It’s the End of the World as We Know It
Many of you know the song from R.E.M. that starts out:
That’s great, it starts with an earthquake, birds and snakes, an aeroplane,
Lenny Bruce is not afraid
Eye of a hurricane, listen to yourself churn - world
Serves its own needs, don’t misserve your own needs. Feed
It off an aux speak, grunt, no, strength,turn, ladder
Start to clatter with fear fight down height. Wire
In a fire, representing seven games, in a government
For hire and a combat site. Left of west and coming in
A hurry with the furies breathing down your neck. Team
By team reporters baffled, trumped, tethered cropped
Look at that low playing! Fine, then. Uh oh,
Overflow, population, common food, but it’ll do. Save
Yourself, serve yourself. World serves its own needs,
Listen to your heart bleed dummy with the rapture and
The revered and the right, right. You vitriolic,
Patriotic, slam, fight, bright light, feeling pretty
Psyched
It’s the end of the world as we know it
It’s the end of the world as we know it
It’s the end of the world as we know it and I feel fine
I find a lot of parallels between this song and what is happening with the world today. And despite the wild ride, if you own physical gold and silver in your own secure possession as I and others have been advocating for years, you too can sing the part that goes “and I feel fine” with not one bit of sarcasm.
Look, we shouldn’t be very surprised by silver and gold getting crushed on a Friday beginning at the usual hour and continuing into the electronic session. It sure had the feel of another (last?) operation by the Hung Brothers. I hope they are almost done trying to wrestle away as much monetary metal from the unwashed masses as possible.
Silver dropping to or below $10, as I’ve mentioned a few times, could indeed be the final capitulation. In particular, the $9.60 level held in December COMEX silver (except for an instant plunge lower). As you may recall, the $9.60 level represents the June 2006 low and it is a fairly clean line in the sand. Should this level fail by a significant margin, it could very well mean that the worst-case “depressionary” scenario will soon be upon us. On the other hand, gold is trading at $850, more than a hundred dollars above its own September low, so let’s not be so hasty writing this bull market’s obituary. Silver could come back in a big hurry to declare that rumors of its death were exaggerated.
In spite of the seemingly imminent financial Armageddon, the basis is telling us that the Last Contango is not yet upon us. We are not in backwardation by any conventional measure. Does this mean the basis doesn’t actually work? No, it means we are not actually at the edge of financial Armageddon despite the appearances.
The basis aside, the gold-silver ratio has reached an extreme level not seen for many years. For a brief moment today, the ratio reached 87, and it settled not far from there at 83. I realize this is extremely painful for silver investors especially those who switched out of gold at some point in the past couple of years. No need to worry, however, if your holding period is long enough. This move will reverse as the bull market resumes. My estimate of the gold-silver ratio at the next rally top (sorry I can’t tell you when that will take place) is 35. Even if won’t quite go that low, it doesn’t take a brain surgeon to figure out that the current gold-silver ratio offers an excellent opportunity to move some gold into silver assuming your PM holdings are allocated more than 50% to gold. Back to the basis, it also is telling you that the allocation should be toward silver for now. I’ll have a special post soon for GSUL Canberra attendees that will explain this in more detail.
Speaking of the GSUL Canberra session to be held November 11-15 (see www.feketeaustralia.com but contact me at tom@silveraxis.com to sign up), I am still short the minimum number of attendees. Please consider signing up even if you cannot make it in person as I will be providing an exclusive video and/or audio feed over the Internet as well as the opportunity to ask questions by e-mail. This so called “remote attendee” option will also include a DVD set that will be made available at production cost. The price will be much higher for non-attendees so don’t think you will be able to save money by waiting.
I could probably spend the next 100 hours writing about all the stuff that has happened in the past few days. Unfortunately, I don’t have 100 hours so here is a bullet point list instead that touches on a few of the topics:
- It is now clear to all but the most obtuse of market observers that the current crisis will have to be hyperinflated away or else we are all going back to the Stone Age. My guess is that $10 trillion or more of direct liquidity injections will be required worldwide, and that might only be the start. None of that “sterilized” Fed credit, either. No, I’m talking about bona fide helicopter drops. Fleets of helicopters, in fact. Speaking of which, I’ll be updating the Fed’s bankruptcy and helicopter status if I get a chance during the next few days but for now I’ll just say that the Monetary Base and Reserve Balances did increase as I expected. In the past week, new liquidity injections came mostly to a halt even as the Treasury provided another $100 billion more financing to the bankrupt Fed.
- Italian Premier Silvio Berlusconi is speculating that a meeting of global leaders will be needed to arrive at a global solution to the present problems, perhaps a sort of Bretton Woods II. He also claims there should be a market holiday, which is not something that anybody would serious consider in my opinion.
- There are all sorts of rumors about bank holidays and freezes, that people should stock up on guns, gas and food, etc. Do what you must, but it is highly unlikely it will come to that in the near future.
- The panic has not yet hit the banking system. There is no run on the banks. Thus, there is no need to close the banks. How do I know this? The banks, at least as of this Wednesday October 8, were holding a large amount of excess cash and had drawn down only very little of the newly-created $180 billion of Reserve Balances. The self-fulfilling prophesy of Jim Sinclair and others urging people to withdraw their money has not yet trickled down to the masses, or perhaps the masses have been reassured by the new FDIC limits and the new-found eagerness of the federal government to nationalize every morsel of the financial system as it fails.
- The commodities are getting extremely oversold even considering that depression might be around the corner. The CRB broke 400 (top of my target), oil went under $80 (top of my target), copper almost hit $2 (again, top of my target). The first day things don’t look as urgent and fatal as they did every day this week, there is going to be a massive relief rally (or dead cat bounce). Even though I expect copper to go lower (perhaps to $1.60 or less), it is very possible that it could first rally all the way back to $3. In anticipation of this possibility, instead of selling a portion of my deep in-the-money copper put options outright, I’ve gone long futures against them. This acts to offset the position and lock in gains although it also eliminates the remaining time value. What you gain in return is the ability to make money coming and going. I’ll explain more to subscribers of The Metal Augmentor (www.metalaugmentor.com). For example, the December $2.50 copper put still had a remaining time value of $1,750 at the close of today out of an overall premium totaling more than $10,000. That “by the way” represents a gain of 50-to-1 or 5000% per option contract on the initial $200 purchase price (more than 20000% annualized and ignoring commissions). And yes, my target is still 100-to-1 on these options.
- I don’t mean to brag but I told you before that such gains were possible on the right option plays and now I’ve shown you. I will have more 50-to-1 or better speculative plays to discuss in the future but only as part of The Metal Augmentor service. In fact, the only reason I even discussed the copper play is to get some of you to believe that applying a bit of intelligence and common sense to the markets can sometimes generate huge returns.
- Speaking of the new service, there is a bit of good news and a bit of bad news to report. The bad news is that we are still a few weeks away from officially launching a fully functioning website. The good news is that we are going to start e-mailing commentaries immediately, including one this weekend. Here’s a hint. It will include a strategy to make 50-to-1 on your money from an extremely speculative, but surprisingly safe, strategy involving call options on silver. To get this report, however, you will need to sign up before it is e-mailed out because we will not be repeating the communication. I will, however, make a special exception for those who sign up by midnight next Tuesday. Just go to www.metalaugmentor.com/subscriptions.com, carefully read our shtick and then click on the link to purchase our inaugural Mining Equities Report. Don’t worry if you don’t give a hoot about mining equities or our reports about them; The Metal Augmentor will include much more than just analysis of stocks. On the other hand, if you are even mildly interested in mining stocks, you should know that we have already e-mailed to our subscribers an updated version of the report (you will be purchasing and downloading this latest version) that now includes an expanded list of 50 companies trading at or below their cash value. In fact, many of these companies are actually trading at less than their cash in the bank.
- If you are sick of hearing about the copper put options or The Metal Augmentor, too bad! I won’t necessarily stoop to used care salesman tactics but I probably won’t stop until I’ve badgered every one of you into subscribing!
Well…It is so funny……in my head Silver is still at $20 an ounce or more for Eagles/maples/bars…..at least that is what I am dumping it for on Ebay…..this Silver nightmare has driven me crazy….I am cashing out, and going to to continue to buy property in Costa Rica.
Anybody want Eagles or Maples at $19 an ounce delivered……I have as many as you want.
I have silver too and I am unloading it … tired of waiting for the so called big explosion of value … cashing out and buying other things
The events in the global markets this week have made every country sit up and take notice. They are now saying that they will do “whatever it takes” to ease the crisis. We all know what this means. World leaders are in emergency meetings this weekend. They will choose the so called “lesser of two evils”. It now looks likely that the Fed’s “Recap the banks with printed money plan” will go global. The monetary metals will become the only true measuring stick of value as we enter competitive currency devaluations.
Look on the bright side, 5 more days like today & silver will be free ! So we therefore KNOW, that the bottom is near ! LOL Alot of the grains will be also in 2 weeks at this rate !
