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Thread ID: 20611 | Posts: 7 | Started: 2005-10-11
2005-10-11 16:42 | User Profile
Peak Silver
Edgar J. Steele
"To the Moon, Alice! To the Moon!" --- Ralph Kramden, played by Jackie Gleason, to his wife (played by Audrey Meadows) on The Honeymooners.
Peak Silver is a concept whose time now has come. There really can no longer be any question as to whether we have reached the point of Peak Silver, save that suggested by silver's current market price. As we shall see, that price is an aberration which inevitably will be swept aside by the tidal force of massive market forces.
There can be no question but that whatever silver now exists, including the ever-more-difficult-to-extract ore still in the ground, is all the silver that ever will exist.
What's more, unlike gold, virtually all the silver ever mined has disappeared via usage, while almost all the gold ever mined still exists in usable form, not that anybody really uses gold for anything. In fact, silver today is a much rarer precious metal than is gold.
Go back and read that last sentence again. I'll wait for you right here.....Good. Now go read it again.
Silver's relative scarcity is a vitally-important concept that simply has yet to sink into the minds of almost everybody in the world today. Else, why does silver trade for only $7 and change per ounce, versus nearly $470 per ounce of gold? Stand by, because all that is about to change. First, though, let's make the basic general case for precious metals as an investment.
If used solely as a money substitute, gold (like silver, platinum and palladium) finds its demand extremely sensitive to price changes. In other words, the demand for precious metals as money is price elastic. When the price of precious metals goes up, demand goes down. Ergo, the demand for precious metals must have declined a lot, you might say, because their prices have soared in recent years. Wrong.
Why are today's gold and silver prices half again as high as just a few years ago (many would say gold is almost 100% higher, but they point to a very brief time when it traded at around $260 per ounce)? Because the international value of the dollar has fallen by a third in the same time frame, that's why. Gold and silver haven't gotten more expensive. They are still the same old prices, just dressed in new, inflation-adjusted dollars.
The price increases seen in both gold and silver amply illustrate my book's contention that they are "particularly good means of transporting wealth from one side of an economic meltdown to the other." (Defensive Racism, Ch 12 - Money's End Game: Depression II) The bad news, for those who haven't yet noticed, is that America's economy is in rapid meltdown right now, just as it has been for the past several years. The worse news: The modern meltdown has only just begun and now is showing signs of rapid acceleration, as America's mortgage, bond and stock bubbles, created by the Federal Reserve's (criminally) excessive easy money policies, have begun to burst.
I call what is happening today the "modern" meltdown because today's dollar already is worth something less than 2 cents in 1914 dollars. Prior to 1914, the dollar had been stable, with zero inflation, for well over a century. What happened in 1914? Why, the Federal Reserve System was created, so as to "stabilize the value of the dollar," if you can believe it! Look, I couldn't just make something this ludicrous up. Look it up for yourself if you don't believe me. But, this is both a digression and a topic about which books have been written, perhaps one of the best of which is Eustace Mullins' Secrets of the Federal Reserve. My own book talks about money, precious metals and the Federal Reserve system extensively in its latter chapters, too.
Today's dollar has only one way to go: down. And it is a lot further to the bottom than one might imagine, despite the perspective provided by 1914. As I said on August 15, 2005: "A falling dollar couldn't be a surer bet than it is right this moment, here at the very tippy-top of the fifth and most prodigious bear market rally for the dollar since it started caving three years ago (and subsequently lost 1/3 of its value through the end of 2004)."
Preserving your wealth is more than a good enough reason to convert as many of your assets as possible right now into the form of precious metals, especially the sort you personally hold, such as rare coins and bar and coin bullion. Mining stocks are more volatile, thus possess more upside potential, but also carry significant risk in the event of a complete collapse of the economy.
Also on August 15, I said the following about buying gold and silver: "Back up the truck, boys and girls. Do it now." Since then, leading American and Canadian mining stocks have risen 20%. The spot prices of gold and silver are up about 5% in the same time period.
If my wife would let me, I would sell the ranch, buy gold and silver with the proceeds, then rent for the next two or three years. Women.
That is the basic case for precious metals. Now for Peak Silver. Remember our mantra from above: Silver today is a much rarer precious metal than is gold.
Yes, there still is much more silver in the ground than there is gold - eight times as much. Historically, we have pulled about eight times as much silver from the ground as we have gold, a ratio which has declined only slightly with today's production. Called the "poor man's gold," silver typically has been the least expensive of all the precious metals because it also has been the most plentiful. That was before industry began to use silver in significant quantities, however.
