David Morgan on the Value of Silver in an Upcoming Inflationary Depression
Introduction: David Morgan, editor of “The Morgan Report” and founder of Silver-Investor.com, started investing in the stock market well before turning 18 years of age. Several years ago, Morgan put his lifelong study of free-market economics to work researching the economy, stock market behavior and precious metals, especially silver. Although very familiar with gold, Morgan believed that silver needed more exposure and would be utilized increasingly as technology continued to demand more and more of the metal. He has followed the silver market daily for over 30 years.
Daily Bell: We’ve interviewed you before but give us background on your publication and interest in silver.
David Morgan: Our publication is called “The Morgan Report” and can be found on the web at www.TheMorganReport.com. We publish at three different levels, one for buy and hold investors, the next level is aimed at market timing and the last is for hedge funds or high net worth investors.
Daily Bell: How are silver and gold performing these days?
David Morgan: Since August the precious metals have performed well. On the basic plus service I provide my own trades, bonds, gold, silver and the US dollar. Recently, I put on a trade for long silver basis $28.00 on the spot market.
Daily Bell: Is silver money?
David Morgan: Silver is both an industrial commodity and money. The word for silver and money is the same in the Romance languages. Anyone interested can do a simple search on Google – some of my articles will come up. The point, however, is 1.2 million references will be made in response to that search query.
Remember, the US was on the “International” gold standard until 1971 but not internally, yet 90 percent of silver circulated as the only “legal” tender through 1964! So silver was actually the ONLY MONEY in the US from 1933 through to 1964 inclusive. How soon people forget!
Silver has served as money through every debased paper currency since the dawn of recorded history. Any way you slice it, the fact remains the component of silver-as-money exists.
Daily Bell: It’s been attacked for being an industrial metal. Your thoughts?
David Morgan: Silver is indispensable for modern life. So are many of the Rare Earth Elements, but without REE’s life would go on. Without silver you basically would not be able to use electricity efficiently enough to have all the electronics and electrical power grids we now enjoy in modern society. No silver basically means no electricity. Think what that would mean to society.
Daily Bell: Is platinum a money metal? It’s called a noble metal. What’s that?
David Morgan: Platinum does have all the classic aspects of money—durable, consistent, divisible – but really is considered more of an industrial metal. Silver is 50 percent industrial and 50 percent money. Platinum is more like 90 percent industrial and 10 percent money.
It is called noble because it is 30 times more rare than gold.
Daily Bell: Where does silver go from here?
David Morgan: All markets go up and down; silver is no exception. We still have at least one more massive up leg in the gold and silver markets. I see silver making a new real high in the next four to five years.
Daily Bell: You called the recent bottom. Please explain.
David Morgan: I use a variety of factors and some technical analysis. I cannot give away trade secrets but my sentiment indicators are very reliable.
Daily Bell: What is the CFTC doing, if anything, about market manipulation?
David Morgan: Sorry, but in my view, very little to nothing. They have had more than ample time and we can be sure sooner or later some “official” statement will come from the CFTC. The gist of it will most likely be some adjustment to the number of contracts being held but there will be loopholes that favor those who have control now.
Again, excuse my cynicism but I have watched this situation since before the Hunt Brothers and it is the same old story, the same old crime and not much has changed.
Daily Bell: Will they get to the bottom of the manipulation?
David Morgan: No. If the CFTC cannot even define what a “swap” is and yet they are traded every day, how can we the public expect them to really understand how buying and selling pressure by large entities control a market?
Daily Bell: Does taking physical delivery put pressure on the big Wall Street firms who may be behind the manipulation?
David Morgan: Taking physical delivery is the worst nightmare for the paper-pushers. Yes, it does have a huge effect over time. This is what basically caused the Hunt debacle. Bunker had plenty of paper silver, but also TONS of real metal. In some cases the exchange could not deliver bars and substituted bags instead. Hunt agreed but had he known what was to happen later on, he may have demanded the contract be filled exactly, which he had every right to do.
Daily Bell: How do silver stocks fit into the bigger picture of investing?
David Morgan: This is the area in which the public will participate as the market begins to make new highs. The price of silver will discourage most investors but many that come late to the silver story will participate by buying silver stocks.
Unfortunately, this is also the time when many “new” worthless companies will be touted by those out to grab a piece of the action. We have a strategy that we will provide to our members when we see this taking place but, in our view, it is a few years off.
Daily Bell: Gold stocks?
David Morgan: Same idea applies to the gold stocks. We at TMR will be guiding our members through this very profitable period of time. It will be quite exciting and, in my view, will become a bubble much bigger than many anticipate currently.
Daily Bell: Explain the silver-gold ratio and how it is changing.