THE MARKET IS A VOTING MACHINE in the short term AND
the vote on silver is not good. In the long term it will value it but I am starting to wonder if we will live that long!!!
What else are you going to buy ??? Cash is king for now.
None of us get out of this game alive and you sure can not take it with you.
Vince,
You don’t know what you are talking about. Look at SLV, it’s not being sold, it’s being bought. Retail silver at for $10 doesn’t exist. Look above, people are asking $19 and $20 an Eagle. This is a paper silver event, which means fake silver, market manipulation, criminal behavior.
When people talk like you, the criminals are getting their way. We need to keep the discussion on what is being done to silver, and who is doing it. The more we talk about Jamie Dimon going to jail, and the CTFC regulators joining him, the closer to a reality it becomes.
Mark’s on the mark. The reason we’re not seeing a silver buying frenzy is that the big levered funds all left town. So nothing is going anywhere any time soon. In fact, I think we may see paper prices below $9 before we find a bottom. All the small investors were “all in” a long time ago and don’t have any dry powder to raise the ante. I felt the earth move at about 4 pm EDT today as the curl in the Dow and the drop in PM’s hit the screen.
But Tom’s correct. The only way out of this mess is to inflate, otherwise we’re all doomed, silver or no.
BTW, when silver peaked the other night above $12 I thought the basis went negative, at least for a few hours. But when I got up silver had taken the Hung Bros Hit and now we’re looking at $10. Time to dig up some cash. Probably sell some more gold.
How’s my nickel looking?
Mark’s on the mark. The reason we’re not seeing a silver buying frenzy is that the big levered funds all left town. So nothing is going anywhere any time soon. In fact, I think we may see paper prices below $9 before we find a bottom. All the small investors were “all in” a long time ago and don’t have any dry powder to raise the ante. I felt the earth move at about 4 pm EDT today as the curl in the Dow and the drop in PM’s hit the screen.
But Tom’s correct. The only way out of this mess is to inflate, otherwise we’re all doomed, silver or no.
BTW, when silver peaked the other night above $12 I thought the basis went negative, at least for a few hours. But when I got up silver had taken the Hung Bros Hit and now we’re looking at $10. Time to dig up some cash. Probably sell some more gold.
How’s my nickel looking?
Mark ,you missed the point. I said in the “short term”.
physical silver is down 30% + from its high this year
so the market is voting against silver .
But as I said before ..”What else are you going to buy ??? Cash is king for now.”
The scramble down the pyramid includes cash guys it may not be the last spot but it is close to the base of it all.
re: mark Says:
“Retail silver at for $10 doesn?t exist.”
sure it does 1000 oz bars are available in qty from Tulving and Apmex at 39-79 cents over spot for imediate delivery.
Do not get me wrong I am in silver bullion,etfs ,miners ,drillers
as well as a lot of energy and nat rescources.
Just for now it is UGLY out there. NO where to hide.
but my silver is not for sale !
not anywhere near these prices.
“The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley’s chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion. That means a lot more borrowing by Treasury, which will push up interest rates, said Greenlaw. “The Treasury’s going to be ramping up supply dramatically over the course of coming months to meet this enormous federal budget obligation,” Greenlaw told Bloomberg this week. “The supply will trigger some elevation in yields.” ”
The treasury bond market will be swamped by massive oversupply that not even China or Japan can absorb indefinately. Bonds will have to be monetised in order to keep interest rates down. This will further devalue the Dollar and can only be good for PM’s in the long run.
Why is Hommel auctioning off his silver? And why are people paying huge premiums for it?
Steve..
Just a guess.. but if he needs cash he cant sell stocks (down 60-90%) from when he recomended.
and he can get the same exposure to silver for less$ thru either SLV(which he down talks) or..1000 oz bars at a way lower premium than 100 oz bars and pocket the spread.
“Why is Hommel auctioning off his silver?”
He’s buying comex futures and taking delivery of the 1000 oz. bars. He’s taking advantage of the premium in the 100 oz. bars, and helping his readers who can’t manage to get their hands on 100 oz. bars. Later on he plans to have the 1000 oz. bars refined into 100 oz., 10 oz. bars and 1 oz. rounds. That’s what his article says anyhow.
Tom: “The panic has not yet hit the banking system. There is no run on the banks.” Roubini has a diff view - “there is a silent bank-run”.
As for these goldbugs getting disillusioned with the silver price action, I have a few words:
Do you ever consider how US centric everything is - “why is gold declining?because, the USD is strengthening blah blah” actual gold physical demand dynamics represents another story…
e.g, Consider this old piece of news: Vietnam became the largest retail gold buyer?
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=53375&sn=Detail
Why would Vietnam (insignificant in terms of GDP) became so imp to the gold market? Because it was semi-pegged to dollar & as the dollar was nose-diving they were inflating like mad to keep pace. result was stock market bubble, >20% inflation and rumors that properties were getting quoted in gold.
Now consider the other side of the story, when the dollar is rallying while deflation & deleveraging are causing foreign equity & sovereign bond markets to collapse.Result - foreign currency collapses.
e.g, http://www.nytimes.com/2008/10/10/business/worldbusiness/10icebank.html?_r=2&ref=business&oref=slogin&oref=slogin
“Iceland is bankrupt.” “The krona has collapsed. “S&P has downgraded Pakistan to junk status.” All this is happening all over. More & more currencies will collapse. Only heavy weights like the yuan have a slight chance. In this environment do you still believe that gold would not deleverage w.r.t the USD.
And then what would happen when everybody including the US would print print print.
Just shut yourself out. Don’t see the USD quotes for PM on a daily basis as if it is a stock portfolio. Remember, it does not matter how many dollars of gold you have. Only how many grams. Got gold?
Tom: Why is my comment suddenly subject to moderation?
Bob Hoye at Institutional Advisors has been saying for a while that silver does not do well at all during deflation, and has posted charts to support his thesis. And he is generally in the goldbug camp, from what I remember. Other analysts I have read are saying similar things.
Right now the deflationary forces (credit loss/contractions) are far more powerful than any inflationary forces.
So I am thinking silver is simply a bad investment now and for the next year (few years), until the deflationary period ends. I can see silver going back to low single digits, and staying there for a long time.
I used to be an inflationista, but I simply do not find facts out there to support that position.
Even if silver has value, why would you want to invest in a market so subject to abuse and manipulation, where it looks likely the real value of silver would never be recognized. The COMEX/NYMEX/LMEX etc are sham exchanges pretending to offer value, run by fraudsters and criminals for their own profit, and designed expressly to part non-insiders from their capital under all market conditions.
As an investment, I would say silver is about worthless, it is subject to so much manipulation, fraud and cheating by exchange participants that I cannot muster any reasonable arguments why anyone would want to participate in the tragic farce that are the commodity exchanges.
The stock market is fair, transparent and honest compared to commodity exchanges. Think about that. Stock options have returned me much more real profits in the past few years than I ever made on precious metals. So I have to conclude there is no point to trading or owning precious metals, the value will not be recognized as it should.
Why beat your head against a wall, just move on to something else. This former goldbug is done. I’m out.
CanadaMetals did make his opinion as this is a free blog….but I must say, he could not be more wrong. There are plenty of people talking about a DEFLATION….most of them are looking at this in a AMERICAN-EUROPEAN CENTRIC mindset. Yes, OECD countries which include America and many countries in EUROPE have had a drop in OIL DEMAND….but FOLKS according to EIA, which UPDATED their FORCAST for demand, they lowered it to STILL A GROWTH of 0.5%
REPEAT a WORLD GROWTH of 0.5% in 2008. They also have lowered their WORLD DEMAND in 2009 to only a 0.8% GROWTH. FOLKS THATS GROWTH….not DEMAND DESTRUCTION. IF anyone with a functioning BRAIN STEM has been reading some of the top OIL MINDS, like MATT SIMMONS…..WORLD DEPLETION RATES are 5% a year according to the EIA (Energy Information Agency). Matt Simmons who does plenty of speeches, did a lecture with some to the top engineers from SCHLUMBERGER and BAKER HUGHS… TOP OIL SERVICE COMPANIES. These are engineers who work on oil fields all over the world. He asked them to raise their hand if they thought the depletion rates on the wells they were working were under 5%. None raised their hands. He then asked them if the depletion rates were 8%. Half of them raised their hands. Then he asked if the depletion rates were 10%. The rest of the room raised their hands.
The EIA is getting ready to release a new STUDY and IS NOW WORRIED more about the SUPPLY SIDE of the OIL problem then they are about DEMAND DESTRUCTION. The United States has the some of the lowest NATURAL GAS INVENTORIES in many years due to the Hurricanes, and is heading into the COLD MONTHS. According to many top Meteorologists…this will be a COLDER WINTER in several years.
