Financial Blow Up: Little Time Left Before Wheels Come Off System Warns David Morgan
“So now all they want is control, saying, ‘I own you because you have to pay me interest. And when you can’t pay interest, what happens? They take over the property,'” warns David Morgan, founder of The Morgan Report. He emphasizes that we don’t have much time left to address these issues.
However, he expresses his optimism about the silver market. “Silver’s not at an all-time high, but it’s at an 11-year high or close to it,” says Morgan. He explains to Daniela Cambone that strong monetary demand for silver, combined with steady or increasing industrial demand, could lead to a situation where both forces compete for the same supply, potentially driving prices higher. “Around 60% of the silver market is driven by industrial demand, especially in areas like solar energy and electric vehicles. As currency wars and financial instability continue, the monetary demand for silver could increase significantly.”
CHAPTERS:
00:00 Silver beats copper and S&P 500
4:30 Silver market share
8:07 Paper v.s. physical silver
12:44 Gold
15:18 Japan became currency manipulator
17:06 BRICs
18:57 Debt
21:19 Economic reality
TRANSCRIPT FROM VIDEO:
00:00
We’re at the end where we can’t pretend that these pieces of paper from government entities that are borrowed into existence by a corporation or a central bank that’s privately held, that issues the currency to governments, can’t win. There’s not mathematically a possibility of ever paying back this debt.
00:24
Hi folks, Daniela Cambone here from ITM Trading. Hope everyone is enjoying their summer. And if you have some extra time, I highly urge you to book a Calendly session with one of my incredible colleagues over at ITM Trading. It’s basically a free strategy session where a very knowledgeable person will walk you through building a wealth preservation strategy. We definitely need it with everything we’re up against in this.
00:51
crazy world that we are living in. So I strongly urge you to do that. It’s a free strategy session. It’s highly educational, informative, and very simple to set up. Just click on the link below in the description of the video. There’s a calendar, just select the best day, the best time for you, and someone will give you a call. You don’t need to do anything. You don’t have to think of questions. You don’t have to think of what to say. You can sit back and listen or ask any questions you may have. On that note, let’s get to today’s interview.
01:22
Hi, Daniela Cambone here for ITM Trading. Welcome back to the show and please welcome back to the show, David Morgan, a publisher of The Morgan Report. David, always good to be with you. How’s your summer going? Oh, it’s been good and it’s great to be back. Thank you for inviting me. Yeah. And I know it’s a special day. It’s your granddaughter’s birthday. So happy birthday to her. One day when she’ll watch this. Yeah, right. Ten years from now.
01:52
Yeah. David, happy to have you on to really just touch base on a few topics that you and I kind of always circle back on, but wanted to start with what’s happening in the silver space here. In fact, I had to re-crunch the numbers, but silver beat gold, copper, and even the S&P in the second quarter. And yet not many folks, at least on mainstream media are talking about silver, but just to give some context.
02:21
spot silver, and this is according to a note from Deutsche Bank, was up nearly 17% in the second quarter versus gold, which gained more than 4%. So what’s going on with silver? Are you excited about what’s happening? Should we be? Yeah, I think anyone that’s long is excited. I mean, silver’s not at an all-time high, but it’s at an 11-year high or close to it.
02:45
I think silver is catching up with gold. I mean, I don’t know what interview it was, but one or two ago, we talked about, you know, where are we in the metals market? And they said gold’s broken out and we’ll see silver catch up at some point. As far as I’m concerned, it’s got a lot more catching up to do. But certainly it has with the numbers you just gave. And I think it’s got people that are involved in silver somewhat excited, but obviously overlooked by the mainstream. I mean, very seldom hear much about silver other than a display of the price.