David Morgan: The gold-silver ratio is simply how many ounces of silver it takes to buy one troy ounce of gold. So for example, when the ratio is at 50 is takes 50 ounces of silver to buy 1 ounce of gold. The gold market new bull run started in 2000 but silver’s recent major bull market did not start until September 2003 and the ratio was at 80 to 1. We have been as low as 36 to 1 and are currently around the 50 level.
One of my basic tenets has been that silver would outperform gold and, so far, that has been the case. Going forward, expect the ratio to narrow, meaning silver will continue to outperform gold.
Lastly, the ratio can be traded; in fact, I am currently holding that ratio trade and plan to roll it over for some time. Of course, our premium members were privy to this trade when I put it on some months ago.
Daily Bell: How do silver and gold track the 1970s?
David Morgan: This market will be far bigger and much more meaningful than the last bull market, in the 1970s. The problems that existed in that time frame are laughable relative to the massive currency destruction taking place now.
Daily Bell: Let’s look at the larger picture. Where is the euro headed?
David Morgan: The euro is headed where all unbacked fiat currencies end up – into the dustbin of history. The greatest lesson of history is that people do not learn the lessons of history.
Daily Bell: Is the EU itself going to founder?
David Morgan: There is nothing more disruptive to any society than the one universal accepted truth that turns out to be a lie. The idea that you can live beyond your means by printing or borrowing the difference never has worked and never will.
Daily Bell: What’s going on with the wars in the Middle East? Are we going to end up in a religious war with Islam?
David Morgan: In a word, yes. The West will end up in a war with “Islam” and the Middle East will be destabilized. This has huge ramifications for oil, which means energy, and nothing happens in today’s world without energy. The US is in better shape than just a few years ago with the huge discoveries and new techniques being employed.
This, of course, was done primarily by the free market without any government sponsored energy policy.
Daily Bell: How does silver fit into a wartime picture?
David Morgan: Fortunately or unfortunately, silver is a metal of war! The larger the war, the more the demand for silver. I seldom get this question but you asked and that is the answer. Anyone who really wants to explore this might consider looking into Charles Savoie’s work on our website.
Daily Bell: How high could silver go? Gold?
David Morgan: Putting a paper price on either could prove to be a futile exercise in a fiat system. However, if things hold together we are looking at a very conservative “matching” of the highs reached in 1980 in real terms.
This would suggest $2500 gold and $130 silver but in the 1980 highs these prices overshot considerably. I expect the same thing will take place again.
Daily Bell: What about China? Is China buying a lot of silver?
David Morgan: China has increased their silver consumption considerably. A few years back China exported 100M ounces of silver on an annual basis; now China imports 100M ounces. They are using a lot of silver but silver for investment purposes is just beginning to catch on in China. It will catch on more and more as the Chinese people have more experience of paper money failures than anyone else on the planet. Current count: eight fiat currencies in Chinese history and eight failures!
Daily Bell: Where is the dollar headed?
David Morgan: The dollar is headed to a point of either complete distrust or a point where a “new” currency or backing of some type is implemented just in the nick of time.
Daily Bell: Do you expect to see a new global currency in your lifetime?
David Morgan: In a way, we have it. I travel the world, as you know, and only use a Visa card. I never worry about the exchange rate, currency board or anything else. The Visa account sorts all of that out in the monthly statement. I can be in several different countries in a single month all using different currencies and just keep throwing it on the Visa card. So debt is very well defined on a global basis amongst the bankers.
Money is power and control; thus, the elite would like to garner even more. The question becomes will it happen even if that is what they want? I have my doubts as complex systems tend to unravel quickly and without warning.
Daily Bell: Is it going to be the SDR? Why isn’t silver included in the basket?
David Morgan: It is possible the SDR is used as a “trial balloon” to test how the public reacts. Personally, I do not see the SDR being used long term.
Silver is simply too precious to be used in the equation. The “price” or ratio to gold would have to be so much better than currently that it will not happen. Putting silver into the mix has no practical use for the bankers, as either platinum or palladium; these markets are simply too small. Or if you prefer, too rare.
Daily Bell: What about the amero? Any thoughts?
David Morgan: Many in my field thought there would be ten or perhaps seven global regional currencies, with the euro being the first and the amero uniting Canada, US and Mexico. Since the euro is such a disaster I do not see any hope for the amero. However, this step may be skipped and again a “one-world” currency proposed.
Daily Bell: Let’s talk about America, which is becoming increasingly authoritarian. Your thoughts?
David Morgan: It is sad times for anyone who understands the importance of freedom. If you don’t mind putting a link to my video on the topic here, it explains my views: “Silver is The Achilles’ Heel to the Entire Economic System.”
Daily Bell: Who is going to win the election?
