Christian Economist Franklin Sanders Advises Preparation for Depression/Hyperinflation (Parts I and II)
By Jeff West
The following article appeared in the May 6 and May 13, 2009 issues of The Times Examiner

Franklin Sanders, an economist well-known among Christian conservatives for his expertise in sound money and precious metals, spoke recently at Rev. E. Ray Moore’s private residence to an audience of about forty local Christian activists. Rev. Moore said, “This address is a special opportunity for those who are concerned about the U.S.'s uncertain moral, cultural and economic health and future by one of the most informed and best Christian and strict Constitutional analysts available.” This author was graciously invited to report Mr. Sanders’ thoughts to the readership of The Times Examiner so that they can prepare for the financial and social crises we face.

Franklin Sanders is a Tennessee cattle farmer who graduated from Rhodes College, studied at Tulane and had a scholarship to study in Germany. He is a student of Austrian economics based on an honest, Biblical monetary system, totally opposite of our current system of printed Federal Reserve notes. He has studied economic history and traded in precious metals for many years and publishes a newspaper entitled The Moneychanger (http://www.the-moneychanger.com), and thus his words of wisdom should be seriously considered. He is also a conservative Episcopal minister.

Mr. Sanders started with a warning and yet hope, saying “I’m just going to talk to you tonight about surviving the next four years...And what our job is as Christian people is to expand the kingdom of Christ in this world and to build it. And so whatever disaster comes, and for heaven’s sakes there’s been disasters come in the world for the last 2000 years. It’s always some looming disaster, that’s what disasters do, they loom all the time. And what we have to do is to build a just world, and just according to the Word of God. That’s what our job is. And there’s no reason for us to be downcast and there’s no reason for us to lose hope in this world because our God goes before us and prepares a way for us.

“So I’m going to say some things tonight that may make you nervous, may make you worry about the future and so forth, so remember I’m saying them in that context. I think that even the catastrophic events of the next 10 or 15 years offer, to those who belong to Christ, an enormous opportunity. Because, whether you know it or not, and you may not like to hear this, but the social and economic system that you live under is one of institutionalized injustice. Let me repeat that: institutionalized injustice. If you’ve read the Scriptures, you know what usury is. Usury is not just interest, but in the last few years, as our economy has been switched from an economy that financed itself out of equity into one that depends almost wholly on borrowed money and usury. And the reason that we’re in this position that we’re in today...[is] very simply because we have a system that rewards the usurer and punishes the productive.

“And whenever you’ve got a system like that, you know what? What you pay for is what you get. So if you pay for usury and you pay for speculation, you reward those things, then you get those things. And you get the drop in morality that comes with those things, as opposed to production. So, I think the next few years offer a tremendous opportunity for us to rebuild a just economic system. Now, in the meantime, there are going to be some bricks falling out of the walls, so life could be extremely, extremely bad...

“There’s such a thing as cause and effect. I’m not clever enough, or intelligent enough, to get into these big, complicated economic equations that economists like...And they always come to the wrong conclusion...So I look for simple things that I can hold onto that I know are true: cause and effect...

“That economy that I described to you goes through constant cycles of speculation, blowing up bubbles and speculation, crashing the bubble and the whole thing starts all over again. This is not a rare occurrence. It happens over and over and over and over again as it continues to happen. In some industries, like agriculture, it’s been chronic for the last 50 years. I mean, agriculture has been a chronic bust...But in that industry, for example, because of the usury pattern...the industry remains in a chronic state of depression. Now we see that in other things and the latest one was the real estate business boom and bust...

“Two definitions that you need to know: first definition is, what is inflation? I’m going to tell you first what it is not. Inflation is not rising prices. Rising prices is the effect; inflation is an increase in the money supply. Now wherever you have an inflation in the money supply, the usual result-I say usual, it’s not inevitable, but it’s usual that prices will rise with a lag of 6-12-18 months...

“Deflation is not falling prices...The fact that housing prices are going down is not a result of the money supply shrinking. That’s being caused by something else...So get the definition of those two words down. Understand cause and effect, and you got the rest...