Now that Natural Gas is priced below $7mmBTU, many companies in the United States like Chesapeake are dropping significantly their DRILLING PROGRAMS for next year…as well as CLOSING IN WELLS in the SHALE GAS PLAYS as they are losing money. People do not realize the MASSIVE DRILLING PROGRAM companies in the United States have done in the past several years to keep GAS PRODUCTION FLAT or slightly Growing. This drilling is very expensive. As prices fall, so will supply. People in the NORTHEAST who need NATURAL GAS to heat, may find that his temporary drop in prices will not remain in the winter.
This is the same problem with the PRECIOUS METALS and COMMODITIES. Back in 2004 the 5 Major Investment Houses in the USA, went to the SEC and asked to be able to LEVERAGE UP. And that is exactly what they did. Hedge funds followed suit. July 13, when the US GOVT decided to pop the DELEVERAGE, they announced that they would BAIL OUT AIG and the GREATEST DELEVERAGE began. People keep talking abot DEFLATION….this is not DEFLATION….but it is BANKS, INVESTMENT HOUSES, and HEDGE FUNDS LEVERAGED much higher than historic standards……DELEVERAGING.
The reason why the DOLLAR and the YEN has risen compared to other countries is the UNWIND of the YEN CARRY TRADE and the DELEVERAGING of US ASSETS by FOREIGN COUNTRIES. There is all this CASH NOW out there….but the FUNDAMENTALS of the COMMODITY BULL MARKET are still intact….because we are adding another 100 million people in the world which are moving into homes with PLUMBING and ELECTRIC. Sure we have a housing bubble in the UNITED STATES or other countries in EUROPE…..but folks….this is a GLOBAL ECONOMY.
Many will sell out of their SILVER and GOLD, but they will have commited the most UNWISE decision of their life. They will have been HOODWINKED by those who look at them as MERE FOODER for their taking. REPEAT….we had a DEFLATION in the 1930’s because we had TREMENDOUS amounts of NATURAL RESOURCES to tap into to ADD to SUPPLY….that is GONE FOLKS……the United States Peaked in oil production in 1971 at 10 million barrels a day. We are producing about half of that, and use 20 million BARRELS. China will be more than happy to take up the SLACK that is lost to AMERICA.
We have peaked in WORLD OIL PRODUCTION and now that OIL prices have plummeted, many ENERGY INTENSIVE and EXPENSIVE OIL PRODUCTION techniques like OIL SANDS, OIL SHALE, HORIZONTAL DRILLING and DEEP SEA DRILLING will be PROHIBITED and future PROJECTS POSTPONED.
Future PROJECTS were being used to OFFSET the 5% world production declines which is 4 MILLION BARRELS A YEAR. Now that oil prices have plummeted so much…..these future projects will be postponed and SUPPLY WILL DROP even further.
Those who say this is a WORLD DEFLATION are using ANCIENT and LOCAL INFORMATION as a GUIDE. ENERGY, AGRICULTURAL, BASE METALS and PRECIOUS METALS are still in a LONG BULL market. People who have been fooled by the DELEVERAGE not DEFLATION will feel FOOLISH when they realize they SOLD OUT on one of the best investments of a LIFETIME.
I totally disagree with your suggestion to switch from gold to silver. I believe the silver to gold ratio is going to 125:1 in this current environment. People may think that is crazy, well we are in crazy times. The big problem with silver is that it is viewed as a industrial metal and with a global slow down or recession, industrial usage will slow. Although I agree with that statement. One has to factor in as a global recession occurs mine production of zinc, copper and other base metals will slow substantial also. Since silver is mostly a by-product of those metals, the supply side of the silver equation will drop substantial also. Not to mention pure silver miners HL, CDE and others will slow production and expansion projects. Which we all know can’t ramp up on a moments notice when things turn around. So having said that perception is reality, the perception is that silver is a industrial metal and the demand side will slow down, hence the price drop and increasing silver to gold ratio. Personnally I believe the investment demand will more then out weight the industrial drop off, however we all know silver is not trading to much on fundamentals these days. I see silver moving back down to the $7.00-$7.50 before years end. Like I said before silver analysts and so call experts have been dead wrong on silver over the past six months basically and especially the last few months. Investors have lost alot of money listening to their opinions and recommendations. I would imagine this post will get the hornets agitated.
I think its important to keep in mind that there truly ARE deflationary forces at work. We can now buy real estate, autos, consumer durables, and now even fuel at much lower prices than just a short time ago. General CRB(oil) malaise killed silver yeserday again IMHO.
The main question is whether or not this is the real deal. I’d say ABSOLUTLY NOT! I’d like to call it a “deflationary bubble”. Haven’t you guys throwing in the towel seen the recent money supply charts? To the moon!
People are over compensating(panic?), thats all.
Lower oil, less oil revenues, less petro-dollar recycling into treasuries, higher treasury yields, lower growth, lower the price of oil,…
forwill: your “deflationary bubble” idea is interesting to say the least. let’s see how it turns out.
SRS: is there a peak oil? peak gold is believable. Even if peak oil is a fact, can we still say ‘peak energy’. I mean wouldn’t the market throw in alternative energy solution at some high oil price? i don’t know what at this moment - maybe 10-20 years down the line could solar cells become v.cheap?i am guessing….
SilverX: your Ag:Ag ratio of 125. improbable. why? Both SLV & retail demands, both investment demands, are tight. They are in fact diverting available silver to SUA. but then as you say, anything is possible.
retail silver in germany:
people are paying at ebay up to 18 euros / 24 dollars (standard mark up was 25% on comex) for maple leaf silver coins (no singles - in mint tubes). 90% circulation coins you could buy for comex spot 1 year ago are sold for a premium over 50%. the commercial dealers have stopped any selling of standard bullion products (maples, eagles) and sell only the expensive (and now competitive) perth mint collectors crap, many have stopped their online shops for every product and are only processing old orders. and there is no bank run of the sheeple - business as usual in bank public areas. so this is only buying of a small minority stressing the gold market and drying out the silver market.
1000 oz bars are no retail silver but industrial. I am no small pocket but in terms of buying investment products there is a maximum product size of 1 kg because of p2p-tradability when reaching our greedy price goals
Comex pricing is far from reality, so Hommels entry in the bullion production market by taking delivery of comex contracts is interesting.
I hope he publishes the producer names and the serial numbers of his 1000oz bars to the public - what everyone of the new 1000oz bar owners should do - so we can compare it with the SLV 5,400 pages file of silver inventory supposedly hold by JPMorgan London Branch (LOL).
When I was flipping through some pages of this big file (they also hold Degussa bar no. 1 !) I found out that many refiners are using identical serial numbers on at least 2 bars. Does anybody know more about that topic ?
Keseri…..today we live in a LIQUID FUELS economy. You can’t TAPE SOLAR PANELS on a JET PLANE or a MILITARY TANK….it just doesn’t work. Even if you do slap a few dozen SOLAR PANELS on a VEHICLE it has to be constructed by engineers with special composite plastics with very little metal and one very LIGHT OPERATOR. There isn’t enough energy coming onto those SOLAR CELLS to create the energy in running a good sized vehcile. What took millions of years to create perfectly combined CARBON MOLECULES in a concentrated form cannot be DUPLICATED with any ALTERNATIVE ENERGY. Its called EROEI….which is ENERGY RETURNED on ENERGY INVESTED.
For example…..back when we first TAPPED into the large OIL fields in the early part of the 1900’s, we were getting 1-100 return. That is 1 barrel of energy created 100 barrels of oil. Basically just sticking a hole in the ground….OIL SHOT UP UNDER PRESSURE….all you had to do was put it in barrels and sell it. As time went on and the pressure dropped, you had to start using more energy by PUMPING it. Today HIGH TECH SOLUTIONS have been HORIZONTAL DRILLING and either WATER INJECTION or NATURAL GAS INJECTION. These have become much more expensive. The ratio now is less then 1-10.
For the sake of COMPARISON……ETHANOL has a 1-1.3 RATIO. It almost cost more ENERGY to make, produce and distribute ETHANOL than you get from the ETHANOL itself. ALL alternatives are very similar. Basically, much closer to that 1 -1 than OIL is.
The WORLD TRANSPORATION INFRASTRUCTURE today is estimated to be between $50-60 TRILLION dollars. If people think we can WILLY NILLY change over to something else quickly….they are sadly mistaken.
Regardless of the PEAKING of WORLD OIL PRODUCTION, the United States is the most VUNERABLE. We have the most wide spread SUBURBAN INFRASTRUCTURE in the world with a TOTAL CONSUMPTION of 20 million barrels day….and a DOMESTIC SUPPLY of 6 million barrels a day. This indeed is the problem.
If those folks at the G-7 do not get some kind of PLAN TOGETHER this weekend….and do not FIX THESE FINANCIAL MARKETS….in time the DOLLAR will be TOAST, and foreign nations will not take MONOPLY MONEY or TOXIC FINANCIAL INSTRUMENTS for OIL and REAL GODS. That means….our BUBBLE BARROW and CONSUME economy is over. If peope think DEFLATION will OCCUR….HAHAHAHAHAHAHA…there will be FIGHTS over SCRAPS…..my friends.
