In Jim Cook's Archive


I have some wealthy friends. They use brokerage firms and hedge funds to manage their money. They make no investment decisions themselves. It’s worked for them in the past and they’re not about to change. The other night one such fellow bragged to me that a hedge fund managing some of his money was up 20% last year.

Later, I thought about how I could ever convince these wealthy individuals to buy silver. Maybe it’s not possible. They pretty much buy the establishment story. The Federal government, the Federal Reserve and Wall Street all agree that inflation has been running about 2% a year. You would have to doubt that fact to buy silver. You would have to be convinced that covering the government deficits with new money and keeping interest rates artificially low would eventually debase the dollar. You would also have to suspect that stocks could someday be impacted negatively by monetary mismanagement.

Lou Rockwell of the Mises Institute puts in aptly. “The American economy may look good on the surface, but underneath the foundation is cracking. The debt is unsustainable. Savings are nearly nonexistent. Money supply creation is getting scary. The paper money economy can’t last and last. One senses that the slightest change could bring about massive wreckage.”

Here’s why wealthy people should put 10% of their net worth into silver. Over two billion new people are in the hunt for products that use silver. For the first time, they have money and they are going to improve their living standards, come hell or high water. This roaring Niagara of demand will devour natural resources like a herd of hungry elephants in a shrub garden. Silver price rise could outdo any money manager’s stock picking ability.

Stocks can get clobbered. What’s worked for money managers can turn against them. Hedge fund investors are reported to be leaving these funds. The current mortgage and derivatives problem looks like a $30 trillion iceberg. According to newsletter author, Chris Laird, (using BIS estimates) “the actual leveraged amount is $600 trillion.” As the Norwegians say in Minnesota, “Uff-da.”

Laird goes on to say, “Right now, central banks are vigorously trying to stem a meltdown in the money markets, as corporate paper (short term money for banks and companies) has pretty much stopped rolling over. The lenders in that market are afraid if they roll the paper over, they will be stuck with loans to companies banks and institutions who are hiding huge derivates losses….A central bank can monetize some things, but it surely cannot monetize trillions and trillions of them over and over. If they do that, then the value of their own bonds collapse, and the currency devalues.….Given the fact that I don’t think Central banks can escape having to monetize more and more trillions worth of derivatives, the question arises ‘what will be the fate of major currencies?’….”

As monetary guru Jim Sinclair says about derivatives. “The problems cannot be fixed by any interest rate action. The problem will not even be fixed by a monetary inflation of unprecedented amounts.”

These are circumstances that Austrian economists companies have always warned against. Paper money is inherently unstable. It has become worthless a thousand times over in a hundred different countries. More than ever paper money and paper assets are at risk. There isn’t one Wall Street money manager in a hundred that truly understands the risks. That’s why wealthy individuals solely invested with the establishment should change directions for 10% of their net worth. They should own silver because it’s one of the few things that can’t go bankrupt.

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