03:15
on the mainstream financial channels. Once gold, gold is more mainstream as we both know. The banks still own it. Central banks have been big buyers. It’s really more of an establishment, conventional investment, believe it or not, relative to silver. Silver is sort of out there at the outskirts and very seldom, but once the bull market really gets going, then they will have people on talking about silver market. I mean, remember the…
03:41
main bull market when we first met, we had that 11-year bull market in gold and silver. Silver outperformed in some years, underperformed in others. But I was on national television, I don’t know, about four or five times. And that hasn’t been the case. It’s not about me, but I’m just saying that silver was in the news. And now it’s not. You just don’t ever hear about it really. We hear so much about how it’s really used, it’s industrial component, right? And in
04:12
Is that where the bulk of the demand that you’re seeing is still coming from? I mean, what’s it going to take to get the, the investor here? Yeah. I was thinking about that this morning before the show right now, but probably around 60% of the market is industrial. So obviously that’s the lion’s share. 60% of a hundred is, you know, six, 10. So, but the problem for the shorts is this.
04:39
As we get through this quagmire of currency wars, as we’re seeing with the Japanese yen and what it could do to interest rates and all this taking place in the, in the let’s say mainstream financial markets where most people pretend to believe that those units of currency actually have value as that unravels further and further and maybe the Japanese have to start selling off the USD and their bond holdings and they start to drive interest rates up, not down.
05:07
you’re going to see more and more pressure on the precious metals. And the point I’m making is simply this. There will be a monetary demand that’s really strong in both the metals. At the same time, the industrial demand, let’s say is, is steady or higher. So you’re going to have two forces vying for the same product. You’re going to have a monetary demand in silver that will accelerate. As you just outlined, it outperformed gold last quarter. What if it continues to outperform gold for the next two years?
05:37
and that’s a possibility. I’m not guaranteeing it. I’m suggesting you think about that. If that’s the case, and you still have this huge push into solar, because solar is actually about as cheap as other forms of electrical conductivity, and think about where you’re gonna put it up. You’re out and about, you know, you’re putting it in a mine. All the, I don’t say all, I was gonna say all, but many.
06:00
of these new mines, they put up a solar array because it’s easier, cheaper, and faster to get the mining production by putting up a solar farm than it is to tie into the grid that’s 16 kilometers away. So you don’t want to cost the same and it’s faster and there’s less red tape, you’re going to go to that. So I think the demand is really strong on both ends. I just want to make one more comment, I’ll give it back to you. In 2020, the investment demand for silver was over 500 million ounces.
06:29
That’s better than 50% of the market. At the same time, you’ve had strong industrial demand. That happened one year and one year only so far, but I think that’s kind of a precursor to what could happen in the future. So if you had, it’s a billion ounce market, about 120 million or 150 million is recycled, 850 million is from mining. If you’ve got a demand of 600 million for…
06:59
industry and then you’ve got, let’s say 500 million. You also have jewelry and some silverware demand. And we’re talking about being a deficit potentially for some, for quite a ways into the future. And all markets move at the margin. If the investors don’t want to part with their silver at 40 bucks, it’s got to be bid to 42. The only part of it at 42 is going to be bid to 45. I’m sure you get the idea, but I can’t help but reassess.
07:26
You know, the long wait that silver investors have had, but yet this is a new day, a new dawn and a new way to look at the silver market because the demands from both sides are so strong. Not to go deep into the rabbit hole here, David, but just to kind of conclude our talk on silver before we move to gold, and I want to circle back on Japan, USA. Can you talk to me a little bit about the paper versus the physical setup in the silver market?
07:55
why many argue it’s quite problematic. It is. First of all, you can control the, or you can manage the price in the futures markets for almost any commodity, because if the supply is more or less infinite in contracts, then that means it’s cheap. So if you can produce a piece of paper that will
08:21
purportedly be exchangeable for physical silver at some point in the future, then that is a huge supply. Really, it’s an infinite supply. It’s not supposed to be. There’s supposed to be limits on the amount of contracts you could produce, but the CFTC kind of looks the other way. So that’s been the case in silver more than any other commodity. Yes, there’s weeks of hypothetical paper, gold, and other commodities, but silver is the extreme case.