Either way…..whatever the MORONS come up with this WEEKEND, is good for GOLD and SILVER. If its a system that will in the end COLLAPSE the DOLLAR…..GOLD and SILVER are KING….if they do somehow come up with a SOLUTION…..INFLATION will be the POLICY…and again..SILVER and GOLD are KING.
People who keep thinking this is DEFLATION need to go back and live in 1930 when the UNITED STATES was the NUMBER 1 OIL PRODUCER in the WORLD…and would continue to do so for the next 50 years. Even though the USA peaked in oil production in 1971…we still were the MAIN DOG on the BLOCK.
RUSSIA survived the COLLAPSE of the SOVIET UNION because more of their people still lived in a RURAL environment and had GARDENS. The UNITED STATES is quite the opposite. We have a NIGHTMARE SUBURBAN ECONOMY and we can’t produce the OIL to SUSTAIN it. RUSSIA produces about 10 million barrels a day….and can EXPORT a great deal because they have not been as STUPID as AMERICANS who wasted all their POST WAR WEALTH on an infrastructure that now has no FUTURE.
BUY ALL THE SILVER and GOLD you can…..BUY BULK FOOD and start a garden….if you do not do those things…..you will regret it.
I am definately not the sharpest tool in the shed. Trying to figure out how this is all going to play out is giving me a headache. The TED spread, peak oil, M3, credit defalt swaps and worst of all boneheaded, illegal, governmental intervention. I’m starting to worry that at some point the government “for the greater good” will confiscate all the holdings of the GLD and SLV ETFs and pay shareholders the going price. They obviously have the power to do anything they want. Look at all the influential billionaires who lost their asses in the Bear Stearns takedown. Look at shareholders of Fannie/Freddie who have no recourse with their worthless shares while the foreign investors get US Government guarantees. I’m hoping I can get even and get the hell out of SLV soon. I’ll ride it out with my physical. Any comments on these fears?
For the ones that believe there is true manipulation in the mkt and are throwing in the towel. Wouldn’t you make tons of money shorting the mkt? If the game is set up against you, join the other side - there is your edge.
As Tom said recently: silver is now well below the marginal cost of production - it cannot remain at these levels for long without supply being choked and a floor remaining under the price. Also remember that in a deflation the dollar price of PM’s may fall (unlikely though, as people buy them up to preserve their wealth), but the relative purchasing power remains the same. So hang in there, do not give in to the chart painting con artists.
@Joe:
This is a manipulation market but its only a matter of time until it collapses by widespread ignoring of Comex pricing (the retail silver market decouples more and more), steady drying out of Comex inventories by a growing retail demand, mines behaving as Fekete proposed (only sales for cost coverage) and some rich guys taking constant deliveries directly from the refiners for setting up a new physical exchange market without paper clearing.
So whats the point in shorting this market ? You would be one of the losers in the end although the rule changing Crimex board is on your shortseller side. Its not about having paper currency but about having something of real value as wealth storage in inflationary times with growing negative real interest rates earned on your paper savings.
i am down about 30k pounds on the precious metals.now.bought 4kgs of physical gold 10 per cent premium (record price in sterling)just hrs b4 the dip on friday .bought more silver in etf friday b4 dip. my physical silver was bought at the top as well.the etfs have screwd me twice by pulling out and going in.in until confiscation this time .(only one account is up.)my mining shares in the pits.my guts wrenching.however my instinct and experience of life tells me different however.i spent 20 years in business by the 19th year i was nearly bankrupt.suddenly the market changed and in the last year i made a fortune.i hung in .
i have money in icesave(bankrupt icelandic bank) i am sick of electronic balance wipeouts .northern rock ,hbos etc.you cannot beat the physical no wipe outs there.(do not hoard cash turn it into gold or silver)these sudden drops are tree shakes.the billionaires are luring us in wiping us out then bargain hunting the bones.have faith in your instinct let them knock the brown stuff out of paper silver until their electronic balance is in the zillions then someone will wipe it for them with a mouse ,trust yourself you know you wont be wrong.
(by the way tom great work on the detailed fed fiddling and treasury drops) see they were joined by the chinooks of the ecb and boe this week.
and for the supposed inventories: is there any independent auditing of Comex inventories and those of the shortable paper monster SLV that excludes double counting of the bars ? SLV: there is only the promise of the London branch of the fascist economy construction winner JPMorgan that they hold silver. Who believes any word of those banksters any longer after the infecting of every monetary zone with their mortgage fraud papers ?
The big question of auditing silver inventories can be compared with the last auditing of FED gold inventories in the 1950s and a blahblah paper promise for 50 years of government that declared “gold bankruptcy” in 1971.
Interesting to read some of these posts - not really surprised that some investors have had enough and are getting out of the precious metals. Obviously this is the intended plan of the manipulators - and it’s working with some investors.
Look - there’s 85 million oz of silver for purchase on the Comex - that’s 85000 bars of 1000 oz silver. That’s less than a quarter of an ounce for every USA citizen and less than $1 billion dollar’s worth of silver at current prices.
I still maintain that if physical silver were for sale at $10 an ounce in coins, 10 oz or 100 oz bars, the queues would be miles long.
The ’silver bugs’ are too busy chasing small weights of physical silver that just isn’t there for sale at spot price. The way to end the manipulation is to deplete the Comex of its 85000 large bars.
Maybe Jason Hommel is making a start in attacking the Comex inventory. But a whole load of others USA citizens need to purchase a 1000 oz bar or more off the Comex. $10,000 or thereabouts is all it takes. That’s a pretty small sum for many investors.
i wouldnt mind a 1000 oz for 10000 used bar but you cant get them here in the uk.
if retail demand and the 1000oz bar - smaller retail units spread keeps above a certain level for a longer time the retail bar producers and mints and new competitors in this highly profitable market will have the time to expand their production capacity to a level that depletes every so-called inventory until the emperor shows his nakedness. we are only at the start of large public interest as rising numbers of people start realizing that the purchasing power of their fantastillion high paper savings is going to be inflated away. retail dealers sell gold and silver and mixing both PMs by the public will crack this tiny market. the “deflation” we see right now is only cash waiting to be invested plus the extremely rising central bank bailout volume pumped to fill the holes the fled waiting money has opened.
water is sucked to the sea before the big wave comes.
GermanFrank….you hit the nail on the HEAD….on Friday APMEX one of the largest BULLION dealers in the USA system went down. People could not get through on phone, and the website FREEZED up. There was a great deal of speculation and rumor spread why this occured. There was a reply from APMEX on the GOLD is MONEY blog sight. It is from the CEO of APMEX….and it is a tad long….but it shows there were THOUSANDS of people trying to BUY GOLD and SILVER….even when the price has been collapsing for the past 2 months.
Here is the reply from APMEX CEO:
A message from APMEX…..
I would like to take a few minutes to respond to the comments I have seen on this forum. First, I would like to thank everyone who posted comments on this board about this situation both positive and negative. Let me tell you exactly what happened yesterday afternoon.
As you all know, the stock market was coming off the worst week in its history and on Friday the Dow frantically went up and down in a 1,000 point range. Our phones were ringing off the hook all week, especially on Friday. All of our staff has been working overtime ? early mornings, late nights, and weekends ? just to process all of the orders and stay ahead. About 12:00PM (CST) on Friday, the traffic on our website was so overwhelming that not only were you unable to get through to us or to purchase what was already in your shopping cart, but it prohibited us from helping with phone orders as well.
I am sure that all of you remember that back in March we had a similar problem. Since then, we upgraded all of our servers, and we considerably increased our bandwidth. This was done to ensure that we didn?t experience the same problems that occurred back in March. However, these past 2 months and yesterday exceeded our wildest expectations in terms of traffic. As our inventory of products continued to shrink, more and more customers dug deeper and deeper into the pages on our website for anything that contained precious metal, including all types of US and world coins. WE literally had thousands of customers wound up opening tens of thousands of pages to find products and to try to order them. For almost 6 hours, our system stopped, started, crawled, and stopped again. Eventually it began to free back up and work efficiently about 5:30 cst. Today, many of our staffers are here processing orders, packaging them, and sorting through the paperwork backlog working to ship out orders for all our customers including the members of the GoldIsMoney forum. Our IT department was here late into the evening last night as well as here early this morning doing what they could to improve website performance.
The bottom line is that we were overloaded with orders and although we were assured that our system could handle any large number of requests, the economic situation has thrown the general public into a panic. People who have never bought precious metals before were clamoring for any products we can deliver. We have opened up more accounts on the past two months than any other period in time. Many of our orders were from people who have never bought precious metals from us before confirming what you all have already known, there is no better asset to own than gold or silver.
Let me state, unequivocally, that we do NOT and HAVE NOT ever shut down our servers when the price of any metal drops! Our entire inventory is completely hedged so we are protected against unforeseen price movements. We are happy to sell you silver when the spot price is $7 or $17 or $27 an ounce. We are happy to sell you gold or platinum or palladium at any market price. We NEVER shut down our servers because of a price movement. Our system is designed to handle very heavy traffic and while it is adequate for us during 363 days a year, there are those 1 or 2 days a year when everyone, including the general public, is trying to buy precious metals at the same time.
