When will Silver be Cheap again?

I agree with this, but not for a long time. Silver gets used, Gold gets stacked. I have no idea how long it would take or even if man will still exist. But when there's more Gold than Silver, Silver will indeed cost more.

 

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I certainly don't deny the math, but I do not believe in looking at a single function and use it to make a derivative. Fiat money survival doesn't lead to failure itself as it is a financial system. The assumption that all will go the same way with world financials for 70 years is unsupportable as factual, it is just opinion. Same with the wild predictions as to the value of precious metals in the coming years, it is all opinions and people who base their future on them without a creditable exit option, ( I want to say 'will" find themselves in a bind, but will temper myself ans say ) may find themselves in dire straits. IMO.

Jim

 

YOU JUST FINISHED DENYING THE MATH IN THE PREVIOUS PARAGRAPH!

An exponential trend never "goes to infinity". It just doesn't. It continues to increase, with all the warning and predictability in the world -- in the example you set, doubling over a period of approximately eight years. From any point on the curve, things look the same -- flat and close to zero in the past, increasing in the present, and increasing more sharply in the future.

Take your curve and scale it vertically by half. You'll find that it looks exactly the same as the previous curve, shifted to the right by about eight years.

Take your curve and double it vertically. You'll find that it looks exactly the same as the previous curve, shifted to the left by about eight years.

When you talk about "going to infinity", you're talking about a hyperbolic curve, one with an asymptote -- a point on the X-axis that it never reaches, because it goes to infinity first. You don't get that from exponential growth. And you certainly don't get it from polynomial growth, despite all the talk about silver or gold "going parabolic". A parabola is gentle in comparison to exponential growth, even though it may look the same on a chart.

Only the hyperbola, and the hyperbole around chart-reading, "goes to infinity".

 

Silver will never be as Cheap as I am!

 

unsure how you go back in time to lower prices back then but oh well...when your done with the time machine I want to borrow it...

 

Ooops!

 

INCORRECT

Moves towards infinity doesn't mean it becomes infinity. The collapse happens long before. In mathematics, "moves towards" or "approaches" is said because in the real world infinity is nonsense. What I had to prove was exactly what I stated.

[highlight]Increase a system at a linear percentage rate and the result is exponential growth.
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The example, which is the point, is exactly the math that can't be denied. Interestingly you do seem to accept there is exponential growth, but then ignore the fact that all exponentially growing systems are unstable and end up destroying themselves. Rather than get hung up on terminology, you might want to address the point made.

For the rest of your contention, you are free to present the actual mathematics, as I have done, rather than offer opinion. As I said, people will deny it, until it hits them in the face.

 

This is why they get away with it.

 

This makes no sense to me. I recommend, if you really have a question, to use more than a one liner.

 

There has to be 1% to 1 1/2% annual inflation of the money supply just to maintain equilibrium. In 1800 the population of the United States was 5.3 million today it stands at 310 million. Just to maintain money supply on par at the 1900 level the US gold reserves would now have to be 4 times as large. And applying your exponential math to required US gold reserves just to maintain money supply at par would eventually require a gold reserve of infinity.

 

I agree with you on the single function but until mathematical proof is given otherwise, it can be considered a valid effect.

The fundamental problem with fiat money is this. (My math hints at it.) How does the interest get paid? This sounds like a simple and easy question at first glance until you realize that unless the system is inflated the interest can't be paid. This is why they tell you that 2%-4% inflation is good. It really means we had to grow the money supply to cover the interest owed on loaning you the dollars. Remember what I said earlier, new money only enters the system via government debt or debt created via fractional reserve banking. The key word here is debt. New dollars are always loaned into existence which means interest is owed.

(This is probably worthy of its own topic on how fiat money works but I'll touch on it here. It's too long so anyone feel free to ignore it.)

This is exactly why we had to go through the entire political mess of TARP. Why didn't the Federal Reserve simply print the money and hand it over to the bankers instead? Before this question is answered, you have to understand there are two classifications of money in a fiat system. Base money and the money supply. Both kinds of dollars are created, but from the prospective of the Fed they are completely different. The base money supply, MB, is the real hard "asset" of the Federal Reserve. It is backed $ for $ by either gold or US Treasury Paper as specified by the FR act. In simple terms if the Fed was a real bank, Base Money would be the hard assets locked up in it's vault. It then can make loans for many times this amount to customers i.e. Fractional Reserve Banking.

In the real world the base money supply (MB) is all the US government debt + the value of the gold seized from the people by FDR in 1933 which remains under the Fed's control. The Money Supply, M0, M1, M2, M3, .... etc (MN) is all the money created by the Fed system of banks. This includes all the money created by the mortgage mess, and the huge number of dubious financial instruments that surround the banks. Thus MB is liability of the US taxpayer, MN is a liability of the bankers. In the real world, MN is actually a liability of 1000s of individual companies that include investment and retail banks including the TBTF banks. This is important because they are subject to local laws that dictate how corporations maintain their balance sheets.

