Buy Silver Bullion Coins

(This is the third of four articles about Maverick Investing in the Age of Obamanomics)

Born Again Gold Bug

When I did a recent radio interview, the host (who was basically friendly), said, “You’ve always liked gold.”

My response? “No, no, no!”

I have been bearish on gold for most of two decades before December 2003. I have only been bullish on gold twelve years out of the thirty-four years I have been publishing The Ruff Times. I was bearish or neutral for twenty-two years. I’ve only been bullish since December 2003. But I guess I can never shake the label of “gold bug” the media gave me way back in the ‘70s.

When I first began publishing The Ruff Times in 1975, I begged my subscribers to buy $120 gold and $2 silver. Gold finally topped out at $850, and silver went to $50. I said, “Sell!” at $750 and $35 respectively. Then for more than twenty years, I made money for The Ruff Times subscribers mostly in stocks, bonds, real estate, and other traditional investments.

At the risk of sounding immodest, (Once I thought I was getting humble. It felt awful, but I was only coming down with the flu.) I probably learned at least as much about gold and silver and their markets in that Bull Run back then as any writer alive today.

Now I’m back again in familiar territory, riding the Golden Calf, since December 2003.

As the golden calf grows into a massive bull over the next few years, you can make a ton of money in gold, more than twice as much in silver and even a lot more than that in carefully selected mining stocks from my Investment Menu (See www.rufft imes.com)

Three Different Uses for the Precious Metals

There are serious uses for gold and silver that have little to do with investment, and gold bugs oft en miss that. You need to know the difference. The metals have three basic uses:

1. Gold and silver coins as personal insurance against a declining dollar.
2. Government holdings of gold backing for the currency (non-investment).
3. Gold and silver for investments when things are right, and only then.

Timing makes no difference with number one and number two. They are for all seasons, not for speculation or investment. However, when you want to invest in gold and silver, timing is everything.

Gold and Silver Insurance

You should always own gold and silver coins as an insurance policy. Like homeowners’ or automobile insurance, its purpose is to protect you against unpredictable economic and political calamities (like now), that you always hope would never happen.

It’s there to use as real money in the case of a worst-case, like an inflationary currency collapse, or terrorist hackers shutting down the power grid so no one has access to their dollars at the bank or at the ATM and they can’t open the supermarket cash registers. The same terrorist-financed hackers could break into the computers of the money-center banks where most of the world’s dollars are in hyperspace, insert a destructive virus, and the world’s dollars would disappear in a nanosecond.

Remember, only about 5% of the world’s dollars are minted, printed, or coined. The rest are only on the computers of banks. If the computer data is wiped out, there could go the monetary system of the world, because the dollar is the world’s reserve currency. This could mean the instant collapse of the American economy, and maybe western civilization.

Then the world would instinctively go back to gold and silver as a means of exchange and store of value until the computers are fixed and a new paper-money system is cobbled together.
 
These things always seemed to be unthinkable in our otherwise comfortable world, but we have never lived through a period of Obamanomics nor had such an implacable enemy as Islamo-fascism.

Insurance Action Steps

Each family should have at least one half-bag of pre-1965, commonly circulated, ninety percent “junk silver” dimes, quarters and halves (360 ounces of silver). Junk silver can be bought from any neighborhood coin dealer or from one of the recommended bullion and coin dealers – Kitco is one of them. (Go to my website www.rufftimes.com to buy the book or subscribe to The Ruff Times.)

Due to Obamanomics, gold and silver will explode in value and your insurance coins will become a fantastic investment, which they may not have been when you bought them. In the case of less drastic events, such as mere rising-price inflation, they will still be very profitable.

For instance, because of the critical supply/demand situation, as the holder of any form of physical silver, you will find the industries that need them will have to bid up the price until you are willing to part with yours. $100 an ounce, anyone?

Coin insurance is a buying decision for all seasons, and it only becomes an investment if bad or even mildly bad things (like slowly rising inflation) happen in the world. This is not for short-term profit, but for long-term protection.