Again I would like to thank you for your patience and understanding during this situation and rest assured that we are aggressively looking to purchase and manufacture products for you to invest in. We are also working very hard to make certain that ordering from us is a pleasant experience for you and hope you can understand that we are in unprecedented times.
Thanks for letting me share this with you.
__________________
Scott Thomas
President & CEO
Just today, I saw a quote for 90% silver bags for $4.5 premium when they were selling for melt value a month ago. It is hard for my mind to wrap around the idea that the physical price is so much more even while the spot has continually dropped during this period. It almost makes me believe people are possibly price gouging and deliberately raising prices. I guess until a see a true free market exchange of many bids/ask (large amount of silver) at the current physical price would it be easier for me to believe that the spot price is indeed a fraud. I guess if I have such a hard time grasping this, it will be more difficult for the masses to see this and want to jump on board on the physical side too. What I’m trying to say is that for a light bulb to go on in many people’s head that silver is manipulated, they would need to see a central liquid mkt for physical prices with as close to real time bids/asks as you can get.
Lots of talk about bailing out from silver every time paper gets whacked.
Mission accomplished.
Lots of talk about the CRIMEX becoming irrelevant, defaulting, disappearing or whatever. Good arguments too.
But I doubt the banksters would give up a good thing and useful tool. Would any criminal?
A nice rally on the COMEX would restore speculative juices and bring people back in no time.
Chris w-uk, thanks for that bit of wisdom! You are so right about having to hang in there during the storm and shake outs (like this one), especially with precious metals. Most of the ?gains? in PMs will occur in the last few blinks of the eye. We are not there yet.
For me, gold is simply financial insurance rather than investment. And there is the speculative aspect of knowing when to buy and sell that insurance. Certainly silver is even more speculative and interesting but not for the short-term oriented or nervous ?investor.? This is a TINY playground filled with BULLIES.
Silver reminds me of the old saying about Brazil, ?Brazil is the country of the future - and always will be.?
Well, recently Brazil has been doing pretty well and some might argue has finally turned that joke on its head.
Professor Fekete makes a great point regarding the destruction of capital through years of cheap money. It appears this trend wants to reverse now as the world is just beginning to recognize the limits of capital destruction. Now we are seeing a massive bursting of the leverage bubble/de-leveraging.
It is premature to call this selling ? monetary deflation, as money is still FREE and expanding. This asset sell-off is a panic, a flailing grasp of air by a world drowning in leverage. A price correction in over-valued assets is natural.
So the question I?m asking is how would this transition be ?managed??
1. Will governments push the wall of zero rates/free money despite the absence of capital? = INFLATION with upside asset price reversals coming. (I?m in this camp)
2. Or will they allow/even demand rates to rise and tighten money? = DEFLATION with continued depressed asset prices.
3. Will central banks hold it together and spread the pain worldwide or will we see a breakdown in international linkages resulting in a wild spread of individual national outcomes?
Indeed the looming liquid fuels situation is a wildcard few people are considering right now. This could alter the world trade and finance paradigm.
The inside players are positioning themselves. They are shaking out and raping investors and speculators to raise cash, buying cheap, covering shorts, consolidating physical gold and silver. Looks like a giant neon sign pointing the way to me.
GermanFrank, SRSrocco,
I hope you are right about the retail market pulling in wholesale silver to the demise of the naked emperor.
Doubt it though.
The retail market will be sucking hard on a little straw, a straw all too easy to pinch now and then. Just enough big bars will come off to ?legitimize? the COMEX game. The retail market will go blue and scramble for alternatives.
The physical/paper spread will fluctuate wildly as COMEX rallies refuel speculative paper participation. It is unrealistic to expect a wildly profitable physical arbitrage/business to last long. Either the straw gets pinched or the price spread disappears.
If you could control the world price of silver would you give that up easily?
If we see some weekend announcement seating the US in the back of the financial bus then all bets are off and we might indeed see the demise of the emperor. But until then I would keep a leash on my hopes and respect my enemy.
BarbarianWhoSays……I posted the reply from the CEO of APMEX….so I don’t get the credit for being right…..the thousands of people crashing the website and phone lines should prove the point.
Furthermore, I do not think in the past there has been much of a market for 1,000 ounce WHOLESALE BARS. I do know a few people who have bought some….but these have been a FRACTION. Today we find many people buying up the large 1,000 bars. These bars do not have to come from the COMEX….they just have to be taken off the market.
We also have to remember the TWO-EDGED SWORD of future SILVER SUPPLY. If we have a DEPRESSION with DEFLATION…..Base Metal Mining will be curtailed due to reduced demand. As most of you know 3/4’s of Silver comes from Base Metal Mining. This will reduce SILVER SUPPLY. Also even if we do not have a DEPRESSION but rather and Hyperinflationary Outcome, Peak Oil will still REVEAL its ugly head and future mine production of all metals will start to decline right along with the decline of world oil production. This again is BULLISH for silver.
If investors are hoping for a SKYROCKETING SILVER price tomorrow…..I would recommend more patience. There is of course a chance for that scenario to take place, if this FINANCIAL SYSTEM can not be saved…..CHINA, RUSSIA, MIDDLE EAST, and other possible countries will back their money with GOLD.
Of course those large entities who are making money on trading the SILVER BASIS……which has been rumored to be CHINA, do not want to see this nice situation to end….but believe me…..if there is no way to SAVE THIS FINANCIAL MESS……CHINA will have to save itself, regardless if they lose a lucrative silver venture..
There are no guarantees that the financial system can be fixed. If anyone has listened to ARCH CRAWFORD who has been one of the best market timers in Technical Analysis, believes this crash could take down the WESTERN CIVILIZATION. You can hear his interview here:
http://radio.goldseek.com/
Again….you have to remember, the United States has been living on EXCHANGING PAPER MONEY and TOXIC INSTRUMENTS for GOODS and OIL. Once this SORDID relationship breaks down….and it has begun……how do you EXPECT AMERICANS to trade for OIL?? We have a $50-60 Billion dollar a month TRADE DEFICIT.
Our ECONOMY has been a BUBBLE REAL ESTATE MARKET…..one that is not PRODUCTIVE…..it is a LEECH SERVICE ECONOMY only viable with INFLOWS from foreign countries. We cannot compete in this GLOBAL ECONOMY….thus….this will be our COLLAPSE.
So if people think there will be DEFLATION……think about 3-5 million barrels of oil a day YANKED from our economy and many of the IMPORTS that FILL WALMART and ETC. The only way the USA can keep this FACADE is print TRILLIONS of DOLLARS. If this does not work, our SUBURBAN ECONOMY will COLLAPSE in a speed similar to that of the SOVIET UNION.
No real WINNERS here, but physical GOLD and SILVER will be great ASSETS to have in ones possession. People have to remember, that this happened in ROME. I am steeling Arch Crawfords words….but the ROMAN ARMY was paid with GOLD. When the GOLD ran out they were paid with SILVER. When SILVER ran out they were paid with BRASS. When BRASS ran out they were paid with SCRIPT.
The United States ran out of GOLD in 1933. The United States ran out of Silver in 1967……..and now we are on SCRIPT. ROME FELL because gold was hoarded by PRIVATE HANDS…..whereas CONSTANINOPLE, or the Eastern Roman Empire lasted another 1,000 years as Constantine kept the MINT OPEN TO GOLD.
Here LIES THE RUB for our WESTERN SOCIETY. Our MILITARY will CONTRACT and in time will have to come back to our HEMISPHERE as the USA will not have the FUNDS to BULLY the world.
The world we become a much larger place.
Given that Tom mentions GSUL, and what this web-site is about, I am surprised to find the INFLATION vs DEFLATION debate played out here between the posters.
If you have not done so, please read Dr. Fekete’s article ” Can We Have Inflation And Deflation All At The Same …” on his archive site. That should hopefully help keep this topic away from here, and leave it relegated to the MSM.
“CanadaMetal” cites Bob Hoye’s silver does not do well in deflation.
For anyone, including Bob Hoye, to make this a GOOD proposition, there needs to be evidence over numerous instances.
Can anyone PLEASE show me where those recurring DEFLATIONARY periods have been these last 100-150 years?
Perhaps with the exception of 1929+, Hoyes charts are not convincing.
And please stop saying we have deflation because various asset classes’ prices are falling (you might as well ape Benny Boy and say we have an increase in deflation expectations
We would have inflation if/when money (the fiat kind of course, choose your proper measure of it) is being contracted.
As to Jason Hommel:
Despite his stated reason for selling, it does leave a sour taste behind.
I do hope it is genuine.
Why would he “attempt” tp replace his 62.500 ounces (2 prev. and current auction total) with COMEX bars?
The exchage has already been rumored to have told participants not to rock the boat or else.