“What has the Federal Government done, and together with the Federal Reserve, what have those two entities that control the money supply done since these crises started, and they started about two years ago...They’re printing money out of thin air. How much money?...So far, probably about $8 trillion have been added...There’s no way that increasing the money supply in less than a year by over 50% is not going to result in inflation. Now obviously this hasn’t happened yet because there’s a lag in the increase in the money supply and the increase in prices. In addition, you have other things going on, you have the collapse in the real estate bubble, which is driving down real estate prices, you have the collapse in the commodity bubble...

“Now, that is not deflation. OK, that’s prices going down, but it is not caused by a decrease in the money supply. I just told you what happened to the money supply-it’s increased by over 50%. Now there’s not a one-to-one correlation. When prices begin to go up in response to this increase in money supply, they will go up more than 50%. How much? I don’t know. That just depends on a lot of other factors. But we know that the future is going to be inflation because the cause has already been installed, so the effect is going to come unless something happens to intervene...

“Now...there’s a panic, there’s a crisis. And the people who run the Federal Reserve, Ben Bernanke, and whoever is the Secretary of the Treasury at the moment happens to be, they panicked. Maybe that’s too strong a word, but they made a decision, and the decision was this: ‘We’re going to inflate our way out of this problem.’ That’s what they think they’re going to do...’We’re going to flood the system with money and we’ll worry about it later...’

“And I want to explain something to you so you all understand this: Ben Bernanke does not care whether you are impoverished or not. OK?...They’re all that way. They don’t care that the dollar is evaporating...In fact, that’s what they intend to do...This is part of an unjust system that steals from you and passes to someone else...

“The biggest danger is that it winds up in a hyperinflation, that destroys the value of the dollar. And what a hyperinflation is, there are different definitions but supposedly it’s where prices go up 50% a month...

“The German hyperinflation, from 1920 to 1923, the value of the mark pre-war was 4.23 gold marks to the gold dollar. At the end in November 1923 the value of the mark was 4.23 trillion marks to the dollar.

“How did they get that much money into circulation? The same way the Federal Reserve is putting the money into circulation today. You’ve heard about quantitative easing, you’ve heard about buying debt on the long end of the yield curve? Well, that’s what’s happening today.

“So you can go through history, and you can look at every instance of hyperinflation, and almost every one ends in a revolution. The middle class, which is the most stable element generally in a society...is wiped out...Does anybody know the date of Hitler’s first attempt to take over the government in Germany? November 1923, the very height of the hyperinflation...

“So, if we have a hyperinflation in this country, then the result will be violence, the almost cessation of business activity. What does that mean for you? It means you can’t buy stuff. Your money isn’t any good, and you can’t buy anything...

“It doesn’t work. The Obama plan, they’re not going to work. In fact, they will make things worse. They absolutely will make things worse...So, you’re going to see more of the same...I think the process will be, not characterized by them sending out jack-booted thugs to confiscate your gold from house-to-house or something like that, it will be a slow process of wealth confiscation.

“If you want to know what the model will be like, look at Argentina under Peron where Peron was in an alliance with the labor unions, and they just bit-by-bit, and this extends in Argentina from the time of Peron to today, because about 4-5 years ago the same thing happened again in Argentina. They had another financial crisis, and they just basically seized everybody’s bank accounts. They didn’t say that they did that, they froze the bank accounts, but if money’s frozen, you can’t get it, you don’t own it anymore...

“So there’s the kind of thing to look for. Not the outright seizure sort of thing that provokes open rebellion, but just the gradual confiscation of wealth. So, that’s what the next four years look like to me...

“The big question is: Can they soak up all that inflation that they put into the system without creating hyperinflation? So that the first part. That’s what I expect to see. What can you do about that? How can you protect yourself?”

See next week’s issue of The Times Examiner for Franklin Sanders’ answer to that question.

Part II

In the first part of this article, Franklin Sanders warned of the coming hyperinflation from the government’s reckless expansion of the money supply. Now he tells us to prepare.