Silver has almost countless modern industrial applications, with both technology and population increases driving demand higher every day. Silver's thermal and electrical conductivity is unparalleled, making it the metal of choice for micro-circuitry. Silver also plays a major role in the medical field, due to its natural antibiotic capability. What's more, silver is one of the few metals that does not corrode, making it essential in modern electrical switches of every sort (including your house and your car). And, yes, the photographic industry continues to consume about a quarter of all silver made available. Silver demand is increasing by leaps and bounds. What's little known is that silver demand has outstripped production for years.
During my lifetime (that's "modern times" to you, despite how you might feel about Bogart movies) we have been using silver a great deal faster than we mine it. Why hasn't the price of silver gone up before this (faster than necessary to counter inflation, that is)? Because the huge, above-ground inventories of silver built up prior to my lifetime (pre Bogie) were added to production in order to meet ongoing demand, that's why. Well, guess what? The stored-up silver now is gone. Just now, in fact. That, or those stores will run out within the next few months, depending upon whose figures you believe.
From here on out, we must live on current silver production alone, all while the non-investment demand for silver continues to grow. We either just passed or are about to reach the point of Peak Silver. In other words, never again will above-ground gold be more rare than silver. That's never again...as in NEVER AGAIN.
Nor will people be melting down their necklaces and heirloom cutlery at anything less than several times the current price of silver. The labor component of such trinkets simply is too high when compared to something like gold, which does see a great deal of jewelry turned in for reprocessing whenever its price jumps.
Owing to the huge industrial demand for silver, which simply does not exist for gold except in fashioning bathroom faucets for Arab oil sheiks, Peak Silver will reflect the price-inelastic demand generated by industrial applications.
The gold-to-silver price ratio also has risen well above the historic mean of 40:1 in recent years, suggesting that either gold will decrease in value or silver will increase. By many traditional measures ("bundle of stocks," "suit of clothes," etc.), gold already is grossly undervalued, due to government rigging of the price via the orchestrated sale and purchase of financial derivatives (again, see my book for a discussion of how gold derivatives temporarily can convert even gold into a fiat currency).
Before silver is done, however, not only should/will/must it revert to the historic gold/silver mean ratio, suggesting a commensurate price for silver of $62.50 per ounce once gold becomes fairly priced. However, silver's scarcity should cause it to surpass even gold's price. Even if I am dead wrong about any upcoming increase in the price of gold, today's gold price alone, when divided by 40, suggests a "mean-ratio value" for silver of $11.75, which is a tidy 60% rise over today's actual silver price!
Why does our government rig financial markets? For the money, of course. Your money. Maintaining monetary stability is a lie, because we had perfectly stable money before the Federal Reserve System was handed control of our money supply. The mark of perfectly stable money is zero inflation, as in no inflation whatsoever. People have forgotten that such is possible and now accept 3% inflation as normal, and seem to view what is about to happen as a temporary inconvenience. People have forgotten the lesson of Depression I.
Yes, what is about to happen is so significant that it will cause us to start numbering our economic depressions, just as we do our world wars. Speaking of which, if you think WWII following Depression I was just coincidence, then you probably don't realize that we already have seen the beginnings of WWIII, which truly is a story for another day.
Unlike gold, silver will not be confiscated. There simply is too little of it around and the dentists couldn't handle the workload. Remember that the Hunt brothers very nearly cornered the world silver market a generation ago. Today, the amount of silver available not only is less, due to the massive reserve depletion that has taken place, but the price is lower than before, even in inflation-adjusted terms (government rigging, don't forget). How low is the price of silver? Well, it is well within the power of a great many individuals (each of them, not all together) to purchase every last ounce of silver that exists above ground today.
This point bears repetition: Silver today is a much rarer precious metal than is gold. Recall our discussion above concerning the price inelasticity of the demand for oil. That goes several times over for silver. Per production unit of consumer and industrial goods and equipment, the consumption of silver is exceedingly small, so that industrial-demand-driven prices are very inelastic. In other words, the price of silver could triple and add but, perhaps, a penny (that's a dollar in future Greenspanbacks) to the cost of your next TV set. Even a hundred-fold increase in the price of silver would not affect the purchase price of most industrial and consumer goods by much. Or a thousand-fold increase, for that matter.
"To the Moon, Alice." That's where the price of silver is headed, now that we have hit Peak Silver. To the Moon.
As I said, back up the truck.
7 October 2005
Copyright é2005, Edgar J. Steele , [url]www.ConspiracyPenPal.com[/url]
2005-10-11 17:10 | User Profile
It's worth noting, that the otherwise sane Mr. Steele, is from a silver producing state. :rolleyes:
2005-10-11 20:32 | User Profile
[QUOTE=Pennsylvania_Dutch]It's worth noting, that the otherwise sane Mr. Steele, is from a silver producing state. :rolleyes:[/QUOTE]That might explain it. Northern Idaho sure needs a silver rebound.