08:52
as the market ebbs and flows, as long as the physical demand is met, and it has been in most cases, the amount of paper doesn’t matter to the end user. It matters in price, but it doesn’t matter in practicality because you’re still getting your demand met. The problem is that that could come to an end that it has a couple of times, just very, very sparsely for just a few deliveries or that type of thing where…
09:21
there’s a delay in the market, or there’ll be the Cantanga moves backwards, you get in the backwardation, and so then your spot market is higher than the futures price, so it kind of flushes out some silver in the market. So the problem is, and I’ve thought about this before our interview, is that even when your open interest is at a low and the longs have been washed out and the shorts have won again and they pocket the currency in their back pocket, you’re still at a very high level.
09:51
of short positions that really can’t be met. So there will be a day that there will be a non-delivery, an excuse, we have to be met by some means or some delay. I think once that happens, if it’s known to the general public, then I think you’ll see a rush in the silver market because there’ll be people that know that there’s a demand or a short squeeze that’s occurring.
10:21
I think that’s more or less inevitable at some point. David, so then is it easy to make the case that one should always just buy physical silver? I mean, why take that risk with paper silver? Well, I think the average investor, even the sophisticated investor, should always start with physical first, even hedge funds, but they don’t. There is a purpose.
10:50
for the futures exchange. I mean, it started off with good intent. You know, the farmers could hedge their wheat production and ensure they made a profit on it and all that. And I get that and it makes sense. But it’s been abused like almost anything in the financial markets. I mean, they’re big, it’s a huge casino these days. And the rules that are in place to try to keep it tidy or within the realms of reality have been ignored as I said a moment ago. So there is a place for hedging.
11:19
But there isn’t a place for the rank speculation in price management that this has turned into in the oil market and the silver market, gold market. You can look at soybeans. You can look at almost any market and make a case that it’s really not a true price by supply and demand. It’s a true price on what a contract costs. And since only 1% of the contracts.
11:47
are ever exchanged for the physical commodity, you can see that it’s really to the advantage of the commodities, CME and the CFTC, to just let it ride. The exchange is making a lot of money, the public usually loses, and the professionals keep making money.
12:06
Just a comment on gold now. Russ Norman had a very good piece on what’s happening in gold. And he brings up the fact that the sky for gold looks a little unfamiliar to those of us who have followed it for so long. He says, quote, gold is currently ignoring most traditional relationships. US dollar yields, rate expectations. So the night sky.
12:32
looks a little unfamiliar and this is absolutely correct and he says but it’s still it’s still doing very well so i just want to get your take on well one do you do you agree um that gold is ignoring you know traditional correlations here i do but i also want to go on record or reiterate what i’ve said years ago i said you know a big believer in the extra pyramid and what you’ll see
13:02
And gold will basically go up at the same time near the end, because in the liquidity pyramid where you’re striving to have something of safety, which there’s one thing’s less safe than gold, but perceived by the public that doesn’t even know about the gold or silver market is that piece of paper. I mean, it’s out of the bank. I mean, and this is a run to the dollar. And since the dollar is the most coveted currency of all of them, then the dollar could be gaining in $0.00.
13:30
value versus other currencies, yet gold is gaining on the dollar. Why? Because it’s superior to the dollar. That’s why. So that doesn’t surprise me. And I’ve been looking for this for a long time because to me, it’s just clear indicated that we’re getting near what, you know, Rafi Farber calls the end game. We’re at the end where we can’t pretend that these pieces of paper from government entities that are borrowed into existence by, you know, corporation or central bank that’s privately held.
13:59
that issues the currency to governments can’t win. There’s not mathematically a possibility of ever paying back this debt. And more and more people not only realize it, because most bankers do, most finance people know it, but they just put it in the back of their mind and say, well, that’s down the road. Well, we’re at the down the road. And how do we know that? What we just said. The dollar’s going up, the gold is going up. Silver’s confirming, gold’s move.