“You certainly can’t stop it, I don’t think, nor would you want to go to Washington to try. But, there’s one thing that we know. Cause and effect again. If you print more dollars, the price of an ounce of gold or silver is going to go up. The price, in fact, of everything is going to go up. But silver and gold, being monetary items, will go up in value faster. Now, I’d like to give you tonight the primary rule of investing. One rule, simple again. The primary rule of investing, always invest with the primary trend...Now, most people don’t know that...

“What is the primary trend? The primary trend is the ten-, fifteen- or twenty-year trend of prices where things go up...These are long-term trends. The trend is your friend. The rising tide raises all boats. If you bought stocks in 1982, ’83, ’84, ’85, it didn’t matter which stocks you bought. You didn’t have to pick stocks, just buy stocks, they’re all going up. Now, in the same way, if you bought stocks in 2000, you’re in trouble now. Because stocks went into a downward trend then, a primary downtrend called a bear market....It actually started against gold in August of 1999 and it’s gone down ever since...

“You have to think just in general terms, very general terms, but when you get a primary uptrend, or primary downtrend, what happens in a primary downtrend is, that you give up anywhere from 50-95% of the peak value of that market. Alright, so stocks went to about 12,000 [counting inflation], they’re going to go back to about where? Going to go back to about 6,000. In 1929 they gave up 89% of their peak value. And they don’t come back. Stocks in 1929 took 25 years and one month, from 1929 until November of 1954 to recover. Just to the nominal tie of 1929. And by then of course inflation had eaten into that quite a bit, so it was probably in the sixties some time before stocks actually recovered the same purchasing power at the level that they had been at...

“In August of 1999, the price of the Dow Jones Industrial Average was about 45 ounces. Today, it’s about ten ounces. And that’s going to keep up until it only takes two ounces or less of gold to buy the entire DJIA. And that’s happened three times in the last century. So I’m not just making guesses, I’m basing this on what’s happened before. And off course, history doesn’t always repeat itself, but it’s the best guide that we have to know what we’re going to do.

“So the first rule of investing is always invest in the primary trend. Do not invest against the primary trend. Because if you try to launch your boat against the tide what’s going to happen? It’s going to sink. It’s going to sink. You’re not that good. You can’t buck the primary trend. So if things are going down, get rid of them. If things are going up, get more of them. It’s just that simple.

“Let’s talk about three different things: precious metals, the dollar and stocks. The U.S. dollar is in a primary downtrend. It has been in a primary downtrend for well over thirty years. And, don’t anybody be under any sort of misapprehension about this: that’s on purpose. They manipulate that dollar lower on purpose. OK, they keep inflating it...The point I’m trying to make to you is, they are purposely manipulating the price of the dollar lower. Why would they do that?

“Well, we’ve got this enormous trade deficit with China. You’ve heard about the balance of payments deficit. One of the ways that you get around that, you just keep lowering the value of your own currency...

“So the dollar is in a downtrend. Many of you have investments in dollars. Every one of you...What do we know about dollars in the future? They’re going to be worth less than dollars today. So, you need to understand, dollars are going down, you don’t want to own them.

“Second thing is stocks. One of the interesting things about this primary trend idea, is that those trends alternate. So if you get a downtrend for 15 or 18 or 20 years, then you get 10, 15, 20 years of uptrend. Gold for instance topped in 1980, it didn’t bottom until 21 years later, and then started up again. The Dow bottomed in 1982, and then it topped in 2000. Again, in 2007 those are a double-top, which without going into all the intricacies of it, is a much stronger top, and it means that the following downtrend is going to be much worse, longer, harder than it otherwise would be...

“So you’ve got at least another ten years where stocks are going to go lower...And you’re listening to people on Wall St...that are telling you it’s going to come back. It is not going to come back, not anytime soon, not soon enough to do you any good. So you want to get out of stocks, because stocks are in this primary downward trend.

“Let me make one thing clear. Because of the confusion with the currency, trying to get a value of anything in dollars, is like trying to shoot skeet off the back of a bass boat in a storm...How do you know you’re ever going to hit the target? So you need to learn to think in terms of purchasing power....Or, you can learn to think in terms of gold. And that’s why I look at the DJIA expressed in gold...and it’s got farther to go [down] still...

