199 years to break even ? zero correlation between silver the dollar and inflation

I have been a trader for my wholecareer, but have in some way shape or form collected coins my wholelife. Having some Asian roots, Gold and Silver coins were commongifts at Lunar new year (Chinese New Year).

When i begantrading professionally in 1998, the world was in mega growth mode dueto the internet, interest rates were fairly close to the historicalnorms between 500 basis points and 800 basis points.

Yetduring the whole decade of the 1990's Silver never really got muchbelow 4.00 or above 6.00.

Mainstream media will want you tobelieve that Gold and Silver only rise when there is inflation, butthat really could not be further from the case.

I could onlygather data that goes back to 1792, when the US passed the coinageact, and they set Silver at 1.29 per oz and Gold at 19.39 hencecreating the bi metallic standard and a ratio of 15:1 in favour ofGold.

Gold has long backed money, and yes there werecirculated Gold coins, but for the most part it was silver and copperthat was used as a medium of exchange.

So Silver was priced at1.29 an oz from 1792 up until 1971 when we officially went off theGold standard, but coin collectors knew something had to be up in1964 as 90% Silver coins were eliminated.

I have long heardSilver and Gold were relics, and that they are in abubble............... time will tell, personally I liked buyingSilver between 5.00 and 10.00 in the 1990's and early part of thismillennium

But with the backdrop of Global interest ratesbeing ZIRP (close to zero ), German 2 year bonds are actuallyyielding negative 2 basis points right now !!!!!!!!!!!!!!! It isreally hard to fathom that the metals that backed money for thousandof years are in a bubble.

Silver stayed at 1.29 an oz from1792 up until around 1862, then spiked due to the civil war, as didGold, making all time high in 1864 at 47.00 and oz and about 3.00 anoz for Silver, this obviously was due to lack of faith in a currencywhether it was the US dollar or confederate dollar.

Silvermaintained a premium to it's 1.29 peg from the civil war until1877................hmmmmmmmmmm............ the Morgan was introducedin 1878...............coincidence ?

Silver then entered a bearmarket until the end of WWII in 1944 when it seemed to find a bottomat 45 cents................ Right around the time of the goldconfiscation, in 1932 Silver made a low of 25 cents peroz..............this was most likely due to the fact, that peoplewere in panic as they had to turn in there gold, so they had to dumpSilver at super cheap prices in order to get gold

From 1944 toabout 1960, Silver was still trading under the government peg and wasunable to get above the 1.00 an oz barrier

Then finally in1961, Silver gets above 1.00 and by 1963, it has made it all the wayback to it's original price of 1.29 an oz

1963-1966 Silverstays at 1.29.............this in spite of the coinage act, thatturned once silver coins into fiat currency at the end of1964............... SO for two whole years, there was no silver incoins, yet it was still 1.29............. I was not alive then, butmy grandfather used to tell me in 1964 how he took all hissavings,and asked for quarters and dimes..................it washarder to get the 90% Kennedy, due to everyone hoarding thatcoin

1967 was another milestone.........Silver breaks 2.00 tothe upside !!!!!!!!!!!!! first time in 97 years since the civil warpanic !!!!!!

Silver then precedes to go into a 4 year bearmarket heading back to 1.40 in 1971, then we go off bretton woods andsilver reclaims 2.00

the 1970's you could say were the decadeof silver as it ran from 1.50 and oz up to 50.00 in JAN of1980

During the 1990's up until 2004 Silver stunk, it wasstuck between 4.00 and 6.00

Even as the millennium came andwent Silver did not do a whole lot

It really was not until2004 when Silver broke 6.00 that it started to gather attention

Ithink we can all agree that if you had save Silver coins from the1790's and early 1800's they did quite well, but what about the junksilver ????

For a commodity to be stuck at one priceessentially from 1792 to 1971, just does not make sense

We allknow the dollar was not the reserve currency of the world until afterWWII

We all know that interest rates were much much higher andthe cost of goods and services rose drastically in those 200years

So in summary...........I have always felt that themedia has tried to explain Silver and gold by moves in the dollar orinflation

Sure there are periods of time where that tradeworks, but in the long run, it just does not make sense

Ithink one would have done a lot better accumulating land in thebeginning days of this country than silver or gold, unless you havethat rare 1o million dollar coin

Last note :
1904 last yearof the Morgan Silver Dollar
Did you know in 1904 one US dollar had25 grams of Silver in it ?
Did you know in 1904 one Mexican pesohad 25 grams of silver in it ?
Did you Know in 1904 one Japaneseyen had 25 grams of silver in it ?
So they were essentially equalright ?