14:28
There’s a lot of angst in the market, and even a country like Japan saying, well, we’ve got to save our own currency. We’re going to have to off some of these bonds and get back to some legitimacy or belief in this currency that we have, even though our deficit is so extreme that our GDP to debt ratio is off the wall. We’ll pretend everything’s okay. It’s not okay. It’s not going to be okay for much longer. Well, on that point, we saw…
14:55
the slap on the wrist Japan received from the US, they’ve now been placed on a Forex watch list labeled as a manipulator by the US. You brought up the fact of what happens if Japan were to stop buying up the US debt, dumping dollars. Is that becoming more and more of a likelihood here?
15:24
Well, I’ve given a hypothetical scenario for years, certainly not every interview I do, but I’ve said it probably three or four times in the last three or four years. What could happen? What could start it? No one knows. It could be anything, but I’ve often said that it could just be some pressure in the US bond market where a country starts selling off more bonds than a normal trading day. Maybe they’re double what they normally sell on any given trading day.
15:52
Let’s just name it as Switzerland for an example. And then Japan says, you know, they’re head trader in a bond department says, holy moly, I don’t know what the Swiss know that I don’t know, but they’re getting out of the dollar. Maybe I better. So they start selling more than their average. Now all of a sudden China looks at it and says, well, we’ve already offed a bunch of US debt, but this looks like these guys know something I don’t. I’m gonna have to get rid of what I’ve got left.
16:19
And all of a sudden you get this race to the bottom where everybody’s trying to sell the bond. Now, that’s an extreme example, but markets move like that. I mean, you get these really extremes, especially near the end where there’s a lot of uncertainty. So is that going to happen? I don’t know. Could it happen?
16:39
Do you think that the bricks could be the player that ultimately breaks the dollar? I don’t think so. First of all, you have to have a debt market in advanced economy, which the US market is primarily. But the bricks is getting stronger because they’re not having like two or three. They don’t have the five.
17:07
nation states, they’ve got several now, which means that they’re trading amongst each other in currency. So that gives you a good currency base. You almost have a very strong foreign exchange market within the BRICS, which gives you a lot of diversification and also that diversity helps to steady the ship. So that’s a good thing. But as far as having an absolute BRICS backed currency with a debt market behind it, I don’t really see that, at least not for some time. So I think it could mitigate.
17:36
Problems with the US dollar, but I don’t think it could overtake it or be a total solution Really when you analyze it the whole crux is energy It’s you know a petrodollar or dollar or yen or even a Canadian dollar or whatever Really? It’s a ticket Value for energy. I mean everything that you buy took energy your sweater your food your car your apartment
18:03
And so what you want to look at is who has control of the energy. And if you look at that, you see that the bricks are really in a strong position energy wise. So if you take it from that analytical perspective, you’re thinking, yeah, you know what, they are in a pretty good position because whatever happens to the currency markets, at least they’ve got the real goods, meaning they’ve got a good supply of energy. You mentioned that before and.
18:29
I know that you were as frustrated as probably 99% of other Americans watching the debate the other night, David. But one thing that surprises me is how little we’re actually talking about the deficit that we find ourselves in. Just for context, two trillion in annual deficits and a hundred trillion of baseline deficits projected into 2050. I mean, it’s obviously and clearly a trajectory that’s not
18:58
sustainable here, David.
19:02
Well, you know, I just like the political class across the board. I pretty much came to that conclusion as an 18 year old. But, you know, it is entertainment and it does pacify a lot of people and it does divide the country, unfortunately. But the real problems, as you said, Danielle, are not addressed. These are real problems that take real solutions and no one’s really stepping up to the plate. I was listening to the W.E.F.’s outlook and they’re looking at still.