You would really need it if a monetary crisis or a war gets bad enough and lasts long enough that we have started to universally use coins as the alternative “real” currency. It might even not take that long for merchants to get the drift. During the OPEC gas crisis in the ‘70s when inflation and silver were in a runaway mode and gas prices were exploding, a few enterprising gas-station operators were advertising gas for a dime a gallon—pre-1965, ninety-percent silver dimes—because a ninety-percent silver dime was worth more than the posted price-per-gallon.

Like all insurance, the coins are there to use when bad things happen which you hope won’t happen. All insurance is a bet that bad things will happen. You win your bet only if you have a car crash, or a fire, or if you die. With orthodox insurance, it doesn’t matter if you win or lose your bet, the premiums are gone forever. In the case of coin insurance, the premiums are still there forever and appreciating, no matter what.

Gold And Silver As Monetary Backing: A Condensed History

In theory, we should be backing our currency with gold and silver, making it fully exchangeable into the metals, like America did for almost two centuries. It’s a principled cause that dedicated gold bugs should fight for, but it has nothing to do with investing in gold.

Years ago when Americans began to vote themselves benefits from the public treasury, government started to print and issue more receipts (currency) than there was gold or silver in the warehouses (which we now called “banks”). Who would know, as long as not too many holders of receipts showed up at the bank with their receipts to demand their gold or silver at the same time?

And then, we eventually thought of the paper receipt (currency) as real money all by itself.

For a long time we had confidence in the “gold and silver backing.” But human nature never changes. We soon got so accustomed to our government benefits, paid with receipts (dollars), that we accepted the printing of more and more receipts (money). We were ignorant of the cause of monetary inflation. The only signs were rising prices of goods, and rising gold and silver, but most people had no idea what was really causing inflation.

The stage was finally set when it became obvious to foreign dollar-holders that there was not enough metal to meet all demands, so they began jostling to be the first in line to present dollars at “the gold window.” Panic!! Nixon finally faced the reality that there soon would be more receipts (dollars) presented for redemption than there was gold available. Until then, foreign governments could exchange their dollars for gold, but we were steadily running out of gold in Fort Knox, as foreign confidence in the paper dollar had sagged so badly due to monetary inflation, that we were soon threatened with losing all our gold reserves.

So Nixon closed the “gold window” at the Federal Reserve to stem the tide, and the process was complete; the dollar was now completely detached from gold and silver, and greenbacks were now just a “fiat currency” (money just because a government order or “fiat” declared it).

Once we accepted that the horse was out of the barn, Congress no longer worried about whether we had enough gold and silver in the bank to redeem the ever-growing supply of banknotes, and the political claims on government “entitlements” were soaring. Inflation was the inevitable consequence of money creation.

Then, Uncle Sam began an anti-gold campaign to de-monetize the metal and separate it in the public mind from “money.” They even began making and marketing gold and silver coins (eagles) as “mere commodities” and collectibles. However, enough of us remembered the monetary meaning of gold and silver—that they rose at the slightest threat of inflation. And as gold was an internationally traded commodity and a lot of foreigners had not bought into the U.S. anti-gold propaganda, the price began to rise.

You Can’t Go Home Again Restoring gold backing to the currency would seem to be the obvious solution. In theory, that is so, but that won’t work until we are willing to forego our soaring government benefits and accept the discipline that gold and silver backing provide. We need a sudden rush of brains to the head and character to the heart—and wallet! Don’t hold your breath! If you think that will happen, I have a big orange used bridge in San Francisco to sell you.

It won’t happen until the present money system has totally collapsed and we have nothing to lose by replacing it with an honest hard-money system. Now, we collectively feel we have too much to lose. We have a huge vested interest in the status quo—our welfare, our Social Security, Medicare, Medicaid, our farm subsidies, etc.

By Howard Ruff
The Ruff Times

*****

Howard J. Ruff, the legendary author and financial advisor, wrote How to Prosper During the Coming Bad Years in 1978. It is still the biggest-selling financial book in history, with 2.6 million copies in print.

His new book, How to Prosper in the Age of Obamanomics is free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.

Howard is founder and editor of The Ruff Times financial newsletter. This article is from a recent issue of The Ruff Times. The newsletter deals with a broad spectrum of middle-class financial issues. (You can learn about it at www.rufftimes.com). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world.