Gary North

September 15, 2008

Jason Hommel has told me off, good and strong. He tells me that I don't understand economics, commodity futures, silver, and especially the Bible.

Why? Because on September 11, I posted an article showing that he has lost a lot of money for investors who listened to him.

He has promoted himself as an expert in silver. He is a good promoter. He tells me he has 80,000 subscribers.

I made the point that he had not seen the imminent collapse of silver in mid-March, when I called the top and warned my subscribers to begin selling their precious metals (though not all of their coins).

All the way down, he has denied that silver has been in a collapse. He told people to buy more silver. He told people not to sell.

It has fallen by 50%.

His denial that silver would fall and my prediction that a bear market had begun are a matter of public record.

Mr. Hommel says that there is some huge silver shortage. I say that when the price of a commodity falls by 50%, there is no shortage.

Mr. Hommel has replied by email to inform me that my problem is that I do not understand economics, commodity futures, interest rates, and the biblical concept of usury. Mr. Hommel hates the economic factor known as interest. He wants an economy without it.

He is like a physicist who wants a perpetual motion machine.

In his letter, he makes a series of accusations against me. He demands that I answer him.

He has 80,000 subscribers. At some point, he may decide to tell them that he answered me, but I could not answer him. So, here is my answer. I am going public, so that my response is a matter of public record. I want to see if, in any published announcement of his devastating intellectual victory over me, he includes a link to this article.

Jason Hommel, Economist

Mr. Hommel says:

A few years ago, you wrote an article on why gold is better than silver. Nearly everything you think you know about silver is wrong.

I said that gold is better than silver. Silver is down 50% since March 17. Gold is down 25%. I am working very hard to understand why silver is better. Bear with me, as the saying goes.

I don't think you have kept up with the statistics of the CPM group in at least 15 years, your information is that outdated. Things have really, really changed in that time frame.

I suggest that you do more research.

And I have tried so hard to keep up! Ah, the terrors of old age! He understood CPM. But I called the market's top. He did not.

He did lots of research. His research did him no good. It did his 80,000 subscribers no good.

He thinks research is a substitute for accurate forecasts. As an investor, I think accurate forecasts are more important.

As Forrest Gump's mother might say, research is as research does.

Next, consider his argument against compound interest:

The reality is that you cannot compound your way to owning every atom in the Universe, which you could do at 2.5% interest on a gold loan for 6000 years. At 1/3 of 1%, you could own every oz. of gold on the planet, 5 billion oz., from 1 oz., starting 6000 years ago. That's math. That goes to show the importance of factoring in size, in relation to growth.

Interest is a discount on the promise of future goods vs. present goods. Interest is an inescapable aspect of human action. That is the argument of Ludwig von Mises and the Austrian School economists.

If you win a contest, and you are given a choice of 100 ounces of silver now or 100 ounces of silver in ten years, which will you pick? To get you to delay for ten years, the contest organization must offer you more silver. Why? Because you discount the value of the future good. The 100 ounces in the future are worth less than 100 ounces today.

This discounting process applies to everything, not just money.

It is clear that he has never read Chapter 19 of Mises' Human Action. It is online and free.

He ended his email with this:

The silver story is not a static one. The story is rapidly changing and for the better.

I agree 100%. It is always better for consumers when the price of a commodity goes down. And, boy oh boy, has the price of silver gone down!

Mr. Hommel's 80,000 subscribers may not appreciate this, but consumers sure do.

The free market is favorable to consumers. It is unfavorable to speculators why buy high and sell low.

Mr. Hommel's expertise is buying high and never selling at all. This is because he is a newcomer. He has never seen silver collapse before. He has seen it now. He can deny that it is a collapse, but it is. If his readers had sold on March 17, they could buy far more silver today, even after taxes. All of the silver that they cannot buy today with their profits on selling constitutes their loss. They own less silver today than they could have owned. They have taken this loss. They may prefer to deny this, but they have suffered it nonetheless.

Jason Hommel, Theologian

Not only am I an incompetent economist, he says, I am an even more incompetent Bible expositor. Mr. Hommel is not hesitant to say so.

The main things I think you don't understand are relative size and usury. The study of usury teaches much about relative size. I studied your prophetic interpretation of The Mother of Harlots, and I see that you don't understand how usury is a central theme of prophecy. The failure to observe debt forgiveness at the Jubilees is why the Israelites were sent captive into Babylon for 70 years and then 70 weeks of years. The borrower is the servant to the lender. Thus, the lender, according to the Bible, rules. The Mother of Harlots rules the nations. Guess how she does it, and why she is called a "harlot"? Because she tries to buy security from the kings of the earth, by lending to them, rather than getting her security through the King of Kings.

He cites the Bible. I do not understand the Bible, it seems, because I do not understand Bible prophecy.

I say that he does not understand the Bible teaching on usury, interest, and loans. Here is the Bible's position.

1. The Mosaic law prohibited interest on charitable loans to fellow Israelites and resident aliens.

2. It authorized interest on charitable loans to non-resident aliens.

3. The Mosaic law had no restriction on interest for non-charitable loans

4. Charitable loans were supposed to be annulled in the seventh or sabbatical year, a national year.

5. The prohibition against interest on charitable loans was not supposed to be enforced by the civil government.

6. The jubilee year of debt repudiation in year 49 was itself repudiated by Jesus when He announced the complete fulfillment of the jubilee laws.

7. The Mosaic laws governing debt ended with the fall of Jerusalem in A.D. 70.

8. Jesus authorized interest on business loans by bankers.

If you want textual support for all this, along with references to my detailed commentaries on every relevant passage, click here:

Conclusion

Jason Hummel is an enthusiastic young man who is in over his head.

His failure to predict the collapse of silver and then continue to insist that there is a silver shortage are the responses of a newcomer who is having his first public humiliation. He brought it on himself. As they say, he read his own press clippings. Worse; he wrote all of his press clippings.

He does not understand basic economic theory. He does not understand interest rates. He does not understand what the Bible says about interest on loans. But he is convinced that his superior knowledge in both areas gave him an edge. The silver market since March 17 indicates that he had no edge. On the contrary, he went over the edge.

There is an old saying: "Genius is a rising market." He looked like a genius for several years when silver rose. Now he looks like just one more investor who got a painful lesson from the market. The market does this all the time.

He has now taken a severe beating in front of 80,000 subscribers. If they did what he said to do, they have experienced the beating with him. They have sustained big losses.

They believed him. They did not understand that his research was irrelevant, that he happened to be promoting silver when gold went up. This was always a gold play. It was never a silver play. Silver did not rise because of some alleged shortage of silver. It rose, along with platinum, because gold was rising. Investors saw it as part of the same metals complex.

A lot of his readers will stick with him. Not to do so would be an admission to themselves that they trusted a young man who did not know what he was talking about and still doesn't. But their loyalty does not change the fact that they have ridden silver down when the could have sold.

I did not do this to him. The market did. I merely reported on it.

He would be wise to cut his losses and shift the focus of his eletter to some other field. But he won't. He is trapped. It is sad to see.

There is a lesson here: "Don't write your own press clippings, but if you do, don't believe them."