Now fast forward 109 year in 2013

Silver is 28dollars in the USA
Silver is 346 pesos in Mexico
Silver is 2600yen in Japan

If the Dollar is bad what does that makeeverything else ????

Best
Q
twitter @quanholdingsllc

 

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I'm certainly not an expert on this, but I would think you would have to consider the potential future cases where the US is not the top economy in the world, the dollar is not the world's reserve currency, and/or the dollar experiences hyperinflation. Japan and Mexico neither were the top economy of the world nor were their currencies major world reserve currencies. Both the Japanese Yen and Mexican Peso have also experienced hyperinflation since 1904, while the US dollar has not.

 

It is the gold standard that is often referred to as the barbarous relic, not gold itself. This is of course rhetoric to instill faith in debt based currency, just as is calling gold a bubble which has been the case throughout every bull market.

It makes sense from the standpoint that metals are free market competition for the controlled currency, and as such need to remain in non-free markets to prevent them from undermining that control. It also makes sense from the standpoint that throughout the 1900's the global stockpile of silver was decimated and is now at its lowest level since the 14th century. Supply and demand does work, even if price discovery does not. Some may consider us lucky, others unlucky, that we are living through a time where true price discovery will return out of necessity due to supply depletion of a non-renewable resource, silver.

The goal has been to use up all the silver so that it cannot return to functional money, since a dual metal standard is the sure way to ensure one metal isn't undermined and swapped out for fiat. This is why silver had to be demonetized, so gold could be subbed out for paper without interference from silver, and the very means of doing this was fixing the GSR in the Coinage Act of 1792 so as to eventually to drive silver out of circulation due to Gresham's Law, culminating in the subsequent Coinage Act / Crime of 1873.

Had the free floating GSR been maintained that was established by the founding fathers neither metal would have been able to be exchanged for fiat since the remaining metal would provide a superior currency, and thus fiat would have failed. Thomas Jefferson argued against fixing the ratio as well as the First Central Bank of the US in 1791, but freemason George Washington sided with Alexander Hamilton and his fractional reserve banking system planted by the Rothschilds since the temptation of loaning money back to themselves to artificially inflate balance sheets was too great. Sound familiar?

This will inevitably backfire since metals are divisible and can function as money in any quantity, but it has provided an extension of the current empire fueled by the petro-dollar long enough to turn the oblivious into debt slaves, and to advance the globalist agenda far enough to erode liberty even in the land of the free, which gave up control of the nation's money only 15 years after declaring independence from the crown which was under the same banker occupation as we are now today.

Yes, the First CB's charter eventually expired, and there is more to the story; Burr and Hamilton's duel, the 2nd Central Bank and Andrew Jackson routing them out, and the Fed sealing the deal in 1913, but essentially 1791-1792 is where things started going wrong. Unfortunately we the people were not eternally vigilant, and the multi-generational enemies of freedom have been, but nature will only bend so far before pushing back. The centuries old suppression of the peoples' money, silver, will ultimately be responsible for its return to prominence once price discovery is based on reality again, which could not happen under current circumstances had the available supply not been nearly depleted.

 

Indeed. And you've confronted the essential problem here. How can we understand retail inflation looking at the Mint's wholesale Silver Price? This flaw also ignores the fact that coin traded at a premium in many years (crises) when Silver money often bought more at the shop!

There's NO PRICE-RECORD FOR RETAIL SILVER .999, just the purported Mint price (Wholesale Bid.) And that's comparing apple-to-oranges.

In 1856, the wholesale price of PURE silver foil was $5. and Gold $32. http://noblemetals.blogspot.com/2010/05/usa-1856-nyc-chemists-catalogues-jh_08.html
The retail price was what someone paid in a shop for 1ozt 999. Fine Ag. That wasn't $1.29!

