Thursday, July 17, 2014

Will My Silver and Gold Be Confiscated?


Fear is a topic I want to address today. Why fear? Because fear is one of the most dangerous and inhibitive emotions that clouds rational thinking and leads to poor judgment. I am not claiming invulnerability to fear, but it must be recognized for what it is; the mind killer.

That being said this post is a direct confrontation to the fear mongers out there who either out of fear are advising silver bugs to stack silver bullion only or out of their own self-interest promote the same thing and they will gladly sell it to you. "Do not buy the shares in mining companies!" they say.

I disagree.

The "Big Three" I will mention, but will focus in on Chris. The three are 1) Chris Duane,, 2) Sean (?) from, and 3) John (?) at

Now first and foremost I have respect for all three of these men. Their cause is just and I truly believe they believe they are helping people and indeed their advice is not terrible; buy physical silver. However I believe their view points to be myopic.

This whole post was inspired by the chief proponent of the "stack bullion only" (SBO) club, Chris Duane from the blog.

Chris and I had an exchange on Youtube that has led me to put "pen to paper". His handle is "TruthNeverTold" and here is the exchange in full:

TheFinnmacool: The real money will be made in the mining shares.....

TruthNeverTold: You mean another paper, counter party risk asset that is highly sensitive to labor and energy prices is going to thrive in an era where currencies collapse because of lack in faith in the stock and bond market and the tremendous amount of debt governments have run up to prop them up? And will that just be before those same governments tax, regulate or confiscate those mines?
Invest in already mined silver, not more risk in the ground.
TheFinnmacool: Yes, that's what I mean. You are making a lot of assumptions that the mines will be confiscated. I believe that to be a ridiculous position.
You can take the whole, "everything paper will burn" extreme view too far. Who will manage these mines? The government? The governments of the world will take ownership of THOUSANDS of mining companies? Spare me. Will they tax gains. Sure, but what will you do with a couple thousand ounces of silver? Sell it to who? Deposit the check where? Or are you now going to tell me you are going to be spending that silver? You'll buy a business or rental homes with it in a private transaction? No, not likely.

And let's say you did. Maybe by some moonshot silver will be money again. If that's your view you're totally full of it because in that situation there will be NO confiscation of mines. There will be NO windfall tax on share gains. How will the government on one hand say silver is money and on the other tax a certain group of people..?

Of course owning the metal is critical. I've stacked physical for over 5 years now and am now building positions in the mining shares. I am recommending that to others.

There's a large group of silver bulls that have fixated on a certain idea over the last few years. I believe it to be wrong and not well thought out. If I am wrong I'll admit it but I'll still be fine. If you guys are wrong, you will have lost a lot of people a lot of money for residing in fear in your minds.

"Never take counsel of your fears." Stonewall Jackson.

End dialogue. Chris never responded.

Where to start without belaboring already stated points?

Will the government confiscate or tax heavily the silver/gold mines or the owners of said metals?

I think that confiscation of mines is next to impossible bordering ridiculous. Will they tax profits? I think the better question is, what won't they tax.

But let's think this through. As I mentioned in my Youtube post, are we to believe that governments are going to confiscate the thousands and thousands of existing mines? Well, how many mines were confiscated in the 80's? This was a time when the world was in great fear as the dollar itself was thought to be on death's doorstep. Gold went from $100 in 1976 to $875 intraday in 1980. Not one mine confiscated. What about the MASSIVE profits that were made in such a short period of time? Were those people punitively taxed for their "profiteering"? Nope.

So where's the precedent for confiscation? FDR in 1933? Maybe. But we were on a gold standard then. It could be justified, the goal being the increase of the money supply, NOT acquiring gold. Confiscation now would be very disorienting to investors and the world would abandon fiat currencies en masse ruining a several hundred year old plan to remove gold and silver from the monetary systems of western banks and hopefully, in due time, the whole world. Not likely. Were any mines confiscated? Homestake went from what, $5 to $400!! Surely that boon was hard to pass by. But they did. Left it right alone. Hell even Venezuela didn't nationalize mines. They instead mandated that they had first dibs on production. Anything they didn't buy could be sold on the open market. The US did the same thing with uranium in the 60's. They didn't confiscate the mines when their need was great.

Most sophisticated governments right now KNOW that they cannot operate in the mining business. IT'S NOT THEIR BUSINESS! Taxing is easier. TAXING is their business. Taxing is why Magna Carta exists today. Monarchies realized long ago that complex societies could not and would not be owned entirely by the state if you want any kind of productive economy. By allowing land ownership and the taxing of that land they created revenue streams and the revolts simmered down.

Here's a recent example of what happens when governments seize mines:

The Colquiri zinc and tin mine was expropriated from Swiss commodities giant Glencore in June last year following a dispute between rival unions.
During that month the mine's output was 429 tonnes of unrefined tin and zinc.
By December 2012, the monthly production rate from the mine reached only 337 tonnes – that's a 21% drop.
Over the same period, the state-controlled miner increased its workforce from 959 to 1,249 workers, an increase of 30%.
Morales said he was "very surprised" by the disappointing figures and characterized the developments at the mine as "worrying," but mentioned nationalization success stories in other sectors in the country, South America's poorest.
At the time the mine was seized Glencore said it had been planning $56 million of investment at Colquiri. source

Bye-bye $56 million investment. Woops. They've lost a LOT more since then. Confiscate mines and you lose investor base and the very product you are after diminishes.

Right now there's about 1% of the world's investments invested in the precious metals. Have you ever heard the phrase, "even bad publicity is good publicity"? Can you imagine the amount of attention that would be brought to the metals market if the government were to announce such a thing? Can you imagine the level of anger that would exude from the American people who DO own the metals and miners? Here you have a group of patriots who poured their savings into these instruments only to be stolen from them because of the financial profligacy of a group (all?) of CONgressmen? 1%, big deal right? Well that's about 3.5 million people, mostly armed. Think about that.

Now here's a situation that could arise that would totally blow Chris et al, right out of the water: what if they confiscate the metals and NOT the miners? Woops!

So if the metals get confiscated and governments start buying first issuance from these mines you will want to own them. And you better hope that the Feds don't subpoena Chris for all of his order history and then come knocking on your door (never fear, not gonna happen).

I could go on and on but I'm going to wrap this up with a point; investing in the miners is WROUGHT with risk. I would be remiss in not stating that. You will have to do your homework and put time in to discovering a mine you believe will be profitable.

However, if you are intellectually lazy, then these guys are for you. You will all sit around and talk about the end of the world and birds falling out of the sky and the return of Jesus and counting your stack (think about the irony there). But your fear which led to your cowardice will keep you from MASSIVE potential profits in the mining shares.

Here's one in my portfolio I like very much, Fortuna Silver Mine, of which I'm up 71.6%:

Here's another, Avino Silver and Gold, up 83% since this purchase:

If/when gold enters into the monetary system again most people of the world won't even know it. The way it's looking now, gold will be used at the highest governmental levels to settle trade deficits. The common man will be born, live and die and never know such arrangements were made. The jury is still out on whether or not the Gov's of the world can do this.

These guys ideas seem to be in stasis. I have continued to learn over the years and will change my opinion when needed. Indeed, if you want to see the progress of my thinking go back to some of my earlier posts. Some of them are quite comical as I've used this blog to document some of my ideas and things I found to be important along the way. But when new data is presented and you gain greater clarity on today's dynamic economic environment, you MUST change your views.

“Speak what you think to-day in words as hard as cannon-balls and to-morrow speak what to-morrow thinks in hard words again, though it contradict every thing you said to-day.”


Ralph Waldo Emerson

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