The Silver Institute is an invaluable source of information about silver, from supply/demand statistics to recent, esoteric developments that may affect future demand.  Serious silver investors can do...

The Silver Institute is an invaluable source of information about silver, from supply/demand statistics to recent, esoteric developments that may affect future demand.  Serious silver investors can do themselves a favor by regularly visiting the site.

Additionally, The Silver Institute publishes on its site a free quarterly publication aptly titled Silver News.  To receive an email when the latest Silver News has been posted, sign up here.  You will also receive notifications of Silver Institute press releases, which should be of interest to all silver investors.  Between notifications of Silver News publications and press releases, you may receive ten emails a year.

Nanosilver particles

The First Quarter 2010 Silver News has a fascinating article about nanosilver particles possibly being used to overcome blood platelet disorders.  When the human body sustains a wound, blood platelets clot to help heal the injury.  That, obviously, is good.  However, when clotting is triggered not to close an open wound but by a disorder, that’s bad.

Millions of people take anti-coagulants to keep their blood flowing through their arteries.  According to the article, tests show that nanosilver particles significantly inhibit clumping or coagulation in hyperactive platelets obtained from patients having diseases that generate hyperactive platelets.  Test also showed that nanosilver also significantly reduces adhesion of platelets to vessel walls and subsequent clogging of the vascular system.

If further testing and trials prove nanosilver particles to be viable alternatives to blood thinners, this could be huge, not only for people suffering from blood disorders but also for the silver market.   But, even if tests and trials support the use of nanosilver in this area, governmental approval could be a while coming.  Not only would FDA approval be needed, but the EPA also claims jurisdiction when it comes to nanosilver.  The second article in the 2010 Silver News discusses the EPA’s position on nanosilver.

Miniaturized devices

Today’s technological advances absolutely boggle the mind, and many involve silver.  For example, the same research team that 20 years ago developed long-lasting batteries for pacemakers is studying the use of silver particles to improve lithium/silver vanadium oxide batteries that are used in current pacemakers.  The batteries are 15,000 times more conductive upon initial use and could be used in other biomedical devices to treat stroke, migraines or Alzheimer’s disease.

According to Ester Takeuchi, Ph.D., developer of the lithium/silver vanadium oxide battery and holder of more than 140 patents, “We may be heading toward a time when we can make batteries so tiny that they – and the devices they power – can simply be injected into the body.”

Silver in cell phone cases

Also according to Silver News, Seal Shield, developer of dishwasher-safe computer keyboards, mice and TV remote controls, has introduced a cell phone with antimicrobial silver embedded in the case.  An antibacterial case for cell phones is certainly needed if researchers at the University of Arizona are correct.  They say cell phones carry 25,000 germs per square inch, or 500 times more bacteria than the average toilet.   Just to make their cell phones still more sanitary for users, Seal Shield’s new phone is dishwasher safe.

Read also about combat gloves that are growing in popularity with soldiers in Afghanistan.  The gloves not only functions as gloves should in keeping hands warm and dry, but the gloves are odor free because of silver-induced antimicrobial properties.  Gloves that are worn for hours at a time gather bacteria that emit foul odors.  Silver’s antibacterial properties solve that problem.

Finally, as if the above described technology is not enough, scientists in Germany and Switzerland are working on inserting silver ions into artificial DNA molecules.  The result, hopefully, will be original size DNA structure with a rigid frame that can be used without risk of structural failure in sub-miniaturized electronic devices.

Dr. Faber, the keynote speaker at the May 22nd NYC Mises Circle Seminar, had no good news about the status of the world’s financial affairs.  He is of the opinion that all sovereigns will continue to...

Dr. Faber, the keynote speaker at the May 22^nd NYC Mises Circle Seminar, had no good news about the status of the world’s financial affairs.  He is of the opinion that all sovereigns will continue to create monies as solutions to their financial woes and that gold is the right investments for the times.

Further, Dr. Faber asserted that the Greenspan-induced artificially low interest rates were the primary cause of the dotcom bubble and the catastrophic housing bubble.  This position is consistent with the Austrian economic theory of boom-bust cycles.   Consequently, if the world’s nations continue to print, the current Great Recession may turn into another Great Depression.  After the corrective part of the boom-bust cycle sets in (the malinvestment liquidation period, the bust), continued government interference in the marketplace causes the recession to be longer in duration and even great in depth than would have been if the government had done nothing.

Lewrockwell.com labeled Dr. Faber’s talk The Coming Economic Catastrophe.  He is a link to a video of Dr. Faber’s one hour talk, compliments of lewrockwell.com.  Do not pass up watching Dr. Faber’s presentation.  It kept 350 attendees glued to their seats.

