The case for physical silver and Gold Investment...
"YOU CAN'T eat gold!" is a common refrain from Gold Investment naysayers.
But you can't eat oil either, and at least gold is easier to carry around, says precious metals pundit Bob Moriarty of 321Gold.
Here he speaks with The Gold Report about his forecast for the US government, banking, and why he continues to increase his mining-stock Gold Investments despite his doomsday predictions.
The Gold Report: When we last spoke in October, we focused on quantitative easing in the US. Since then, the people of Tunisia and Egypt have successfully overturned their governments. Now there are significant civil uprisings in Libya, Bahrain and Yemen...
Bob Moriarty: The cause of all the turmoil in the Middle East – and what's going on in Wisconsin for that matter – has nothing to do with religion. It has nothing to do with democracy. It has everything to do with the cost of food.
Either Ben Bernanke is the dumbest guy in the known universe or the biggest liar – and perhaps both. He says that the Federal Reserve's second round of quantitative easing, QE2, has nothing to do with the cost of fuel and food. Of course it does. He has been wrong about every single thing he's said since he took office.
When people are hungry, they start riots. The riots in Egypt were directly related to the cost of food. The riots in Wisconsin are being framed as union versus anti-union. But it is really about people being afraid they won't be able to feed their families.
In the US, the problem is that the government can't afford the outrageous sums that it's paying union members for retirements. As many as 90% of members are retiring on permanent disability in some unions. California couldn't balance its budget even if it fired every state employee. We have too much government.
TGR: To what extent do you think Wisconsin is a harbinger of government cutbacks to follow in other states?
Bob Moriarty: Wisconsin is the canary in the coal mine. The funny thing is that Wisconsin isn't the state that is in the worst shape. California, Michigan or maybe New York, is in the worst shape.
Do you know how long it will take for the US government to fail? Nineteen days.
TGR: How do you arrive at 19 days?
Bob Moriarty: Because that's how long it took in Egypt.
TGR: Do you think this unrest is going to overflow into the oil-rich countries, like Saudi Arabia?
Bob Moriarty: Absolutely. The media is highlighting the Middle East, but unrest has occurred in Croatia, Albania, France, England and Greece as well. The breadth of these uprisings is connected to the power of the internet. These crowds can communicate because of Twitter, Facebook, Google, instant messaging and e-mail. People have the ability, on an individual basis, to take command of the situation. This has never before occurred, and it's a very important concept.
If the US has riots and we overthrow the government, which I absolutely believe is going to happen, we're no better off. The debt still exists.
The entire world needs to go back to real-world economics – supply and demand. The economy needs to start producing things of value. This is literally a worldwide revolution.
TGR: So, if it's 19 days to overthrow a figurehead government, how much time does it take until some regulatory body is able to create food, jobs or a middle class?
Bob Moriarty: If there isn't any real money, which is gold and Silver Bullion, probably 20 years.
TGR: What if you're Saudi Arabia and you have oil?
Bob Moriarty: Have you ever tried to eat oil?
TGR: You can't eat gold or silver either.
Bob Moriarty: You could trade it for food. There are no individual companies in Saudi Arabia running the oil business; rather, it's the government of Saudi Arabia. If the government fails, then oil refining and oil shipping stops immediately. It's already happened in Libya, but Libya's only 1.2% of world oil production, and Saudi Arabia is about 14%.
After the Yom Kippur War in 1973, Saudi Arabia was very upset with the US for supporting Israel and declared an oil embargo. But what really happened was that the Organization of the Petroleum Exporting Countries (Opec) started raising the price of oil across the board. Oil went from about $0.15 in 1969 to several Dollars a barrel. There was another crisis in 1979, when the Shah of Iran was overthrown. Oil shot up to $12 or $15 a barrel, which was enormous.
TGR: Shouldn't we be getting out of equities, and getting into precious metals, at this time?
Bob Moriarty: I define silver and Gold Investing primarily as being an insurance policy. I believe that everybody should own some gold and silver. I had a meeting with a billionaire yesterday and I told him exactly the same thing. You could have hundreds of billions of Dollars and not have the ability to buy gasoline.
Buying Gold and silver is something that prudent people should do. I'm not saying that people need to go Buy Silver at $34 an ounce because it's going to $500 an ounce. I'm saying people need to own some silver, and I don't give a damn what the price is today because they may want to buy some food and gasoline down the road.
TGR: Let's assume our readers have already made physical silver Gold Investment. Should they be pulling out of equities?
Bob Moriarty: You always need a spectrum of investments. Once they get past physical gold and silver as an insurance policy and investment, investors have got to put money into something. I keep most of my liquid assets in equities, even though I believe that we're on the verge of a major collapse in the stock market, and gold and silver shares could absolutely get whacked.
TGR: Currently, gold is doing quite well and silver is doing even better. Are there certain types of mining or junior equities that investors should be looking at?
Bob Moriarty: I avoid the popular areas in investment. Investors should want to get into investments when nobody wants them. That's when they're cheap.
TGR: Do you believe that metal juniors are popular now, or that they are yet to become popular? A lot of the mainstream investment shows and media really aren't talking about gold yet.
Bob Moriarty: I think we are in phase two of three. But I'm seeing a lot of scary things – like "market experts" forecasting that silver could go to $500 an ounce. I could see silver at $40 an ounce. in the short term, but I could see it at $20 an ounce. in six months. Silver at $34 an ounce. is pretty expensive.
TGR: A lot of people are speculating that silver will go higher. I haven't heard $500 an ounce., but we're looking at that Gold-to-Silver Price ratio.
Bob Moriarty: They're wrong about the Gold/Silver Ratio. Historically in the US, it was 17:1, but we were using silver for coins. Nobody in the world uses silver for coins now, so most of the demand is as a commodity. Unless we go back to silver coins, I don't see the ratio going to 17:1.
TGR: No one really uses Gold Coins now either...
Bob Moriarty: True, but almost all the gold ever produced is still above ground. Gold gets recycled. Silver gets used. It's a commodity. At today's prices, there is something like $8 trillion worth of gold in the world. I doubt very seriously that there's $500 billion worth of silver.
TGR: Any other thoughts you'd like to leave with our readers?
Bob Moriarty: Investors should be looking at graphite companies. Graphite is a metal that's been ignored. There's big potential there. There are just a few juniors that have started mining graphite.
I believe there is going to be a correction in gold and silver. It's not something that panics me, but people are making too much money and are getting too bullish.
TGR: Do you think the correction will be more than 10%?
Bob Moriarty: Absolutely. Silver can correct 10% in one day.
TGR: What about in gold?
Bob Moriarty: I'm a contrarian. I would rather see gold go down to $900. That wouldn't hurt my feelings at all.
TGR: It's a privilege, Bob. Thanks for being so forthright.
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