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Franklin Sanders has been described as the most
dangerous man in the South. In 1980 he opened his own physical gold and
silver investment brokerage company. Working for grassroots monetary reform,
in 1984 Mr. Sanders opened a gold and silver bank. This apparently upset the
federal government, who investigated and harassed him for several years.
After a long struggle with the law, he was entirely vindicated and continues
as a strong advocate of monetary reform. I first met Franklin Sanders in
1997. I was impressed with his clarity of thinking, style of expression and
sense of humor.
The interview (1) picks up with us speaking on the
potential that exists for people to rush from the less liquid and higher
geared forms of assets, like real estate, businesses and stocks and shares,
into more liquid forms of assets such as cash and gold and silver.
FRANKLIN SANDERS . . . . people who are
counting on a failure of the monetary system, either massive and complete or
partial, are looking for an alternative coin, they know gold and silver has
been stable money for 4500 years.
PHILIP - Getting back to the up-side-down debt pyramid, even more
liquid than cash of course is gold and silver, and that’s what we are
seeing a return to again.
FRANKLIN SANDERS - Well they are the ultimate money, I’ve said
over and over again, they are the only financial asset that is not
simultaneously somebody else’s liability.
PHILIP - You have recommended for a long time now that a large portion
of peoples metals portfolio should be in silver.
Silver is often over looked, not spoken about, is this because it has the
greatest potential for growth in the long term?
PHILIP - You have recommended for a long time now that a large portion
of peoples metals portfolio should be in silver.
Silver is often over looked, not spoken about, is this because it has the
greatest potential for growth in the long term?
FRANKLIN SANDERS - Certainly, I think silver will rise 4 – 5
times as fast as gold in the next 4 – 5 years. Both gold and silver are
severely undervalued by historical standards, but silver is roughly 5 times
undervalued as what gold is, so the potential for increase is much greater.
Not only that Philip, but silver for most of mankind’s history has been
the most common daily money, the money that most people are familiar with.
Gold is just to valuable in
relation to its weight to be used in everyday commerce.
PHILIP - Gold has been reserved for larger transactions, you
can’t buy a loaf of bread with a 1/10th oz
gold coin.
FRANKLIN SANDERS - No, but you could buy a truckload of bread with
your 1/10th oz coin.
PHILIP - Franklin, do you think we could see bank runs again today?
FRANKLIN SANDERS - In 1933 the banking system relied on gold as its
reserve requirement. Today gold makes up no part of the monetary system. The
US today holds gold at about 15% of the Federal Reserve notes in circulation,
but local banks don’t hold gold as a reserve against their deposits.
PHILIP - They don’t really even hold cash as a reserve against
their deposits.
FRANKLIN SANDERS - Yes, cash is the only thing they hold, but they
only hold a very small fraction of what they owe. The last time I checked it
here in the US it was about 1.13% against all deposit liabilities. The
banking system as a whole held 1.13% of all its deposit liabilities in cash.
PHILIP - The last time we saw bank runs in the 1930’s in the US,
the reserve ratio was well above 10% and as you have
said now its only 1.13%.
FRANKLIN SANDERS - Well back then it was actually 35%.
PHILIP - And that was enough to cause bank runs back in those days, so
we see ourselves in a much more precarious situation today.
FRANKLIN SANDERS - Well lets
look at it this way. If you had a bank runs in 1933, you had a 1 in 3 chance
of getting some money, that is if you had a dollar
in the bank you had a chance of getting 35 cents on the dollar. Today from
the outset, a bank that is in good shape, only has
1.13% reserves so that if all the depositors got paid off, the most anyone
would possible get would be a little over 1 cent in every dollar, or $1.13
for every $100 they had on deposit.
PHILIP - Then add to that people trying to liquidate their way out
non-banks assets like stocks, shares, mutual funds and investment real estate
into cash that would drastically reduce that measly 1.13%.
FRANKLIN SANDERS - Oh certainly, because you are further increasing
the demand for cash. It absolutely terrorizing when you think about it. If a
bank run ever started it would be all over before you heard about it on the
news.
PHILIP - Franklin, thanks for your time again
today.
For subscription information on Franklin Sanders excellent newsletter
"The Moneychanger" contact moneychanger@compuserve.com
PO Box 178, Westpoint, TN USA 38486 (mention Philip
Judge referred you)
(1) radio interview recorded with Franklin
Sanders March 1999.
Philip Judge
Anglo Far-East Company
Also
by Philip Judge
Philip
Judge is the 3rd generation of a family that has had substantial involvement
in the Precious Metals markets. He has researched, written and spoken on the
gold, silver and commodities markets for over a decade. Philip works in
the marketing and operations department of The Anglo Far-East Bullion
Company, an internationally based Bullion Banking, Investment Management and
Financial Services Company
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