Silver Will Never Be Valuable

There was a Youtube video from a few years ago where this guy was trying to sell a gold coin to people off the street. They were only selling it for a very small part of its worth. Notice now this was just too see if people knew the worth of gold. They selected 20 random people to try to sell the coin to. Out of all 20 people only one man was willing to buy the gold coin and he was a stock broker.

 

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The funny thing about herd mentality is that the more something goes up in value, the more desirable it becomes. As long as fiat currency is stable and functional, most people won't see any reason to own metals. Betting that will always be the case is a risky bet in my opinion for the very reason you've touched upon; equilibrium.

When dollars were originally conceived, they were denominated in grains of gold or silver, which were real money for thousands of years. Dollars were a measure of value in gold or silver, but today we have it backwards.

The Coinage Act of 1873 was a major step away from equilbrium, as it ended bi-metalism. After going to strictly a gold standard, we still had gold and silver certificates in paper form. It was certainly a convenient change, but ending the bi-metal standard took us further away from equilibrium, because you need two honest currencies to keep each other honest. Even the most honest of currencies won't stay honest for long without another honest currency to hold it accountable.

These certificates were redeemable for the silver or gold they represented, for a time, but eventually the government printed paper beyond its capacity to redeem in order to fund the military industrial complex, and subsequently closed the gold window in 1971. While money was technically being printed out of nothing before that, it was under the ruse of redeemability. Since 1971 the flood gates were opened, and people seem to have forgotten what money came from. What we call money now has no tangible backing. Rather it is only the promise to repay debt, which is what money is today; debt, not actual value.

Going back to the Coinage Act of 1873, the reason that bi-metalism was ended was because the gold to silver ratio was fixed before that. Lack of a free floating exchange rate for the two metals meant that people would trade for whichever one they could get for cheaper than the fixed rate on the open market. This caused people to hoard silver, the more undervalued metal of the two, and thus it largely disappeared from circulation.

We didn't originally have a fixed gold to silver ratio when the US was formed in 1776, but within 1 year of the First Central Bank of the US coming into the picture the gold to silver ratio was fixed at 15:1 at the behest of Alexander Hamilton and the approval of George Washington, against the protests of Thomas Jefferson. It was this fixing of the ratio in 1792 that set the wheels in motion, and we have been growing further and further from equilibrium ever since as more and more money has come into circulation without equivalent increase in its backing, to the point we are at today where there is no backing at all.

The dollar has lost over 98% of its value in the last century. Using that as a baseline, a century ago a dollar was worth what $100 dollars are worth today, and an ounce of silver was the same as a dollar back then.

I don't think the question is what direction the price of silver and gold need to move in to reach equilibrium. The questions in my mind are why are so many people ignorant of the answer, and why do so many people value something that has so little value? I should be thankful for the opportunity to be a step ahead of the herd, but I'd rather trade that for a currency that doesn't prey on its users.

It doesn't much matter to me what the price of silver is in dollars, because dollars aren't something I can trust. Eventually equilibrium will be achieved, and until then I will be waiting. It doesn't really have anything to do with all the taboos being thrown about that are not mutually exclusive to being a stacker. Using labels says a lot more about the labeler than the labelee.

 

The worlds population is at a point now where a currency backed by gold and silver wouldn't work unless you're going to back by fractions of an ounce of either metal.

 

A metal standard is simply backing the amount of dollars in circulation with the amount of metal on hand. Whatever that ratio is is what the ratio would need to be from that point forward in order to preserve buying power. Since metals are divisible, there is no restriction on how little backing can be used. It doesn't matter how small the fraction is. The purpose is not to bolster the value of currency. It is to peg the value at its inception at a constant going forward.

One way to bolster the value would be to destroy currency in circulation. Another way would be to acquire more metal.

 

It should matter to you since silver is not something you can spend. Unless your monthly expenses are zero, this make little sense.

 

I still think that silver and gold are going to start going up again. I may be wrong, but I think another rally is on its way soon. I could be wrong...

 

I am going to trust my dollars to buy more Silver.

 

I don't like the way this little rally has fizzled. I wonder what it will do tomorrow?

 

That's the spirit!

 

Clive Maund has turned neutral from bearish, so maybe that's a good sign:

http://www.silverseek.com/commentary/silver-market-update-14376

 

What do these charts imply to you, about June Ag prices, on average?

 

It would appear that the buy time will be end of June if it follows historic trends...

 

Yes, on average: "Early Summer discount" on Silver, if premiums don't rise.

"Typically"? I'd want to compare prior Feb-Apr, Nov-Apr and Aug-Apr prior periods, and to see what's similar to 2014-April 2015 Silver trend.

And narrower still: what specific past years look most relevant (same-same) for comparison today, how a "typical Summer" 2015 might play out?

I'm offering no forecast nor guarantee for 2015 direction but that's how I look at things, anyway.

 

Without getting in deep, I would think comparing all 'same-same' periods, since, 1970(?), would be appropriate to understand trend, not accounting for the socio-political context leading up to and during each period.

 

from: http://www.silverseek.com/commentary/silver-market-update-14376

Look at the chart from the source quoted above. See the 2 red channel lines. The POS has already violated 2 support levels and should be very scary to those who are advocating buying big. If it continues, $10 silver by mid 2016. I love their bottom chart section labeled "Downside momentum easing". You could just as easily draw a mirror line above the MACD crossing and call it " Downside momentum increasing". My interpretation for entertainment only.

 

Well now I feel unfortunate. I have 21.5 oz of silver.

 

21.5 oz is not too much, so I wouldn't worry. There is a reason why JP Morgan keeps buying. Maybe they are big enough to make the markets, and they have made them in order to buy silver cheaply. That can't continue forever, and if they are buying they want the price to go up eventually.

 

Miss you Em. Wanted to hit $5/oz too, but alas, no dice.

 

I love the U2 song "Silver & Gold" because that's what I'm buying and they are both going up and up. Silver is up 44% this year and going higher.

 

This thread is making me laugh