The Exchange can and would “Hunt” anyone attempting this, as Nelson and Bunker can attest. And don’t believe that fully paid for contracts would make you immune. Remember the LME and copper? If they want to force paper settlement they will.
Why not get >50,000oz in 1000oz form the safer and easier route from SLV? COMEX can’t rule-manipulate there, and SLV has honored all delivery requests to date.
Finally it would be nice to see some people give up and liquidate physical at close to spot, I know one buyer of their burden. The smart money of course papers down to protect, and all you sellers should do that instead.
SRS: Your reply about peak oil was magnificent. I agree completely with
the EROEI thing. however, i was considering the future with latest research in nano-science & fusion in perspective. What these things could or couldn’t do is speculation at the moment. In the past humankind has been repeatedly bailed out by technology. and like any dumb mortal fool, i would still prefer to wear the technology tin-foil hat till doomsday. Consider this….
the depression that we are staring now had almost hit the US in ‘97-98. Wall street invented the CDO trash, Greenspan was able to inflate further & Microsoft$ came up with Windows95,98 etc. With the advent of this “industrial computing” more than a marginal impact on industrial productivity was felt. all this helped pushing the D-day by at least 10 years. Even the internet helped. This put Pretcher & many others look like assholes. (If you had met John the baptist in his times you would have said the same for him. Only the lucky few believers had faith & waited for what seemed liked ages)
Having said that, your parallel with the Roman empire is GOOD!!!!!!!!
backwardation phenomena:
there is also a practical approach of comparing INTERmarket data and not only INTRAmarket as Silveraxis argues.
according to pricing relations in normal peaceful times over the last years we can see that retail PMs have rising premiums on the big bar spot prices. PM mining shares (=deep storage PM very often in countries where there is a risk of nationalization) are trading for a deep discount what many are calling extremely undervalued.
why cant some of the smaller Asian countries just spread rumors about a massive T-bill sale. That will cause some panic selling. Meanwhile uncle Sam could simply mop up the sale with USD printed outta nothing. maybe china could help.
this will cause a steady (ok managed steady) decline in the dollar. A return to days of yore of inflation. everybody would be happy - Saudis, Chinese, Indians, Russians et al. goldilocks & some.
if the UST sale gets jerky & panicky China could come with massive buys using “loaned” brand new USD (wink wink). maybe I should talk to Paulson. Yea, I have a job offer!!!!!!!!!!!!!!!
There is clearly no panick buying into longer term T bonds. The 10-Y yield is actually up 40 basispoints sinds early october. And 50 bps higher than the mid september drop to 3.3%.
If we had such a “hyperdeflation”, would the 10-Y not rally?
there are so many analogies concerning the current situation it is untrue.however do not underestimate the combined power of the small guys.you have a small dustbin of waste at your house but go to the local dump and see the vast mountain this creates from the small bins.i havent been watching the comex but i am shocked to find out there are only 85000 bars in there.a lot of people bash hommel and butler perhaps as zealouts.but there instinct is correct though of late they just keep repeating the same lines.however repetition teachs the dog.. in the absence of not knowing what to do the best thing to do is nothing and sit tight.another rubber dead cat bounce in stocks is coming next week or two could harm ag/au.prices .there will be no single right answer.people should remember why they invested in pm.silver is a commodity with monetary qualities though demonetized for now..both an investment and hopefully a storage of wealth.gold is a storage of wealth and inflation hedge come the best form of catastrophe insurance.if prices fall much more than this silver be a no brainer but the small guy wont get it less than 15$ regardless.hommel is right to start to attack the comex directly i would buy a 5000 oz contract and sell my kilo bars off but as i live in uk there are many obstacles to trading the comex.finally i see the forum is becoming multinational lots of european input as well as us and anglo saxon.etc.its a sign of the times the message is spreading worldwide.our german friends know what the dangers are it is taught in their history books.
sorry people.just another point slightly off the thread.we as contributors to the forum should also be looking at ways of making our silver work for us.ie.are there are any ideas on silver containg solar panels.combined with silver calcium batteries as an off grid power solution for your home.this could be an example of an investment in silver with a pay back.just a thought any ideas out there.
Chris w-uk,
good point, but you mention three geographical regions of posters:
the us,
the europeans,
the anglo saxons
I thought the UK is in Europe? Should I check my map?
well of course it is in europe except the british tend to try to see themselves as something different for some unknown reason..what i really mean is that this seems to me primarily an english speakers forum.i am assuming that some of the european contributors and others from other parts of the world.are not using english as their first language.by anglo saxons i mean countries like canada,australia etc.please i am not wishing to factionolise anyone.it is good to get all peoples perspectives from everywhere in the world.i am sure there are africans.asians .russians.south americans whom may be contributors .if they can speak and write english.another point i am making is particularly as purchases of physical metals like silver we are very much prisoners of our own counrties market.for example vat on silver in uk 17.5 per cent.in germany 7 per cent.for example it would not be easy to take delivery of a 5000 oz comex contract accesible to us and canadians within reason. here in uk.
Thousands of people swamping dealers and crashing websites searching for silver and gold is noteworthy and significant, but that does not mean they are getting any - or as a group will get very much off the COMEX or other managed piles. That is my earlier point.
Would love to see the retail market supplied but instead I think it will be starved. Would love to see COMEX silver inventory drawn down by retail investment demand and the COMEX lose influence but that would be too easy.
Not convinced that swapping 1,000 oz bars between investors (”taking them off the market”) will have much effect on the COMEX pile and the influence of the COMEX.
But I will be quite happy to be wrong.
Unfortunately, the people running the show are criminals and murderers to the highest extent. We have always known it but as long as they were doing it to someone else we chose to look the other way. Now it is our turn to be ripped off.
I don’t think PM holders will ever reap the rewards of their wisdom because there will be confiscation, with a value based upon some absurd price such as Comex, while the true market price (reflected on Ebay) will be ignored.
I would convert paper assets to productive farmland or forestland or even machine tools something that produces something. Avoid the paper charade for as we have learned the rules will always be changed so that they win and we lose.
Get rid of any physical PMs owned that have a easily traceable paper trail.
Keep your stash in amounts that can be comfortably unloaded on the black market. ( All state controlled economies have vibrant black markets ours is Ebay but it won’t last too much longer.)
Read “1984 ” to see what is store for us. I hope I don’t sound too bleak but I realized back in March that free markets were dead as far as major exchanges were concerned. I didn’t listen to my own advice and now have significant losses in my paper positions whereas my farmland and physical PM are up but not for sale at any price.
The “Pussy from Pearl Street Paulson” has gone from “Mr. Free Market” to “Mr. Nationalize It” as soon as his fortune was on the line. Anything of value that can be easily stolen will be.
Get used to being poorer. Music and laughter are cheap.
I believe the time is close for default on comex.last week I withdrew all my 401 funds.I will be taking out a personel loan and get cash advances on my credit cards.I will be buying any bullion I can get my hands on even 1000 oz bars if I must. Wish me well.better yet join me.the fundamentals are so obvious it is completley insane!
CEF premium is 18.6% give or take.
Acted better Friday relative to both GLD and SLV.
Do we see a discounting of different risks here or is CEF simply less in the line of fire right now?
As I sat with my Dad (who has been around the block a few times) and discussed the bailout - he related to me that instead of giving the $700 billion to Wall Street, Banks, et al., why not give each American (approx. 300 million) each an equal share of that money. That would basically be $2 million for each man, woman, and child. This would certainly help the economy more than the current bailout. Let Wall Street, Banks, businesses, etc. go bankrupt and empower the people with that money to re-start the U.S. economy. I’m sure all Americans could care less if everyone who would go bankrupt without this bailout went bankrupt at that point.
Making every American an instant millionaire would certainly allow each to pay off their debt (mortgages, cars, etc.) and create a vibrant economic miracle more than what they are doing. As a matter of fact it’s our money anyhow so why not put it to its best use.
People say EBAY is a joke. It is not a TRUE FORM OF A MARKET. I might agree, but I will say this….normal items….junk sold on EBAY are done at a FRACTION of what it costs to buy it brand new. I bought and sold items that only went for 20-30% of their TRUE COST.
Today we see SILVER and GOLD being sold for a much higher PREMIUM than one can get from a large BULLION DEALER. But I have to say…the difference is far less than the difference from the spot price and what BULLION DEALERS are selling.
Regardless….when the CEO of APMEX, one of the largest BULLION DEALERS in the USA, said that thousands of people where crashing their website to buy gold and silver…..many of them were FIRST TIME BUYERS.
Folks this is JOE BAG OF DOUGHNUTS. As the Continued collapse of the STOCK MARKET save a DEAD CAT BOUNCE as well as the BANKING SYSTEM, more of the PUBLIC will get into SILVER. If we think the DEMAND IS HIGH NOW….watch as the MASSES start to get in…..forget about those (50,000) 1,000 ounce bars in the COMEX…..the DEMAND will WIPE out the WHOLESALE MARKET.