19:30
growth to increase. I mean, they’re so out of touch with reality. These people just have no idea of what we call the mining industry boots on the ground. They don’t live in the real world. And unfortunately, the food supply is getting diminished. We’ve got water issues in many places, not only droughts, but purity of the water. I mean, the air supply is less than clean. And I’ll just go one step further, a little off target, but-
19:58
I was commenting to another deep thinker about the auto industry as kind of a mean to look at and I don’t see any new cars here. Spokane is not the richest place around. It’s not New York City. But even here, these ranchers will buy a new truck every three, four, five years. You just don’t see it. And the car dealerships, there’s one north of me in a small town. And I would say they’ve got enough.
20:25
cars and trucks to supply a car truck to everyone in that town. That’s how many acres of cars just sitting there doing nothing but collecting dust. So that’s a real indicator to me other than lots of others. But that’s the one you can look at every day and say, you know what, something’s wrong with this economy. If they can’t move these automobiles because it costs too much for people to have the money to buy them. What the heck’s going on? Right. Okay. So I’m so happy. And let’s wrap on that point about being out of touch because obviously I watched the Fed.
20:54
latest comments yesterday how they’re getting closer to that inflation target. They think that they’re winning the battle. But to your point, cars are not moving off the lots. Housing affordability now, David, at the worst level since 07. Folks going into debt to even take a vacation. Credit card debt at the highest levels we’ve seen. So that’s the real picture, right?
21:23
The real picture, I mean, I want to close that slide, but it’s basically usury. Once you have this debt that starts compounding because the interest rate, it all revolves around usury in a way because once the compounding gets to such a level that even the interest can’t be paid back, that’s the end of the system. That’s pretty much what we’re approaching now. The bankers create the principle for nothing. When you create a T-bill or a T-bond or a
21:51
Let’s take a hundred dollar bill, cost five cents to produce it. It’s produced by the treasury and sold at cost five cents to the federal reserve that loans it back to the government at face value plus interest. It costs them nothing. So they have no risk on the principle really. They created it out of thin air more or less. So now all they want is the control of I own you because you got to pay me interest. And when you can’t pay me interest, then what happens? Well, you take over the
22:19
property, take over, you have a mortgage, take over the building, take over a strip mall, a house, an apartment building or whatever. So it’s really a rig game. You know, my whole life has been to educate people and try to bring it back to a system of the people, for the people, by the people. Crypto has a chance. I’m not a huge crypto component, but I’m not against it. I’m, as I said, I’m for freedom and for us having the money power taken away as a control mechanism from the elites. I mean, that’s why I live.
22:48
read every day because this has gone far enough. And unfortunately, your children and my grandchildren or children may be in a world that we don’t want to provide to them because we just didn’t stand up and shout it loud enough. So shows like yours, mine, and other people that you interviewed, hats off to them, keep going. Let’s get people educated. Let’s take some action because we’re not gonna, we’re in a position in my strong view and studied opinion. We don’t have a lot of time left. Wow.
23:17
Yeah, amen to that. David, we got it. We definitely need to be shouting louder here. You’re really a sad state of affairs, but let’s focus on some happy, happy things like your granddaughter’s birthday. And like I said, hope you’re keeping well. Hope you’re having a great summer and hope things are a little, little better in Spokane.
23:42
It’s quiet here. It’s a small, quiet town. I still glad I moved here 25 years ago. It’s great place, great place to raise the kids. One of the reasons was affordability and to get them in a more peaceful, country-fied type of environment to grow up in. And I’m very glad I made the move. Yeah. Smart move. Definitely beats New York city, David. I hope to see you soon. Thank you so much, my friend, for coming back on the show. Thanks for having me. It’s been a pleasure.
24:09
And thank you all for watching. We’ll have more great content headed your way. So be sure to stay tuned to the Daniela Cambone show and don’t forget to sign up at danielacambone.com. That’s it for me. Thanks for watching.
SOURCES:
https://www.google.com/finance/quote/SLV:NYSEARCA?window=YTD
https://www.metalsdaily.com/archive/ross-norman-gold-price-out-of-this-world-/356660/