Consider the following was what a dentist paid his supplier/dealer and NOT what he charged his patients: in the Confederacy late 1864-1865, the wholesale price for Gold Foil was $64./ozt in Gold coin, so C$3,840./ozt. (Platinum - a strategic metal for munitions - was likely higher!) See "Dental Surgery as applied in the Armies of the Late Confederate States" W. Leigh Burton in American Journal of Dental Science, Vol. 1, No. 4 (August, 1867), p.182

 

First, the bimetallic system was inflationary. Please read your history and why Bryant created his "Cross of Gold" speech.

Second, the "worthless paper" is the PREFERRED money of most humans. Please look at how very few silver dollars ever circulated. No one was "duped" into using currency, they DEMANDED IT. Look at polls today, and see why our politicians do not get rid of the $1 bill. Overwhelmingly, the public WANTS paper money, and do not want coins. I don't give a dang whether the coins are silver, gold, or kryptonite, people prefer using paper for money. To say the government "tricked" people into using paper currency to me is simply a lie made up to justify your own supreme belief in both PM and some grand conspiracy. Please show me an example of anywhere in the world where paper and coins are the same denomination, and people prefer to use the coins over paper.

Third, I simply disagree about your numbers about silver depletion. We are mining more silver every year than is physically destroyed through industry. Every year, hundreds of millions more ounces are above ground than has ever been. Yes, they might be in the shape of ASE, maple leaves, or silver tea sets, but its ABOVE GROUND SILVER that can be melted and used at any time. To say we are "running out" of silver is simply hyperbole created to justify higher PM purchases IMHO.

 

No, because with the technology that existed in 1856, it was quite difficult to refine silver or gold to .999 fine. At that time, .999 fine silver or gold foil were specialty products that were much more expensive than the value of the metal they contained.

If you want to find the "retail price" of silver in 1856, look at the price of silver in the forms in which it was most commonly traded in 1856. That'd be .900 fine (coin silver) or .925 fine (sterling silver) for most purposes....

 

Stephen, you posted essentially the same thing here:

http://www.cointalk.com/t217556/

The points about the position being a political rant still hold. In fact, you know why the yen and dollar don't correlate. As for the peso v the dollar, the same argument generally applies. The difference is we used our military to force Mexico to sell us the majority of our oil and metals supplies in 1854. If not for that, it's entirely possible that Mexico would be in a similar position to Canada, where the peso could be on par with the dollar, based entirely on gold, oil, silver and uranium reserves.

 

BTW, Inflexion, I always see you commenting about how worthless fiat currency is. I'll trade you my bullion for your fiat. I think I have around 20 troy ounces of gold and 175 troy ounces of silver sitting around.

 

Medoraman, the cross of gold speech was in 1896. If you had read what I posted the bi-metallic standard was undermined beginning in 1792. A hundred years of fixing the GSR in defiance of free market forces will cause strange things to happen which were not the result of the bi-metallic standard but rather the result of rigging the ratio. You may feel free to disagree with the Silver Institute's numbers about silver supply (not my numbers), but I will go ahead and continue to listen to the experts. I never said silver was running out, I said supply was being depleted. This is absolute fact. Look at the government stockpile numbers, zero. They can't even keep up with ASE demand this year. Last year they made more silver eagles alone than silver is mined in the US in a year which is contrary to the law that enacted the eagles in that they could only be minted with silver from our own land.

I have no issue with paper currency when backed by metal. I take issue with debt based fiat currency. A debt based currency would not be achievable with a bi-metallic standard using a free market exchange ratio because an inferior debt based currency could only be successfully substituted for gold in the absence of a competing superior metal standard, otherwise everyone would stick with the money that isn't being devalued and fiat would fail. So in order for that to reach fruition first silver had to be removed from the equation, as I stated by Gresham's Law, due to the rigging of the GSR. It was a very calculated plan, and isn't so hard to grasp. What is hard is for people to remember longer than the average human life span which is why we need to be students of history.


NorthKorea, I've never once said fiat was worthless. I only buy from trusted sources, so not really interested in yours. I bought about 20 ounces this week, and around 30 last month at 28 and change. I have no issue putting my money where my mouth is.

 

I actually got tipped off to a growing divergence in physical price vs. paper price today. Typically US 90% coinage is available for purchase at or below spot price. It is also typical that 90% premiums are one of the more reliable leading indicators of a supply shortage.