I also believe what JASON HOMMEL is doing by getting members to buy 1,000 WHOLESALE bars and get them turned into smaller denominations.. This kind of TECHNIQUE will SPREAD throughout the country. But I will also say….it will not take much time to WIPE out the WHOLESALE INVENTORY….and thus a DEFAULT on the COMEX is now IMMINENT.
We have to remember, BEAR STEARNS was falling apart months before its BANKRUPTCY. Those in the KNOW were quitely selling stock as they saw the CREDIT DEFAULT SWAP SPREADS increase. As more time went by this UNDERSTANDING spread to more investors and clients. Toward the end….there was a MAD DASH out. We are in the PHASE now with SILVER and GOLD……this will not take years.
Joe Bag of Doughnuts might be NAIVE and TRUSTING…..but they do have a SIX SENSE when it comes to UNDERSTANDING CRISIS. When Silver was hitting $40-50 an ounce in the early 1980’s many think Americans were suckers and buying at that price. Yes….some were….but most AMERICANS were SELLING…..they were smart enough to figure that out. Today….I believe the OPPOSTITE is taking PLACE…they are getting smart enough to know its time to BUY.
Well the silver:gold ratio is at 83.7 right now. Hoye predicted 100:1 or more a while back. Time will tell. Readers of this Blog obviously hope he is wrong.
I was talking about paper metals trading in my comment above. I just don’t want to play in a rigged game in a mafia casino where the dealer uses marked cards. So I’m not putting any chips in. That’s all.
Buy all the physical metal you want. I have some. Hope it works out.
It seems to me that waiting around for the manipulators to fail, which it seems a lot of you are saying, is a highly speculative bet, because if they don’t collapse, the price won’t go up much.
Inflation may take hold, after the deflation is over, but so far the Trillions of losses are out weighing the interventions. The Credit Dams have burst, and the liquidity is all going away.
These are just my opinion. I’ll be day-trading stocks and options, market up or down I can usually eke out some profit there. To each his own.
$700 billion divided by 300 million is only a $2333 bonanza…not a life changing amount I’m afraid. To show you the negative kind of guy I am, divide the ONE YEAR federal budget of $10 trillion by 300 million and you’ll find we’re each on the hook for about $33 thousand and growing quickly.
I still feel very uneasy holding SLV at anything 5% or so less than I can buy physical bullion for. It seems like its an easy(and profitable) pick off for the criminals in Washington. Keep up the great posts!
why is tom posting less & less scarcely when more & more is happening?
With all the metaphors flying around the media…”toxic paper”,
“clogged credit”, “poison derivatives”, etc etc., I am beginning
to think the great bailout, the cleanup…is not a job for Hank
Paulson and Treasury…by rights the whole thing belongs
at the Environmental Protection Agency. After all…you are
making the great polluter responsible for the cleanup.
Is the Treasury the right place for a Toxic Dump? The
people should rise up..”Not in my Neighborhood! should
be the cry!
EPA had the right idea back a few years ago with the great
forest fire at Yellowstone…Let it Burn!!! Its nature’s way of
clearing away the rotting deadwood..makes way for healthy
new growth. The ashes of the old burnt up junk makes
nice fertilizer for the new plants. EPA is tempermentally,
plhilosophically far more qualified to deal with the mess than the
FED or Treasury.
In the last 10 years or so, the real focus on PMs has been “americana” in desire. worldwide folks will spend ungodly amounts of dollars for sreetrods/hotrods/musclecars and treat it as precious metal! so much so that we employ TV shows to auction off used cars and motorized gadgets at 10X fold what they cost at conception. Buying and selling is emotion based. talk to elderly folks about life in america. they will reveal having lived thru troubled times of little or no money with sleepless nights worrying about tomorrows dinner. none of these folks had an overpriced , seldom used garage queen/RV parked to feed an ego. family survival got priority. sad to say the price of PMs is the direct result of folks who would rather drop dead from making an expensive car/house payment than be caught dead with gold/silver coins . that said….go ask grandpa if you should go buy a new car or instead, run the wheels off the current one and invest the difference in gold/silver. his reply should not astound you. look around. the chinese call this yin and yang. the circle will run its loop. be inside not outside of it. when you read about folks that took 2nd mortgages on the home that shelters them to invest on wall steet and gold/silver fiat future prices there is proof that the world has gone to greed. no sensible society can make cents(sense) out of non-cents(non-sense). it also wont keep some from trying.
a nice bit let go by a bbc reporter today concerning government recapitalisation of the banks in uk.rbs (royal bank of scotland uks third largest bank)raised 12 billion pounds in april 08 from its existing shareholders as of friday the bank was worth less than 12 billion in total.nice of the goverment to chuck our taxpayer money into the banking blackhole.i believe the eu and us are following the uks lead.
The Price of SILVER has been priced more to its PRODUCTION COST than rather to its RATIO to GOLD in the GROUND or its ratio to production. In 2004 the AVERAGE COST of PRODUCTION per ounce for SILVER was about $5.00. The Average cost per ounce PRODUCTION for GOLD was $300 per ounce. That is a 60-1 ratio. Thus the average price of silver in 2004 was $6.67 and Gold was $409, thus a 61-1 ratio.
Historically it has been normally priced to its GEOLOGICAL RELATION in the EARTH and that is about 15-1. Currently the USGS states there is only a 7-1 ratio in the GROUND RESERVES.
HERE are some GOLD - SILVER ratios from the website of THOMAS CHAIZE:
This ratio has varied greatly through history :
- 90 Was the ratio of silver to gold when the price of an ounce of silver was at a low in 1991. With one kilogram of gold one could buy 90 kilograms of silver.
- 51Was the average ratio of the price of gold to silver in 2007.
- 17 Was the gold / silver ratio at the time of the record gold and silver prices in 1980.
- 15 Was the official ratio of gold to silver during the great period of Bi metallism, 15 ? for France (1803), 15.68 for the USA (1800), 14,29 for England (1806).
- 12 Was the gold/silver ratio in Antiquity in Rome.
- 12.5 Was the ratio in Greece at the time of the death of Alexander the Great in 323 BC.
The ratio of production and reserves of gold and silver :
- 13 Is the ratio of world production from 1493 to 1931. For this 400 year period 13 times more silver than gold was produced.
- 8 Was the ratio of silver to gold production in the world in 2006. What is being said is that eight times more silver than gold was produced in 2006.
- 7.64 It the ratio of all production of gold and silver during one century (1900-2003).
In the 103 year period, there was 7.64 times more silver than gold produced in the world.
- 6.4 Was the ratio of the ground reserves of silver to gold in 2000.
The reason why SILVER has been RAPED of its REAL MONETARY VAUE has been due to the wonderful world of CHEAP OIL. Back in the day, most of the GOLD and SILVER ORES were highly concentrated and mined with mostly HUMAN and ANIMAL LABOR. Today the price has been KNOCKED OUT OF WACK due to the fact that WHITE MAN has found a way to MINE LARGER AMOUNTS OF ORE CHEAPER.
This will change as OIL becomes more scarce and more expensive. We cannot go back to the OLD FASHION WAY of MINING as the easy to get to and LOW HANGING FRUIT is gone. Today its GRAMS PER TON, mined and transported with LARGE EARTH MOVING MACHINES that consume DIESEL…an oil derivative.
Furthermore, because FIAT MONEY has been riding the WAVE of CHEAP and ABUNDANT OIL……there was no need to use GOLD or SILVER as money. Now that we have PEAKED in WORLD OIL PRODUCTION….the whole world economy will enter into a long contraction. This will DESTROY the MYTH of FIAT CURRENCIES and GOLD and SILVER will be used as MONEY in some fashion. Whether that is COINS, CERTIFICATES or GOLD CREDIT CARDS….who knows. But this means that SILVER will be priced more to the OLD RATIO of 15-1.
It make take time for this to take place….but as we see the EXPONENTIAL way the FINANCIAL SYSTEM is IMPLODING…it may happen sooner than later.
Antal Fekete states you cannot VALUE GOLD as a COMMODITY, and that is its SUPPLY and DEMAND FUNDAMENTALS. The Marginal Utility of GOLD is that of MONEY and not its supply and demand aspect in DENTAL FILLINGS. Many ANAL-LISTS do not understand this way of VALUING GOLD. The same mistake is made with SILVER. Most ANAL-LISTS are VALUING SILVER as just a COMMODITY….this might be the same way as VALUING HUMANS in SLAVERY.
What was a PATHETIC ASPECT of the HUMAN RACE…..by SELLING SLAVES based on their use as a COMMODITY can be seen as SHORTSIGHTED and APPALLING. Sure Humans can be used in this fashion…..their LOWEST MARGINAL UTILITY….but we know, when a HUMAN MIND is free to think, reason and create….the sky is the limit.
Many think TECHNOLOGY has been our SAVING GRACE. There is good information now that this may not be the case. Technology might have just allowed us to use RESOURCES quicker and FASTER…..As walking is healthier for us, but driving in a car gets us there just faster.
