This article was originally printed in the latest issue of Numismatic News.
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All this frenzy about gold and silver. No one seems to think about what is really going on.
I lived and worked in the Philippines for 20 years from 1972 to 1992. When I first arrived I knew something about the country, as I had lived in Okinawa for the previous 15 years and we had 22,000 Filipinos living there.
President Marcos had just declared martial law when I arrived. The country was a financial mess as Marcos and Imelda his wife had spent his presidency trying to run the country on borrowed money. Imelda had spent the national treasury trying to take care of “her children” and had failed. The Senate and House of Representatives would no longer go along with the spending, so with the help of the American CIA they declared martial law. Congressmen and senators were sent home, and these chambers were padlocked.
As an outsider, martial law seemed great. Law and order was restored, and most important, credit was restored to the country by the International Monetary Fund and World Bank. So the social welfare spending was restored, along with housing for the poor and land for the landless.
As a lifelong coin collector, I noticed that the cost of collector silver coins was creeping up in peso value but not in American dollars. Native Filipino collectors complained that silver was gaining value, not that the peso was devaluing. For the next 20 years as the peso declined from five to eight to 10 to 14 to 18 to 22 to 28 to 34 to 40 and finally when I left, 48 pesos to the U.S. dollar, nine times out of 10 local nationals would complain that silver was going crazy.
All the while this was going on, manufacturing was being outsourced to China. Regardless how cheap local goods were, Chinese goods would be less expensive.
Now we fast forward to middle America. Most of what has happened you are aware of, but one important thing that you have missed is in our little state, oil and gas is the engine that drives our economy. The state has had a 7 percent gross production tax on these resources. One source of income was the “Big Inch,” a 22-inch natural gas pipeline that went from Cushing, Okla., to Chicago for nearly 60 years.
President Bill Clinton signed the NAFTA agreement. I will not reiterate what that has done to manufacaturing and the move to China, but the energy story is one that is almost never heard.
In 2004, Enbridge Energy Partners bought the Big Inch and in 2006 reversed the flow from Cushing to Chicago and changed the product to Canadian crude oil to Oklahoma. First it was 90,000 barrels a day. Then in 2008 that was increased to 150,000 and today it is 300,000 barrels a day. That crude is what the industry calls “heavy” of low gravity and so must be blended with West Texas “sweet” or higher gravity product. The heavy grade sells for as low as $31 a barrel so as much as can be blended into the mix is done so.
Our oil and gas industry has been decimated. State production in 2009 was the lowest since 1940. Yesterday, just as almost in passing, the local news broadcast that a larger line is almost complete and crude import from Canada will be increased to a million barrels a day. Oklahoma and Texas refiners have adapted to use more of the heavy product.
You can imagine what that has done to our economy. Consumers are happy as gasoline is $2.40 a gallon. The downside is there are fewer jobs to drive to as the economy turns down even further.
So what has really happened is the silver and gold has not gone up, the U.S. dollar is going down. Just as the old collectors in the Philippines were complaining about the common date 1907 silver peso costing 50 pesos, you will hear people complain about any old Peace or Morgan being $50.
It has to happen. We have spent the national treasury, not on freedom but on free stuff. Free rent, free food and free health care.
I have felt like a missionary in Africa. No one will listen. Even I am trapped in the dollar investments. I can’t get out without a huge haircut, and I can’t bring myself to take it.
The average person does not have the resources to buy enough silver or gold to make a meaningful difference on a retirement plan. It would take a lifetime of accumulation. No investment adviser would have a vested interest in proposing such a plan.
So I will march along with all the rest of the lemmings and walk over the edge of the cliff.
There, I feel better however, just putting it down for someone who may read it.
This “Viewpoint” was written by Neal Coffin, a hobbyist from Cyril, Okla.
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