He sure picks some dead horses to ride. People have been predicting a silver rebound for 30 years. They miss some very basic fundamentals.
I think the chief of these is silver is no longer mined principly by itself, rather its a by product of the mining of other metals. Which means its supply has very little dependence on its price. That makes analyses such as Steele gives completely bogus.
Hope his legal reasoning is better than that - apparently not though (re: Matt Hale).
2005-10-12 00:22 | User Profile
[QUOTE=Okiereddust]
I think the chief of these is silver is no longer mined principly by itself, rather its a by product of the mining of other metals. Which means its supply has very little dependence on its price. That makes analyses such as Steele gives completely bogus.
[/QUOTE]The fact that most silver is mined along with other metals like copper is a good reason to invest in it. Any surge in demand will be hard to fulfill unless it is accompanied by a surge in demand for the other metal it is mined with. Above ground supplies of silver have dwindled in the last decade and it is used extensively in industry, unlike gold. There has been a supply/demand deficit for many years. Also, investor demand will have a substantial effect on it as folks are having less and less faith in Jewish funny money aka "Federal" Reserve Notes. The silver market is very small, if any country anywhere decides to re-monetize it it will go through the roof.
2005-10-12 01:01 | User Profile
[QUOTE=travis]The fact that most silver is mined along with other metals like copper is a good reason to invest in it. Any surge in demand will be hard to fulfill unless it is accompanied by a surge in demand for the other metal it is mined with. Yes, but right now that surge in demand seems to be happening, thanks to the booming demand in countries like China and India (copper is used especially in industrializing nations). The copper price is hitting record heights now.
What this relationship means I think basically is that there is in an inverse relationship between the price of metals like copper and of silver, when the price of copper is high, that wil tend to drive down the price of silver, and vice versa.
It makes forecasting silver prices tricky. I think that's why past forecasts of a shortage have been off so often.
2005-10-12 01:22 | User Profile
[QUOTE=Okiereddust]Yes, but right now that surge in demand seems to be happening, thanks to the booming demand in countries like China and India (copper is used especially in industrializing nations). The copper price is hitting record heights now.
What this relationship means I think basically is that there is in an inverse relationship between the price of metals like copper and of silver, when the price of copper is high, that wil tend to drive down the price of silver, and vice versa.
It makes forecasting silver prices tricky. I think that's why past forecasts of a shortage have been off so often.[/QUOTE]Silver and copper have both gone up considerably in the last 3 years. There is much less above ground stocks of silver now than 20 years ago. It is used in almost all electrical switches, circuit board and panels, in mirrors, in solar panels and in photography. China will be needing tons of it since they are phasing out bicycles in favor of cars. Third world countries have increasing demand for electronics. Silver used in most of the products above is not recycled, but rather thrown away. Since silver is only a small part of the total cost of manufacturing a refrigerator for example, they will not hesitate to pay 2 or 3 times as much for the small amount of silver needed. The US government used to have tons and tons of it in reserves. Not any more. Central banks (spelled Jews) have dumped their silver reserves over many years (as well as gold) to suppress PM prices, thus making fiat money look good, but there is not much more left in worldwide reserves to dump. This is all coming to a head. During times of war, gold and silver have always been favored stores of wealth. Look at the probability of more wars around the world, look at what has happened to our fiat money in the last 4 years. People will need some kind of store of wealth, investor demand is and will help drive up the prices. Mexico and some Islamic countries have shown recent interest in monetizing silver. Only one small country needs to do this and silver will skyrocket. Most silver trading done is paper silver. There is of course much more paper silver above ground than real, physical silver. If paper silver investors ever decide to demand delivery it will spell disater for the shorts, as they will not be able to fulfill their obligations.
2005-10-12 02:06 | User Profile
[QUOTE]What this relationship means I think basically is that there is in an inverse relationship between the price of metals like copper and of silver, when the price of copper is high, that wil tend to drive down the price of silver, and vice versa. [QUOTE=travis]Silver and copper have both gone up considerably in the last 3 years.[/QUOTE][/QUOTE]In general terms that relationship is true. However the actual relationship of course would be between the price of silver and the [I]production[/I] of copper. Generally of course the price is related to the production - the higher the price, the more copper or whatever people willwant to produce. There is however a considerable lag time for the production to respond to increases in price. It takes a lot of time to bring new mines on line.
The price of copper of course is how now, but two years ago it was barely half what it is now. This price depressed production levels, leading to the current high prices of copper and silver. Eventually copper production will increase, and silver production with it.
Just a heads up. I wouldn't bet the farm on silver, although it may have other things still going for it like you mention.