Other programs will store gold; but the metal is often held in the form of fractional ownership in a 400-oz. bar and not specific coins and bars held in your name. A better solution is to store your bullion in a non-bank depository, outside your home country, without shared ownership, and do it for a reasonable fee. We found a program that provides all those things; and it offers BIG GOLD readers six months' free gold and silver storage in a Canadian vault. A risk-free, three-month trial subscription to BIG GOLD will qualify you for that deal... plus all the expert analysis and actionable investment advice packed into each issue.]

Related Articles:

• Buying & Storage Options
• Storing gold & silver at GoldMoney, BullionVault, AFE

 

Source

Suicide of the Saver
by Adrian Ash
BullionVault
Wednesday, 19 October 2011

Savers and pensioners! Your murderers need no revolution to storm your stately homes and
palaces…

IT’S NOW 100 years since Great Britain established its welfare state. Shortly after, and as
the First World War kicked off, it abandoned the free exchange of bullion for notes under the
classical Gold Standard.

Those 3 events were far from unrelated, but 100 years later it’s the monetary shift which
feels most pressing right now. Yes, political fighting over the welfare state is hotting up,
but a European shooting match looks unlikely (for the time being). Whereas UK savers and
retirees, like their peers across the continent, in North America and pretty much everywhere
else, are getting slaughtered.

Compared to the previous 100 years, real UK interest rates – the returns paid to cash deposits
over and above inflation – have been atrocious since 1911. Averaging less than 0.9% per
year, they’ve been a fraction of the 4.4% averaged in the 100 years starting in 1811, just after
the British Parliament’s Bullion Committee recommended a full return to gold following the
Napoleonic Wars, setting in train the global Gold Standard run from London until the start of
World War I.

Enough ancient history; fast forward to today, and the UK’s real rate of interest is now the
worst since 1975, back when inflation was running well into double digits but at least the
central bank made a pretence of addressing it, setting a nominal base rate of 11%. Last
month’s inflation reading was only a 20-year high, but all-time record-low interest rates make
cash such a losing proposition, savers are actively paying to hold cash in the bank. And these
unsecured creditors are lending to institutions whose “underlying problem is one of solvency
not liquidity” as Bank of England governor Mervyn King himself put it in a speech last night.

Losing real value by holding money with insolvent banks sounds like financial suicide.
Which for today’s moneyed classes – those millions of savers, pensioners and would-be
retirees raised by the welfare state – should sound uncomfortably like the “euthanasia of the
rentier” hoped for in the mid-1930s by J.M.Keynes, apostle of deficit spending (and nemesis
of the Gold Standard), and slowly put into practice after World War Two by decades of sub-
zero real interest rates. Taxation of unearned income peaking at 98% sure helped, too.

“Interest today rewards no genuine sacrifice, any more than does the rent of land,” wrote
Keynes in 1936, just ahead of that “depression within a depression” which forced economists
to coin a new term, “recession”.

“The owner of capital can obtain interest because capital is scarce,” Keynes went on, “just
as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic
reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital…I see,
therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it
has done its work…The euthanasia of the rentier, of the functionless investor, will be nothing
sudden, merely a gradual but prolonged continuance of what we have seen recently in Great
Britain, and will need no revolution.”

Today’s savers might not see themselves as “functionless investors” anymore than they see
themselves as stuffed-shirt aristocrats wielding “the cumulative oppressive power of the
capitalist to exploit the scarcity-value of capital”. But the owner of capital, however modest,
can no longer obtain interest, that much is plain. Because capital is no longer scarce. But
solvency is.

Adrian Ash
BullionVault