When will Silver be Cheap again?

I believe that no matter how bad things might get, there will always be a demand for all things shiny and/or precious. However, I do agree that if you can drink it, eat it or use it, those would be the more common transactions in a barter system.

 

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It's very easy to manipulate data. Take this simple math equation for example: 4+9x3. If you calculate this by the order of operations you get (9x3=27+4) 31 as an answer. Now if you use paretheses like this: (4+9)x3 you get 39. Or, if you ignore the rules of math you get 16. As for graphs, all you have to do is expand or contract the axes and voila! You have a chart that appears to show exponential change or the converse, a nearly flat graph.

 

Because you can't carry around 10 bushels of corn or 100 gallons of water.

There always has to be a store of value besides the commodity itself. Otherwise you would always have to search for someone with a reciprocal trade.

 

No sir there has not always been such a thing. Reciprical trades were the norm of human society for most of its existence. To be a store of value such as gold you must have enough demand for it by wealthy upper classes to value it and be willing to trade for it. The idea of a store of value started with ancient Assyrians and Mesopotamians. The clergy used gold as a symbol of power, and therefor created a steady demand. Copper was demanded for use for agricultural instruments and weapons, so it also evolved as a store of value.

In a Mad Max world, where there is no where to escape TO, I simply do not see why people would care to own any PM. Survivalist equipment and supplies will be the only barter worthy items.

Just my view of course.

 

The central banking system doesn't need to steal money. Why would they need to do this when they can create it out of thin air? What they have to do is to get the people to accept this worthless creation as currency. They did this by legislation running from 1914 to 1971 where they removed an asset based currency and replaced it with a fiat (worthless) currency.

Currency represents a claim on wealth and labor. Since the the currency is now worthless, then they can expand the supply of it at will, without regard to economic output, and in doing so, a portion of that wealth has been transferred from you to them. This transfer has been obfuscated as inflation and people have been convinced due to decades of this, to believe that inflation is a good thing. In comparison, an asset based currency requires the government/bank to possess the asset. They can't create gold and silver out of thin air and hence, when it's used as currency your wealth can't be stolen.

People buy gold to protect themselves against this. The government started borrowing heavily starting in 2000 (when we were supposed to be pay off the debt) and the Fed began to lower interest rates to the point where they have fallen to unprecedented lows. like 0%. As a result, the price of gold has shot through the roof. The results speak for themselves. Believe your eyes.

There are individuals who simply don't accept and believe this has happened. They don't trust their eyes and instead refer to those who point this out as some sort of doom-sayer. I've said before that attacking the messenger, rather than address the message, really means the party has no logical argument to the contrary and must resort to said tactics. It really doesn't matter however. It means there is more opportunity to buy gold for those of us who understand this.

The same may or may not hold true for silver buyers. The silver buyer will have to do their own research.

 

Debt was growing exponentially in the 70's though, as one example, and it still is today. At the time that debt seemed large, but today it seems like nothing. If debt doesn't continue to grow exponentially then the monetary system will cease to function. Without money printing to buy treasury debt, which is in and of itself debt based money, then the US will default. The situation then is the same as it was now. We're just a lot further along the path. If and when the debt reaches $100 quadrillion we will look at $15 trillion like peanuts, and an ounce of gold will still buy a nice suit At some point, which is anybody's guess, the amount of debt will no longer be sustainable. I am of the thinking this can go on indefinitely as long as the USD is the world reserve currency, but China, Russia, Iran, Nigeria, and Zimbabwe are already working around that as we speak. It's not about scare tactics. It's about warning people so they don't get robbed blind by inflation. I don't want my neighbors coming to me for help. I want them to be able to take care of themselves.

 

I can see the the value of gold has increased and has been a good investment recently. What I can't seem to get my arms around is the concept of the banksters stealing my wealth. Sure one can say a basket of goods costing $100.00 in 1800 will cost you $3000.00 today. But what one fails to mention is in 1800 only about 10% of the households could buy that $100.00 basket of goods while today 50% of the households can buy that $3000.00 basket of goods.

 

Your argument about supply and demand makes perfect sense in the real world, but that's not the world that silver lives in. Its price action is determined by paper traded contracts to the tune of 1 billion ounces of volume per day in the uninsured futures market on the COMEX which is more than is mined in a single year. This volume does not even include the options market, the SLV, foreign exchanges, or the derivatives market which dwarves them all. Physical supply and demand only affects the price insomuch as to prevent it from becoming completely unavailable.

Because of this, we could see $6 silver again. We could see $0 silver, BUT that will be the paper price. At some point the physical price will diverge from the paper price, and the lower the paper price goes the sooner that will happen due to all the physical disappearing from the market as it gets further undervalued. The supply levels are already dangerously low, the lowest levels in over 700 years, and less than a year's worth of mining supply.