My perception, coming away from the seminar:  The car has gone over the cliff.  The best we can hope for is something to break its fall.

Summer is here, and the US Mint is just now releasing 2010-dated fractional-ounce Gold Eagles, the ½-oz, the ¼-oz and the 1/10-oz sizes.  We expect to have the coins ready for shipment on or about June...

Summer is here, and the US Mint is just now releasing 2010-dated fractional-ounce Gold Eagles, the ½-oz, the ¼-oz and the 1/10-oz sizes.  We expect to have the coins ready for shipment on or about June 21.  Because of subdued buying, premiums are about where they have been during normal times in years past, meaning that wholesalers are not tacking on additional premiums because they fear running out of the coins.

A big however is that the wholesalers could change their pricing if the Mint releases small quantities.  The Mint has not allocated coins so there is still the possibility that there could be a short mintage.  I think a short mintage is an outside possibility.

The Mint received huge criticism in 2008 and 2009 for not being able to meet demand.  I felt that the criticism was unjustified.  The financial crisis of 2008 came out of nowhere (at least to the Establishment), and the Mint didn’t see it coming any more than Wall Street, the banking industry and certainly the government.  (Although you have to admit that John Paulson had his hand on the pulse of the financial markets.)

Therefore, I believe that the Mint will have a huge supply of fractional-ounce Gold Eagles on hand when they are released.

This belated release of fractional-ounce Gold Eagles should not be construed as flaw on the part of the Mint but a sign of the tremendous success of the its bullion coins programs.  In my opinion, the Mint appropriately dedicated its production to the more popular 1-oz coins: the 1-oz Gold Eagles, the 1-oz Silver Eagles and the 1-oz Gold Buffalos.

Had the Mint considered only “profitability,” it would have been producing the fractional-ounces Gold Eagles all along because the Mint has a bigger margin in the small coins.  However, the mint chose to produce the lower-margin coins (1-oz Gold Eagles, primarily) in efforts to satisfy demand.

The Mystery of Banking is not just another book on banking.  It pulls back the curtains that hide the flaws of fractional-reserve banking and explains the differences between loan banks and deposits...

The Mystery of Banking is not just another book on banking.  It pulls back the curtains that hide the flaws of fractional-reserve banking and explains the differences between loan banks and deposits banks.  Further, it discusses why free banking would provide a much more stable banking system without the inflation that is inherent in any system that utilizes a central bank.  The Mystery of Banking also discloses how loan banks and deposit banks were married because of poor legal decisions.

Although many books discuss fractional-reserve banking, Murray Rothbard, with simple T-charts, explains the simplicity of fractional-reserve banking and discloses why it inflates the money supply.  Although this book mentions the immorality of fractional-reserve banking, that is not the focus.  The Mystery of Banking deals more with the mechanics of fractional-reserve banking and its inflationary impact.

Many critics of our monetary system lay the blame for inflation solely at the feet of the Federal Reserve System, through its purchases of debt instruments with money created out of thin air.  However, the greatest creation of money out of thin air comes on the books of the banks when they make loans.

While the Fed itself is not the biggest inflator, the very existence of the Fed, the central bank of the United States, encourages banks to collectively be the primary cause of the inflation of the money supply.  Rothbard includes eight chapters on central banking because banking in today’s world cannot be discussed without a thorough understanding of the concept of central banking.

Much has been written about the Fed, central banking and their flaws.  Still, the chapters on central banking are worth reviewing for clarification.  However, discussions of loan banks and deposit banks are not easily found, and most readers will find Rothbard’s explanations enlightening.

Loan banks started out doing just what the name implies: they loaned money.  Investors put their money in loan banks expecting to earn profits on the money loaned.  When money is loaned, interest (or profits) is earned for doing without the money for a period of time and for taking risks (The loaned money may not be paid back.)  Deposit banks, however, began as totally different institutions from loan banks.

Originally, deposit banks offered bailment services.  They would accept items such as gold and silver and issue receipts.  On presentation of the receipts, the items were returned to the depositors.  Deposit banks earned profits by charging for their bailment services; loan banks earned profits by charging interest on the money loaned.

In a series of English court decisions, the line between loan banks and deposit banks was not blurred but erased.  Those decisions resulted in the evolution of monetary system that today permits banks to be the great inflators that they are.  (Rothbard does not discuss it, but old court decisions in England hold precedence in American law.)

Rothbard does not leave readers hanging with the notion that inflation is a necessary evil that must come with banking.  He offers an explanation of free banking, which, unfortunately, has never been tried in modern times.

