David Morgan & Max Keiser talk GOLD and SILVER used as Currency in Utah


(text on screen): David Morgan Update Keiser Report Max Keiser: Welcome back to the Keiser Report. Time now to go to Washington State and speak with David Morgan of Silver-Investor.com. David Morgan, welcome back to the Keiser Report. David Morgan: It’s great to be with you, Max. Max Keiser: All right. David Morgan, this is exciting stuff. You’ve just returned from Utah, where you took part in an historic event. Tell us what you were doing there; what’s going on in Utah? David Morgan: The House Bill 371 was passed into law and signed by the governor of Utah. I was invited to participate in the ceremonial signing. This is the first state in the several states of the U.S. to put back in the law the ability, on a voluntary basis, to do transactions in gold or silver. Max Keiser: Right. So, walk us through this a little bit here, David Morgan. In other words, I’ve got a pocket full of silver bullion, I can walk into the store, and I can buy a pair of shoes and give them silver bullion? How does it work? David Morgan: First of all, the merchant that’s selling you the shoes or whatever you would want to purchase has got to say, “Yes. I do accept silver.” Because he voluntarily does or does not. So, it’s got to be voluntary on both sides. The law was very strict of what silver and gold they would accept. And for right now, the bill that’s passed into law, you can only use Silver Eagles or Gold Eagles. So, only coinage that’s minted by the federal government is accepted by this law at the current time. So, that’s sort of important. So, what is gonna take place is, there is a depository that is already set up that people can deposit their Gold and Silver Eagles into and be issued a debit card. Now it makes a whole transaction process pretty transparent, where you’re able to walk into that merchant and, you know, use a debit card similar to any debit card, and buy whatever you’re going to buy and it just takes the appropriate amount of silver or gold out of your account. So, once this is implemented, and it should be soon, from what I’ve been told at this meeting, I think it could really, you know, catch on. Max Keiser: Now, David Morgan, on the political front here, it sounds as if you’ve got a bit of a standoff developing between the states and the federal government. Because the federal government and the Federal Reserve Bank are really not for this type of conversion out of fiat currency into precious metal-based currency. Is this part of the standoff we’re seeing between the states and the federal government? Because it also applies to other political issues as well. David Morgan: Well said, Max. Yes, I do. I think what you see is Utah has the ability to stand up for states’ rights as outlined in the Bill of Rights. There are certain powers that were given to the federal government, on a very limited basis. And the states actually have all the power beyond those limited abilities of the federal government. And, of course, the federal government has usurped all kinds of power, really outside the purview of the Constitution. Utah says, “Hey, wait a minute. States’ rights. No state shall issue anything but gold and silver for payments of debt.” “That’s the law. We’re implementing it. We’re putting it into law. And let’s see what happens.” One thing I’d like to address, Max, and you’ll probably get to it anyway, but Gresham’s Law. You know: the idea that, well, why would I spend a gold coin that’s appreciating in value versus the fiat currency that’s depreciating in value? Because of that fact, how much traction will we get in this, you know, this movement, you might call it, in Utah. Max Keiser: Yeah, well, that’s a good question, and I’ve seen it raised on the blogs, and people are suggesting that, well, this is a way for the state to get people to get out of their precious metal positions and to liquidate those precious metal positions and it’s a way for the, kind of, the intention being the opposite of what we’re suggesting here: that there are some benefits and, as part of a trend, to move away from fiat currency. But I would imagine the answer to this would be that you need to start the circulation of precious metals trend somewhere, and once it hits a certain critical mass, then it takes on a life of its own and people then; the benefits of having a non-; of having a currency that’s not being; the purchasing power is not being whittled away from inflation overcomes the perceived shortcomings of the fact that you’re swapping out a fiat for precious in the very short term. David Morgan: You know, you can look at it both sides. One is, the free market is going to make the determination. So, there’s somebody out there, perhaps, that bought silver at 10, it’s sitting there at 50, but momentarily, and it’s saying, “Oh, I want to spend it.” And they do. That’s an example. The other example is, let’s take the Gresham’s Law to the extreme. And that would be what Hugo Salinas Price pointed out in one of his early articles is that just the idea that you can now start saving in gold and silver, maybe people will just start saving that and spend very little, but at least it brings the awareness of sound money to the forefront of a lot of people who have thought of it before. Plus, you’ve got to look at the free market. Maybe a lot of merchants will give a discount if you pay in silver or gold, whereas if you’re paying in fiat you have a different price. So, I think there’s lots of ways that you can see it actually get a foothold and to move onward from there. Max Keiser: Right. That’s a good point. In other words, the merchant is very interested in getting a hold of this appreciating asset; this appreciating currency. So they might be willing to offer a discount, which would give further incentive. And the other point you make in terms of savings is a very key point. Savings is something that is the inverse of what most people in America have come to understand to be their daily management of their finances, which has been dominated by consumption and debt. So, here you have the opposite of this, which would be savings and watching your savings appreciate in value. So, let’s say that in the state of Utah and in a few states around the country and maybe one or two countries around the world, they say, “We’re going to go to a silver standard for commerce.” What does this do to the above-ground value of the above-ground stock of silver, of which, depending on who you talk to, is let’s say, between 800 million and a billion ounces. Does it increase the demand? And if so, does it affect the . . . what happens there, on the dynamics of supply and demand? David Morgan: It would put great price pressure on silver, and I believe, you know, it’s already there as you well know, but put much, much more on it, because when you go back into history and you look at, you know, what the average wage for the average person was back in the late 1800s, you’re looking at a dollar a day. And in Constitutional dollars, at even an ounce, today’s U.S. Silver Eagle is one ounce; I know that. But