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Aaron Task: The resent tumble in gold prices and its subsequent rebound has revived the
conversation about gold as an alternative currency. My guest today, David Morgan, who
is the creator and publisher of The Morgan Report and Silver-Investor.com.
He actually says silver is a better alternative currency than gold. We'll get to that in a
second. But first of all, David, why don't you give your thoughts on the short-term trading
activity. We obviously had a huge rout in all the commodities, particularly precious
metals, a week or so ago. There's been a rebound but not as big a rebound in silver as in gold.
What do you think is happening there in the short term?
David Morgan: Well, short-term, more volatility. Obviously, we had a huge sell-off. In fact,
record sell-off in both the precious metals very recently. And it takes time to work that
out, especially it starts compounding on itself. You start getting margin calls, which means
more falling. And until that stabilizes, and it's starting to stabilize now, but I see
more of the same. I see kind of a broad trading range at these low levels for awhile. We'll
find a bottom and we'll start back up, in my view.
Aaron Task: And do you have a thought on why silver hasn't rebounded as much as gold has
to this point?
David Morgan: Yeah, it's always a tough call. One, it's a smaller market. It's easier to
manage as far as the price for a short period of time. Or, in some cases, intermediate time.
I think also the demand side for both is extremely robust, but silver is actually a much smaller
market than gold and there isn't much silver availability in the Asian community. You see
that most of the gold-buying is coming through Asia and there's lot of gold there. At least,
much more gold available for that whole sector than there is silver. Silver's really kind
of thought of not as much as the monetary metal in the Asian countries as it is, let's
say, in some other parts of the world.
Aaron Task: All right. So, let's segue. Let's talk about why you think it is a better currency
alternative than even gold. What is it about silver that you think makes it; that we should
be thinking about it as the alternative currency?
David Morgan: Well, to try to be brief, when I wrote The 10 Rules of Silver Investing,
rule number one was: "No one wants to be a prophet of doom." But in absolute crisis,
silver would be the monetary metal of choice, and the reason being is that its value per
unit is a lot less than gold. So, if you had to go to a barter type of situation, it would
be silver.
Secondly, silver's been used as money more places and more times than gold ever has.
Lastly, if you look at the word "silver" it means money in almost every Latin-based language.
I mean, if you go into the Torah, the word for "money" is "silver." In the Bible, silver's
talked about before gold as money. So, silver really has a history of money much, much more
than gold does. Gold is money, and gold is used as settlement between nation state to
nation state, king to king. But in everyday commerce, it's always been silver when we
have been on precious metals or by metallic standards.
So, that's a fact. No one can dispute that? Will it come back to that? No one knows. But,
again, since its unit value is less than gold, it would be used more often.
Aaron Task: Right. More people would probably have silver quote-unquote "lying around the
house" than they do gold, for sure. They probably know where their gold is more than their silver.
So, you're involved with a movement in Utah to have silver be adopted as a currency. Where
do things stand with that, and, again, is this realistic; that this could happen? Because
obviously the United States of America is pretty determined to maintain the dollar as
the one currency that's in use here.
David Morgan: Right. Well, I have to jump on that a little bit, Aaron. I mean, the dollar
is a weight of silver is what it's defined as. But coming back on point, yes, the Utah
situation currently there is a; Larry Hilton that wrote the legislation that was passed
and adopted has a mechanism where you can pay bills. It's a bill-pay service using gold
only, and it has to be U.S.-minted gold. We talked to him recently about silver.
But I think it's rather impractical. There is a situation I'll be writing about in The
Morgan Report this month that uses a silver, gold, platinum, or palladium; any of the precious
metals-backed debit card. And I think this is the only way to actually use metal in commerce,
because it's transparent to the purchase. You just put your debit card in, they don't
know if it's coming out in Federal Reserve notes or if it's coming out in some certain
amount of silver, gold, platinum, palladium.
So, this is the way to implement it is to have a depository to put precious metals in
there, issue a debit card against that, and then go about your business. And I think this
is the only way to really put precious metals back into circulation.
Aaron Task: That's very interesting, that sort of an electronic means of currency, a
debit card, but using silver or other precious metals to back it. Are there any financial
institutions that have said that they might adopt this or get behind it?
David Morgan: Well, there has to be a financial institution because, you know, the person
that generated this has to obey all the, you know, the Patriot Act and everything else.
So there is a bank that's FDIC-insured and everything else that we are familiar with
that was open-minded enough (and that's my words) to say, "Yeah, we'll take a look at
this. OK."
Aaron Task: What's that bank?
David Morgan: It's a bank here in the Northwest, I forget the name currently, but it is a member
of the Federal Reserve system and they've adopted this. It's a startup. I mean, I'll
be honest, Aaron. I think there's less than 30 people involved with it right now. But
it has been going for about a year. No problem so far. Accounting takes care of it. And there's
always the question, well, what about the profit and loss. And, of course, with today's
computer technology, there's nothing to it. Whenever you swipe the card you either have
a loss on your silver or a gain on your silver, and that's printed out for you. So it's a
very easy accounting methodology if you need that for reporting purposes later on.
Aaron Task: So, do you think Bitcoin is a legitimate currency as well? Any thoughts
on the recent wild ride that Bitcoin has been on?
David Morgan: Well, I'm not sure I wrote that. One of my staff might have. And I don't want
to back out of it. Bitcoin is an alternative digital currency and, of course, there's lots
of factors that people like it. I'm somewhat favorable to it, but I'm on the side of specie
money; something you can hold in your hand. Or, in the case of the debit card, where it
actually exists and you swipe your card and it comes out of your account.
Bitcoin, I think, is something that really gets people thinking about alternative currencies.
And I'm free market. Basically, you can put 10 different currencies out there and let
the market decide which one is the best. And I think that's really an approach that we're
starting to see, like it or not, governments worldwide or not. This is what we're seeing
in the real world. So, there is a demand, let's say, for alternative currencies in different
forms, and the market will probably decide at some point which one they like the best.
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