Under free banking, banks can inflate if they want but if their depositors get wind of it and want their deposits returned, the banks do not have central banks or governments to bail them out.  Under free banking, the government could not suspend the redemption of paper receipts for specie (gold and silver coins).  In short, the marketplace monitors the soundness of the individual banks.  The banks must earn the respect of the populace.  The populace, in return, has no government or central bank “guarantee” that their deposits will be safe.  Free banking requires diligence by depositors.

In today’s financial world, this may seem a reckless notion, that the marketplace can monitor the banks.  But, it is not.  If the banks did not have the assurances (written, tacit or otherwise) that the governments would bail them out, would they not be more careful with their lending policies?  And, would depositors not ask a few questions before depositing with just any bank?

We do not expect the government to guarantee our car insurance or life insurance companies, but we expect the government to guarantee our bank deposits.   This notion comes from 1930s legislation (many times modified) that was supposed to offer stability to our financial system.  The concept, of course, is flawed, as now we see that the government’s “guarantee” is only money created out of thin air.  It was the Fed’s reckless policies of the 1920s (The Roaring Twenties) that brought on the Great Depression.   (See Rothbard’s magnum opus America’s Great Depression for a thorough discussion of this heretical view.)

Advocates of free banking assert that it has only been tried once: in Scotland, 1727 to 1845.  Rothbard includes an appendix, The Myth of Free Banking in Scotland, which reveals that Scotland during that time had a highly developed monetary, credit, and banking system.  Further, there was no governmental monetary policy, no central bank, and virtually no political regulation of the banking industry.  During those nearly one hundred twenty years, Scotland enjoyed remarkable macroeconomic stability.

But, free banking, in its pure form was not practiced in Scotland 1727 to 1845.  Several times, when the banks issued too much paper, the government permitted them to suspend redemption in specie (coin money).  As long as the government stands ready to abrogate the redemption right of receipt holders, free banking is not practiced.  Still, Scotland enjoyed great prosperity and with a stable monetary system while many of the features of free banking were practiced.

The Mystery of Banking is an excellent read for gold and silver investors.  It will add further to their understanding of banking and inflation, which will enable them to better understand their investments in precious metals.

Friday, the FDIC closed eight banks, three in Florida, two in California, and one in each of three other states: Michigan, Massachusetts and Washington.  So far this year, the FDIC has closed fifty banks,...

Friday, the FDIC closed eight banks, three in Florida, two in California, and one in each of three other states: Michigan, Massachusetts and Washington.  So far this year, the FDIC has closed fifty banks, which puts it on pace to match last year’s 140 closures.

To put this in perspective, in 2008 there were only 25 closures and in 2007 a mere three.  There were no bank failures in 2005 and 2006.  The surging number of bank failures is another indicator of the severity of the Great Recession.

According to the December 31, 2009 FDIC Quarterly Banking Profile, the FDIC had 702 “problem banks” on its list, nearly three times the 252 at the end of 2008.  So, 2010 may see more bank failures than 2009.

With the number of bank failures at such high levels, the FDIC losses are huge.  2007 to date, bank failures have cost the FDIC nearly $60 billion.  The 2008 Washington Mutual collapse officially was, at the time, declared the largest in recent history.  Now, though, there are reports that the WaMu failure was a “zero cost” to taxpayers.  (Sounds like JPMorgan Chase picked up a lot of branches really cheap.  Maybe it really does help to have your headquarters in NYC instead of Henderson, NV and Park City, UT.)

However, the US largest bank failure in history is not on the FDIC’s failure list.  That inglorious record is held by Wachovia Bank, which was rolled into Wells Fargo, with the government guaranteeing Wells Fargo against certain losses.  With more than $812 in assets, Wachovia came under the “too big to fail” umbrella.

Where’s the deflation?

The 1930s, before the FDIC, saw massive bank failures, somewhere around 9,000.  As the banks failed, depositors lost their savings and the nation’s money supply shrank.  In short, money disappeared and deflation set in, resulting in falling prices.  Deflation is a decrease in the money supply.  It is the reduced money supply that results in lower prices.

Today, we have failing banks, but the money supply is not shrinking.  That’s because the FDIC and the Fed’s bailout programs, TARP (Troubled Asset Relief Program) being the big one.  Who knows what tacit deals have been made.

The threat of deflation guarantees inflation.  We have a Fed Head who, supposedly, is an expert on the Great Depression.  He has said that all is necessary to prevent another Great Depression is for the Fed to print enough money.  Inflation is the problem, not deflation, regardless of how many banks fail.  Invest accordingly.

Gold and silver are appropriate for the times, but before investing read The Dangers of Buying Gold.  There are right ways and wrong ways to invest in gold and silver.