So here is where we are at right now, and these are the cheaper bank wire transfer prices from the dealers that hedge:
APMEX bulk bags of 90% silver @ $29.93/oz, a premium of $2.95 per oz.
Provident Metals is almost all sold out of 90%, what's there is $30.44/oz, a premium of $3.46 per oz.
Gainesville Coins bulk bags of 90% @ $29.75/oz, a premium of $2.77 per oz.
Tulving is completely sold out of 90%, with a buy price of spot + $1.10 per oz for 90%.

If this is not a sign of a supply depletion I don't know what is.

 

I would sooner assume it's a sign of retailers not updating their prices to the downside as quickly as they do to the upside. BTW, I take strong offence to your comment about trusted sources v my bullion. US Eagles are US Eagles regardless of who's selling them.

 

Feel free to take offense. I've seen fake eagles, and I don't know you. I reserve the right to buy how I choose. Also every single one of the the retailiers I outlined updates their prices in real time via data feed.

 

Inflexion, I have posted 50 times at least here how EVERY TIME PM goes down, dealers increase their premiums. It ALWAYS happens. They do this because they do not want to sell all of their silver at a low. THey also ALWAYS lower their buy prices when prices go up high. Its as sure as the sun rising in the east. Nothing new. They will only decrease premiums when they believe PM is at a new level, and probably is not going back up anytime soon. This always takes a while. Remember in 2008 when PM went down? Exact same thing happenen.

Regarding paper vs PM. Lets go back to when the last time gold, silver, and paper, (yes even "debt backed" paper), coexisted. I believe it was from 1914 to 1933. So, did the new FRN not circulate? Do we see massive amounts of well worn gold coins and silver dollars from this time period because "people refused to be suckered into using debt backed paper?" Why don't you tell me what the numismatic evidence tells us?

 

Premiums have not changed on bullion, only for 90% silver. These dealers hedge, and can always sell for a 'loss' because they profit on the buy/sell spread. The only reason they can get away with charging more is because people are willing to pay it. Some dealers are even paying $1.50 over spot for junk right now. Now if you can show me examples instead of simply saying it's so then you might have a chance of convincing me otherwise, but where I looked bullion premiums had not changed, only 90%. This is nowhere near the magnitude of 2008, and even in 2008 generic silver premiums didn't rise, because I bought most of my stack for $1 over spot at the time. It was only eagles and the like that had higher premiums in 08, and right now they don't.

From 1914 to 1933 we did not have debt based fiat currency, we had a gold standard. If you are referring to bonds those are irrelevant as they were not circulating currency. I never said people refused to be suckered into anything.

Since you are incapable of refraining from putting my words in my mouth, this is the last resposne you will get from me.

 

I never stuck one word into your mouth. This is your post. You stated point blank that fiat would "fail" if everyone had a metal alternative. FRN is backed by bonds, pretty much the definition of fiat money. FRN's did not fail, in fact people PREFERRED THEM. This is evidenced by very well worn paper money from the period, and our records of the money taken out of circulation because it was too worn to still be used, versus the LACK of worn gold coins, even though gold wears much faster than coins today. Silver was freely available, and anyone who preferred them could use them. However, silver dollars also did not circulate nearly to the extent of paper money. Gold did not circulate, FRN's DID. Gold certificates would have been backed by gold, but again it appears gold and silver certificates circulated at par with US notes and FRN's. All of them circulated MUCH more than gold did.

As to premiums on junk silver, I see it for sale online right this second for very slightly over 21x face. Its a touch high, but like I said they usually run a touch higher in downward movements. People rush to buy at the new "deal" of a price, though you have to be careful trying to "catch a falling knife". Btw, the premiums on bullion ASE's seem about $1 higher than normal right now too.

I am not trying to put words in your mouth any more than you attempt to do to me.

 

FALSE and evidently so by the great number of dentists and industrialists then using refined Gold or Silver.
To price a .999 Fine Round in 1856 (or whenever) Dollars with inflation, you do need to include the refining cost and/or premium at retail market, not the Mint.

It's fairly simple and easy to calc, and YES, Fine Ag and Fiine Au cost significantly more retail. Often, coin did as well. Apples-to-apples comparisons, here.