Eric Sprott's purchase last week of $300 million in physical silver caused a 5% price increase. If $300 million is 5% of the market then the entire market is only $6 billion. Contrast this with oil which is a $3 trillion market per year. Silver is the second most useful commodity after oil with over 10,000 industrial uses, none of which can be done cheaper, and none of which can be substituted without loss of quality because silver is the best conductor of electricity, the best thermal conductor of heat, and the most reflective metal - of anything in existence whether man made or a nature made finite resource as silver is. Gold's purpose is a hedge against inflation, but silver is an indispensible miracle metal that technological advancement is utterly dependent upon. It is running out due to price suppression, and in my opinion will be a wonderful investment regardless of what the currencies or the economy does - the caveat being on a long enough timeline.

 

You are forgetting the effects of technology on the availability of goods. Remove the monetary inflation caused by the bankers and the price of the the basket of goods from the 1800s, would now be worth say $10 instead of $100.

When you use fiat currency your wealth is taken from you in two ways. The most obvious is that it takes more cash to buy something tomorrow than it does today because the money supply has been expanded. This wealth flows back to the bankers via the interest charged when the money was created and released into the system as debt. The second way that you lose is that the government spends fiat money and must pay interest on the funds that it borrows. You will be taxed to pay back that interest.

 

Here is an interesting piece, whether you believe it or not

http://www.cnbc.com/id/46115915

 

Let me know when you buy, I'll wait a day then buy at the lower price. Thanks!
HOTN

 

Sure I believe the private-sector "businesses" have reduced debt and saved money. =Employ less people, put more money in the bank.

"Meanwhile, about two-thirds of household debt reduction comes from defaults on home loans and other consumer debt." YUP, I believe that one too!

 

One of the ways they are stealing your wealth is simple really. They create the money supply and inflate your wealth away. If today you have 100 dollars in your bank account and there are 10,000 dollars in existence what happens when tomorrow you still have 100 dollars but there are now 100,000 dollars in existence that they created over night. They didn't do anything to your 100 dollars except create more money so now your 100 doesn't buy as much as it did before. The problem is also that the created money stays with the banksters they don't suddenly double your bank account only their own.

 

Since you are implying a geometric increase, then why isn't inflation also increasing in a similar geometric ratio?

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maybe this sounds stupid, but believe me on this one.
There is going to be a day that silver will be more expensive than gold

 

My thousands of dollars worth of US silver coins wishes it were so, but since silver is much more common in the ground than gold, I cannot see it. Not unless gold collapsed to $100 an ounce or something.

 

I was doing that too simplify the point.

 

In fact geometric expansion is exactly what happens but inflation is always given as a percent of the current system, not as a flat number. This tends to hide the effects of the increase. However the math is extremely simple as it follows this rule. Increase a system at a linear percentage rate and the result is exponential growth.

This can be demonstrated by this pretty simple example which I did on a spread sheet. Assume that you start with a price of $1000 and you inflate it by 10%/year. I picked these numbers to make the example clear but the math is always the same. First note the data. First year you start with $1000, 10% inflation means cost goes up $100, year 2 you start with $1100. Rince & repeat for 100 years.

Here is the first 25 years. It looks harmless enough even at 10%



However it's a sheep in wolves clothing. Each year doesn't look that bad, until you hit the puck end of the hockey stick graph as a graph of the entire 100 years shows. There is your geometric expansion caused by simple inflation. In just a few more years, the line moves to infinity and the system collapses. The effect is the same no matter the inflation rate or the initial principle. Keep in mind, this is just for a fixed amount of money. Imagine the effects of creating new money and adding it to this system.

Geometric Expansion


The math can't be denied. The system looks stable for quite a while then all of a sudden there is an explosive increase that comes without warning. Since we are talking about generational time spans, it goes by unnoticed by the current generation until you hit the puck end of the hockey stick and the generation unfortunate enough to be living during that time is shocked beyond belief. Governments fall, wars start, etc. It's all happened before. This is why no fiat based system has managed to last more than 50-70 years in human history. Most collapse sooner than that.

 

So when the central bankers and the government tell you that 2%-4% inflation each year is good for the economy, they are describing exactly the situation in my last post. I will note the debt is now being increased by $1.5T every few months. To put this into perspective, all the money spent in the USA AND during the colonial period, and I mean on everything, wars, going to the moon, expanding to the west, all of it, did not total $1T until 1974. Over 300 years. Now this amount is being burned up in less than a couple of months time. It only took 40 years of fiat currency to accomplish this feat.

The math can't be denied.

It's why physical assets are good to hold. Paper? At some point, good for starting fires and wrapping up fish.

 

If the economy rebounds significantly and interest rates go back up, PM's could take a big hit. Today, Silver is attractive because, it performed better than other investments. People feel it will continue to rise, so the demand is there.

But we did see the same thing with housing. So, I am being very cautious. Not selling any, not even my lower grade key and semi key dates. Not buying much either. Waiting to see what will happen.