a Constitutional dollar is about .76 of an ounce, or roughly three-quarters of an ounce. So the point is simply that a dollar per day was a pretty good wage at one time. So, in today’s fiat world that might be $100, let’s say, per ounce. And we’re not there yet. And I believe we’re gonna get there; maybe surpass that. But once the real value is determined and we haven’t, in my strong opinion, determined the true value of silver yet, you’re gonna see lots and lots of upward pressure. That’s why this Gresham’s Law is kind of important to think about because, you know, people, once they feel that they’re getting fair value for an ounce or 10 ounces or whatever they determine to use in the marketplace, then you’d probably see a lot more transactions take place in precious metals. But if they believe strongly that it’s undervalued, then the tendency is, of course, to save it. Max Keiser: All right. Let’s talk about Gresham’s Law for a second. Because it’s something that Bill Black, former regulator during the S&L crisis in the U.S., speaks about often as well, as being one of those, if you will, “behavioral” economic aspects that drives markets and finance underneath the surface a little bit. Tell us, you know, explain Gresham’s Law, how it applies here, and what is the law? David Morgan: Gresham’s Law is commonly stated that bad money drives out good. It’s more accurately stated that bad money drives out good if the exchange rate is set by law. But regardless, what it really means is that if you’ve got gold and silver appreciating and fiat depreciating, people will make a choice. And the choice usually is that I will spend the fiat that’s depreciating and hold on to the gold and silver. So, there’s a good argument to be made that, you know, even with this enactment in Utah, that there won’t be a lot of incentive for people to spend their gold and silver. Max Keiser: All right. Well, it sounds almost as if you could apply the same concept that you used in the fractional reserve banking system: the velocity of money concept, which is to say that loans become more plentiful the more that they are recycled through the banking system. You could say, apply this to silver, and say there’s a velocity of silver concept here is that the more it’s used, the greater demand there is for the silver, and therefore the price goes higher. So, actually by spending your silver, you’re increasing the price of the savings that you have left in your silver savings account. But let’s move on to supply and demand here for a second. The CPM Group. What’s the most bullish data in the report that’s just come out, and the most bearish? I know you track this stuff pretty closely over there at The Morgan Report. David Morgan: One of the more bullish aspects is China. The amount of demand from China, and it’s, of course, two-fold. There is investment demand in China, but particularly the industrial demand, it’s really never thought of thoroughly. You go back to the Silver Institute’s 2000 issue. The amount of silver used on a per capita basis in China was 170th the amount of silver used in the Western Hemisphere. So, United States and Canada, for example. Now it’s about 120th. So it’s been about a four-fold increase in the amount of silver used: cell phones, laptops, anything electrical, in China as they build and modernize their whole infrastructure. That trend continues and continues strongly. So right now they’re using about 120th the amount of silver per capita that they were using, you know, several years ago. And, again, that trend continues. So if you look at what’s going on in the solar energy field, a lot of solar panels produced in China, the industrial side of China is huge. On top of that, you have gold and silver availability for investment in China as well. Well, it doesn’t take much imagination to think of about 1.4 billion people in China (certainly not every one of them is going to buy silver, unless, of course, they catch on to the Max Keiser, you know, buy-an-ounce situation). But, seriously, there’s a lot of pent-up demand available in China and, of course, other places as well. I see that would be one of the most bullish things. On the bearish side, what’s interesting to me is that the recycling has started to increase. And, as I’ve thought about it more and more, it’s very likely because there are more electronics, some of them can be recycled. Some of them are uneconomic to recycle, but they’re mandated by governments to be recycled. For example, in California, some of the circuit boards that are not economic to recycle, still the law states that it must be, so even at a loss economically the government has stepped in and said this silver must be recycled. So, the idea is that, I thought, with photography going to, you know, very low-level silver halide photography and replaced by digital, that recycling would be in a major downtrend, and it has been for a few years, but now it’s starting to come back up. So, it’s in that slightly bearish. That’s about the most bearish thing I can find in the report. Max Keiser: All right. Well, that’s all the time we have on this episode. David Morgan of The Morgan Report. Thanks, as always, for your contributions on the silver side of things. And, I, would you say the trend; the bullish trend, is still intact? Is that your basic bottom line? David Morgan: Absolutely, Max. You’ve seen my lecture there in London and also in France. I’m extremely bullish. You’ve seen my 10-year projections. Certainly the price of silver, like anything, goes up and down. But we’re far, far, far away from the ultimate top in the silver market. Max Keiser: And that’s gonna do it for this edition of the Keiser report with me, Max Keiser, and Stacy Herbert. I want to thank my guest David Morgan of The Morgan Report. If you want to send me an email, please do so at [email protected] Until next time, this is Max Keiser saying, “Bye y’all.” (Text on screen): Keiser Report David Morgan: David Morgan with you. I’m here in Utah at the Old Glory Mint. And I just want to, again, emphasize what a historic day I witnessed yesterday, with the ceremonial signing of House Bill 371, which allows gold and silver to be used in commerce in the state of Utah on a voluntary basis. What I found interesting is that the implementation is going to be actually very streamlined, because the people will be able to deposit their gold and silver coins with the depository and be issued a debit card. So, basically, to a merchant, in the state, they won’t know, really, what’s going on in the aspect that you just produce a debit card, make your transaction, it debits your gold or silver coins, and you go about your normal business. So, I think it’s a rather ingenious methodology. It should be starting very soon. I’ve met many of the players. They’ll be reporting about this more in The Morgan Report as we follow the progression of the first state to re-enact gold and silver coinage as legal tender. And, again, I want to commend Utah for being the first. Buy Real, Get Real, Be Real. Silver-Investor.com

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