So if you followed this, you start to realize that TARP was necessary because the bankers needed MB increased substantially because MN was out of control and that requires an act of congress because the liability gets transferred to MB. ...........
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(Hmm, this IS getting too long and too far off the point. Maybe I will finish it elsewhere if there is interest. )

The only way to pay back the interest is to inflate the system. If the entire system is inflated on a percentage basis each year and furthermore the base and money supplies are increased as well, then it becomes a simple matter of plugging those numbers into my chart and letting the math do its business. Over time this is how inflation becomes geometric.

 

No, this isn't the case.

There is absolutely no problem in expanding the currency due to increases in economic productivity. More wealth means more currency to cover it.

If you have an asset based currency, then the currency increases because there are more real assets created by this increased productivity. Keep in mind that in a PM based system, the value of a government gold coin is nothing more than an assay that your coin has x amount of PM. Beyond that, government has no role in the currency. There was no inflation during the 1800s except during the periods where governments were issuing paper money mainly during war time.

If you read my previous post, where I went off-topic about fiat currency, as opposed to asset currency, (see the small print) this will make more sense.

 

Addressing inflation in the 1800s certainly the fact during this time the US was sitting on and mining the largest gold and silver deposits the world had ever seen played a major role in the situation.

It is a fairly simple concept. For the money supply to remain at equilibrium on par; exponential growth of the population requires exponential growth of the money supply. A money supply based on a reserve asset would therefore require exponential growth of that asset reserve. Accordingly based on the idea that exponential growth eventually reaches virtual infinity then the required reserve of the underlying asset will eventually reach virtual infinity. It is very difficult to strike more gold coins without more gold.

 

You're right. "Moves towards infinity" means "goes up". And, conversely, "moves toward zero" means "goes down". Of course, "moves toward infinity" is a lot more dramatic than "increases".

You're also correct that unbounded exponential growth doesn't happen in the real world. Eventually you run out of something. At that point, the quantity you're measuring can stabilize, or go back down, or be replaced by something else.

 

On the first point, gold and silver are a world wide currency. It allowed American's to do things which they otherwise could not have done (effectively). For example. During the Civil War, the South did not have much in the way of industrial production. They addressed this trading gold for armaments. This is one of the reasons that gold coins minted from the Charlotte, NC mint are relatively rare. This gold ended up in Europe were it was melted down. It should be noted the Europeans would not accept Confederate money for payment. They understood the worth of that.

On the second point, nature always prevents population growth from expanding at a fixed percentage rate forever. Lack of resources sees to that. In the case of humans, either more resources have to be exploited, or laws put in place to limit children to 1 child/couple (or less), or disease, starvation, etc takes care of it. All these examples exist in some form today. An extreme example is Easter Island. The inhabitant population expanded beyond what the island's resources could support and both the ecology and population collapsed. It happened in a very short time too.

 

The non-inflation of the 1800s was due in part to the fact that we were mining gold and especially silver faster than we could spend it. Look at all the Morgan dollars that were bagged and put in the mint vaults, post office vaults, etc. We had silver comming out of our ears. Also we found so much gold we had to build two additional mints just for that (Dahlonega and Charlotte). So many of the mines that created the gold and silver rushes were so depleted that they became unprofitable to mine. There's still gold and silver to be found in these regions but untill PM values rise far enough, not many will invest in getting it out of the ground. Who knows what vast PM deposits lie beneath the oceans?

 

Heck, gold is minable from sea water. The technology is already there, just waiting for a high enough price. FYI magnesium is mined that way already.

Regarding the 1800's, not only was it not inflation, it was deflation. That is the real risk to worldwide economy. I know everyone likes to jump on Fed policy, but they really are on a balancing act. They cannot risk deflation since its effects on an economy are severe, but they try to hold down inflation at the same time. I am not saying I agree with other decisions, but that is theoretically the parameters they play in.

Speaking of deflation, anyone else read yesterday Japan has turned into a net importer now? That is what 20 years of deflation can do to you, take the world largest net exporter and turn it into an importing nation.

 

Interesting ideas, but I'd be concerned about mining underwater just like I am concerned about deep sea oil drilling. I wouldn't be surprised if metal extraction from seawter became increasingly used. Something someone mentioned to me recently, was what if some science facility (let's say CERN) could duplicate the effects of nuclear fusion in a dying star and begin to create new elements currently unable to be manufactured in any way. That would be a game changer for sure.

 

Interesting idea, but I understnad this process, (while replicatable), would take enormous amounts of energy. The amount of energy that produced all of our elements above iron is simply inconceivable to human minds. I still believe quantity of PM will be for the foreseeable future a function of price. Like farming, the quickest way to $1000 gold would be $3000 gold, (or $15 silver would be $80 silver).

 

I like this idea as nuclear fusion does indeed create heavier elements. The big questions are: How much money does it take to make gold this way?, What percentage of the yield will be gold?, What size fusion reaction is required (I believe immense gravity is required)? and How long must the chain reaction be sustained to make gold (nano-seconds or millenia)? Or perhaps it require a special balance of the 4 nuclear forces that we have yet to understand/discover?

Who knows?