David Morgan: Does it matter? At this point is would be like changing the captain on the Titanic. There is no REAL difference between the parties but many think their vote matters when the truth is that the elected classes look upon the people as lesser than themselves.
How many even know that the elected do not participate in the Social Security System? Instead, they have their own special program. The idea “of the people, by the people and for the people” died a very long time ago. But most people are so distracted they have not even noticed.
The moral structure that makes us human has been destroyed in many ways. If you want to see more of my thoughts on this topic let me suggest the movie “The Four Horsemen,” in which I participated. Here is a clip On Education.
Daily Bell: Did Ron Paul run an effective campaign?
David Morgan: How effective can you be when the controlled media blacks you out?
Daily Bell: What do you think of Obama?
David Morgan: I don’t. My time is much too valuable to take any time thinking about the man.
Daily Bell: Who will win? Will it make a difference?
David Morgan: Again, to me it makes no difference. Will it affect the markets? Yes but only on a temporary basis. A currency crisis is coming, ready or not, and no human power can stop it! The markets are more powerful than any group or government. Yes, this is where the small (people) actually make a difference with many acting together out of fear. It could get ugly in some areas. Keep a high moral standard and set an example. Be your best. The world is crying for leadership.
Daily Bell: Are we headed to a worldwide depression?
David Morgan: We are moving toward an inflationary depression where money promises are largely maintained yet people become poorer and poorer. Even the “rich” suffer at some point because the quality of life is not money dependent − it is integrity dependent.
That is why I have fought for honest money most of my life – but alas, shouting into the wilderness can drain one’s energy over time. For me personally, my cries have been heard by many such as this publication and many younger men and women have become interested in my work and others like-minded. This pleases me greatly. Never give up. Be the change you want to see in the world, as Gandhi said.
Daily Bell: What do people need to do to protect themselves?
David Morgan: Become themselves. Sorry for the esoteric answer. I mean, be true to themselves. Few read the classics, listen to classical music, get deep meaning out of anything they think, do, or say. Everything exists for them in the external material world. In a sense, a real man could lose everything and as long as he remains “himself” he would have lost nothing. But almost everyone reading this will not have a clue of what I just wrote.
Protection begins with something to protect. If all you care about is what is outside yourself you have missed the human experience. The real value is being free and so few know it and even fewer understand it. However, once it (freedom) is lost completely then many will rise and ask what happened.
Daily Bell: Is America headed toward some kind of social chaos? What will another term of the Obama presidency bring?
David Morgan: There will be social chaos in some areas, of that I have little doubt. Another term would accelerate the idea that government is the solution when, in fact, it breeds dependency; the very essence of freedom is to be independent.
Daily Bell: Is the Internet continuing to make a difference in terms of waking people up?
David Morgan: Yes. There is little doubt, in my view, that the World Wide Web is the freest market that currently exists – the free market of ideas. Being as idealistic as I have been and remain, there is nothing as powerful as an idea whose time has come. Now is the time for those who can critically think to take some action. Many of those are producing some fine information in various forms on the Internet.
Daily Bell: What has it done for your business?
David Morgan: My business has been built entirely on the Internet.
Daily Bell: Can anyone shut it down?
David Morgan: I have read articles of an Internet kill switch and, of course, individual sites could be blocked.
Daily Bell: Any other points you want to make?
David Morgan: Yes, nature preaches balance. Our entire system has become corrupted. I do not have time to go into the main reasons but few reading this will disagree that that the food chain, air and our water supply have largely been corrupted.
If we look further we will see even the human dignity has been taken away. When someone is given something without work, all self-respect disappears over time and what is left is a shell.
Daily Bell: Any comments on upcoming newsletter issues?
David Morgan: Yes. I will be raising prices in 2013 but all paid members before that time will be able to enjoy the current price structure.
Daily Bell: Any websites or other informational literature you want to point to?
David Morgan: For an overview of many of the things our staff does relating to silver go to www.SilverSpeculator.com.
If your readers want to join the free list they can access it here: www.silver-investor.com/joinfreelist.html.
As far as something deep and meaningful to leave your readers with, let me suggest that perhaps they stop looking for answers and begin to ask the right questions.
Above all else, question authority – why is anyone the “boss” of you? My oldest daughter asked me this when she was three years old. I had asked her to do something – she promptly informed me that I was not the boss of her! But what would you expect from one of my offspring?
Coming full circle … people, in my view, do not take the time to get quiet and centered and ask themselves what are the most important things in life. Money is important! But there is much more to life than money. Real security is being secure in yourself and knowing that is priceless. Learning to live a simpler life could lead to greater happiness and from what I see just ahead, almost all of us are going to have a much simpler way of life forced upon us, like it or not.
Daily Bell: Great speaking with you again. Thank you.