“Now when people ask me about investing, one thing I always tell them is: ‘Ask yourself this: “What is your primary source of revenue?”’ How do you keep bread on the table?...But that’s the first thing you’ve got to invest in and the first thing you’ve got to protect. If you’ve got a business, you need to ask yourself, ‘Can this business survive a Depression? And if it can’t, if it has weaknesses, what can I do to mitigate those weaknesses? What can I do to make it survive?’

“If you have a job, and you’re wondering, ‘Is the company that I work for going to survive this Depression?’ You better start making plans now. Because the most important thing before you make any other investment is, your source of revenue. How you make your living day-by-day. So that’s the first thing you’ve got to think about.

“So now that we’ve talked about that, let’s talk about silver and gold. The gold and silver markets began a primary uptrend in November of 2001...There’s a proverb: ‘Bull markets climb a wall of worry.’ What does that mean? It means, everybody’s always worrying, ‘This is going to break. It’s not going to keep going up.’ They always do that.

“In addition to that, there is heavy government intervention in the gold and silver market by the government, because, the precious metals are the primary safety valve or safety alarm on the monetary system...Every time gold starts running off to the upside, or silver, then people in the economy know there’s a problem with the dollar. It’s just that simple, it’s not any more complicated than that. So the government manipulates the value, tries to manipulate the gold and silver markets.

“Now, this is not theory on my part, it’s not conspiracy theory and all that. Go look at the Gold Reserve Act of 1934. And you’ll see that in there, the Roosevelt government set up something called the Exchange Stabilization Fund...But it authorizes the Exchange Stabilization Fund as a secret slush fund, never been audited, not going to be audited, never published, a secret slush fund for the U.S. Treasury to manipulate the gold market and the exchange rate of the dollar. So this is not conspiracy, not just me spinning cobwebs here, that’s what I think is happening. That’s what the law is.

“So do they manipulate the markets? Absolutely, no question that they do, they try to...They can manipulate the price for awhile, but they can’t manipulate it forever. How does silver come into this? I said gold is the alarm on the boiler. Here’s how silver comes here. You can’t manipulate gold if you don’t manipulate silver, too. The reason is very plain. The people who watch those markets know, they watch the ratio between the two, and if gold goes down and silver does not, then there’s monkey business, and it’s very obvious. So you’ve got to manipulate both of them. But the future of that is limited. You can’t keep doing that forever. And I think that we’re pretty much approaching that limit. And as more and more dollars get kicked out, the price of gold will go up faster.

“How much longer can this go on? Just a guess, if it got real bad real fast, another two years. It could get bad that fast, I don’t think it will. But I think we’ve got at least another seven or eight years of primary uptrend in both the gold and silver markets. I don’t know how high it could go. It’s just a guess, if I tell you that gold will go to $6,000. But I do know what the relationship between gold and silver will be, I think I know, based on past action...at the top of that market. And this is the second thing I wanted to tell you about investing. If you buy gold and silver, go to my website, which is the-moneychanger.com, and on the front there’s a link to an article “Why Silver Will Outperform Gold 400%.” Read that article. And it outlines the strategy that I use to swap between gold and silver. And we do that periodically, not very often, about once every three years or so. But every time we do it we increase the number of ounces that we have.

“Why? Because there is a primary downtrend from the ratio of gold to silver. In 1991 it took 100 ounces of silver to buy one ounce of gold. Today it takes about 70. That ratio has been as low in the past few years of 43:1...Eventually, at the top of the market, it will only take 16 ounces of silver to buy one ounce of gold, or less...

“Let me just say one more thing that you ought to think about. If you live in a city, the next 4-8 years could be very, very difficult. Because if there is a hyperinflationary problem, you’re not going to be able to get anything to eat. And you’re liable to be locked up in that city and there’s liable to be a lot of violence. So you need to think about that in advance. You know, the best way to stay out of a barfight is to not be in the bar when the fight starts. And the best way to stay out of violence and that kind of trouble is not to be there when it starts.