Regardless of my TANGENTS……silver will be used as MONEY again. Whether that is on a NATIONAL or WORLD SCALE, or just more local….remains to be seen. We have to remember the ENERGY it took to EXPLORE, MINE, REFINE, ASSAY, MINT and TRANSPORT are all included in way we pay for that SILVER. It cannot go to ZERO because all those aspects cost something.
The OIL ANAL-LISTS during 1999 said that the present $10 a BARREL OIL was going to $5. These Same ANAL-LISTS today are saying OIL is going down to $50 a barrel. My thoughts are……if these MORONS, TWITS and NIMWITS got it SO WORNG back in 1999, why in the HELL should we listen to their GARBAGE today. Same has HOYE who uses the REAR VIEW MIRROR VALUATION in the GOLD and SILVER RATIO.
Times….they are …..a….. CHANGING…..
SRSrocco,
I could not have put it any better. I am a fan of Matt Simmons and Ron Paul and your comments above was like a combination of their thoughts.
BTW , here in Aussie, our Government just announced it would guarantee all bank, credit union and bulding socitiy deposits and offshore bank loans made by our banks for 3 years . 3 weeks ago we were told we were light years away from the offshore credit problems!
I agree with most here that holding PM during the “deleveriging crisis ” is the way to go.
SRS thank you for sharing some great ideas. I think the production and reserve ratios are fascinating and when combined with industrial silver depletion, the gold/silver ratio could easily have overshot by a factor of 10.
Can anyone explain why cost of silver production was $5 when oil was $10-20 and now is $10-$13 with oil 5X higher? Like you said, the low hanging fruit is gone, environmental costs are higher, wages up, diesel up etc etc. One might wonder why anyone bothers to mine metals at these prices.
Inflation wins the pennant! Inflation wins the pennant! Inflation wins the pennant!
Well… maybe.
The US has been cornered into following the US. It seems to me that this posturing was all about the election and holding on until the dems won. Next meeting is to discuss the USD and it’s reserve status. UH OH!
Whew! lot’s of people throwing in the towel on silver! Are they right or is it the sign of a bottom. I’m hoping the latter because I’m not throwing in. Deflation or inflation? Got to bet on inflation-big time. The government is committed to it and what’s so hard about printing money? Although they do have their work cut out for them. Tom’s helicopter drop analysis is quite good and that’s what they are going to do. But now we have the big deflation scare and people are panicking out of stocks and paper silver but panicking into physical gold and silver. It’s quite clear the powers that be are restricitng the public’s access to physical. Why would they do that in a deflationary scenario? I don’t think they would. This is their alternative to confiscation, to limit the availability of retail PM and let them trade as coins at a premium. They’re very good at manipulating the stock and commodities markets so that’s what they will rely on.
If it is inflation it will be a big one and then what?- a panic out of paper money into anything especially gold and silver.
I mean does anyone think it is beyond our money masters to create a panic out of stocks-so that they can buy up the good ones cheap, followed by a big inflation( the big banks get the $ first so they have 1st crack at the cheap assets) and a panic out of cash.
After all why did Hank and friends create such a high fear level?-that is not what our leaders should do. Clearly they knew it would lead to a panic out of the stock market. Ergo it was intentional.
We are being manipulated by fear. I set myself up for the big inflation and I am holding tight. I’ll go with Sinclair and stay the course rather than jump into the fire. I’ve taken some big losses on my PM shares and slv but I have a big core holding of physical PM and I am going to sit tight.
If the world starts avoiding US treasuries the inflation and panic that will ensue will be mind boggling.
Good luck to you all and thanks for all the info and insights.
ROB….do not worry…..at least AIR is STILL FREE. In a BATTLE when things look bleak, there are those who do not have the COURAGE or STOMACH to continue. Usually, those who become EXCELENT GENERALS have STEEL BALZ, HIGH INTELLIGENCE, and COURAGE. STONE WALL JACKSON comes to mind as a General for the Confederacy. He became famous for STANDING AGAINST THE ENEMY at all ODDS.
Today….we do not have to deal with BULLETS, BLOOD, DISEASE or being SHOT from DESERTION. All we have to do is BUY our BULLION and wait for the SMOKE to CLEAR….is this really that hard….or would you rather be 100 yards away from 1000 men with MUSKETS firing hot shot ripping through your flesh?? When you think of it that way….sounds kind of childish to be AFRAID of a little selling pressure, now doesn’t it?
Those who are best prepared do not care about INFLATION or DEFLATION as those words are just SEMANTICS. The world ahead is unlike any world we have lived in the past.
Lehman at the Center
..sellers of protection will need to make cash payments of more than $270 billion, BNP Paribas SA strategist Andrea Cicione said in London….
Read more:
http://www.2000wave.com/gateway.asp
Rob, great attitude. Thanks for that post.
Calm detachment is the way forward.
It seems most of us posting here are of similar mind regarding the big picture. We all have our piles of PM and some still play with paper. All of us want to understand what has happened, what is happening and most importantly anticipate what will happen as we stumble through this transition.
With that in mind, this weekend?s meetings should make for fascinating theater.
Yes, I know the G7 are all overspending posturing deadbeats. To call these ?rich? countries is bad humor. But even for those of us whose minds are all made up regarding the state of the world, money etc, one has to be fascinated to see how this actually plays out politically and how power shifts. I will be eager to identify any ?tells? in the behavior, actions, inactions, levels of cooperation etc. I look forward to the insights posted here.
Inflate or die. That is the way of the world governments. The last week should lay the inflation/deflation question to bed. I haven’t seen the money supply drop. Have you ?
SRSrocco says:
“We cannot go back to the OLD FASHION WAY of MINING as the easy to get to and LOW HANGING FRUIT is gone.”
And that is the crux of Dr. Fekete’s argument. The mining companies have been raping their own deposits in this way for years, thus their shareholders. Not a ONE of them understands the concept of ore conservation, whereby you always mine the lowest grade that is just economical to mine. Your production capacity is always geared to 100% of ore processing capacity, thus the lower the spot, the less is produced, as less refined material results.
They do the opposite, depleting the best at the lowest prices.
A few thoughts on foreign countries supplying us with all the
goods and services we want in exchange for our fiat dollars…
Question of will they be willing to continue this.
The first fact to be realized is that the United States is predatory Empire…
It is not much different in basic dynamics than the Egyptians,, the
Babylonians, the Assyrians, Carthaginians, Romans of ancient
times. For more recent comparison there are the Spanish, French
British experience of the past 500 years. These systems were
all sustained over their effective lifetimes by overwhelming
military power.
We spend more on our military annually than the rest
of the world combined…that will be the decisive factor in this
crisis. When the thin glove of fiat dollars finally rots off
Uncle Sam’s fist…the real “backing” of the dollar will become
apparent…the mailed fist of the military. Who needs Gold
when you the Fleet? Fiat is in truth, force. You will accept
it because the one with the biggest guns says you must. That’s what is ultimately at stake in the World “crisis”…I do have a hunch that this cannot be resolved without war in some form.
Well, lets hope that if and when “The Empire Strikes Back”
our generals and admirals prove to be more competent
in use of the “currency” of their profession than have been
the money men in use in the currency of theirs.
BTW,
Peak Oil may not be quite as imminent as we have all been led to believe.
Just the Bakken alone some reckon to hold as much as 2x the oil Saudi Arabia claims to have.
And that does not even include a drop of the oil long purported to have been found adjacent to Prudhoe in the mid 70s, which is claimed to surpass the 100bb mark.
That would certainly push back peak oil.
How could this be?
Well, our West Point custodial gold is a perfect analogy.
It has been demonstrated by people in the know, that the only swap ever admitted to by the powers that be (other than the Mexican 80s bail out), was one done with the Bundesbank.
Had Eagle-melt gold bars with their coin-grade alloy hit the market, every participant would have know that it was US gold from West Point. Those bars are impossible to sell anonymously (short of refining of course, but then the processor would know).
Instead we swapped our gold for BuBa gold, which in turn was sold for the US, giving the BuBa claim on our gold up the Hudson.
Many criticize us for that, and illegally selling our patrimony.
Yet, did we do that? Not really because in this case, posession is 100% of the law. We still have our gold, and the BuBa is out of its gold. True, ours is legally encumbered of course, but that is nothing a little President to Chancellor talk can not cure. It will never be demanded, so no need to even default.
THUS, we suckered someone else into tossing out their metal first, but for our purpose. Last man who has any left is the winner. I say “first”, because perhaps even that is no longer there, who can tell, lacking audits?
In any case, the game is to get others to deplete theirs first.
And THAT is the game here with these above pools of oil. Why dig into them now, when you can sucker everyone into depleting their reserves first, then when all that is gone (the peak of the officially anounced world quantity), you are the last man standing and you will dictate the conditions of sale (of which price is just one part).
Sound far-fetched? Google BP-Amoco’s Alaskan work-force pastor’s memoirs to find out the details.
keseri: As I mentioned a number of times before, if your comment has 2 or more links than it is automatically flagged for moderation as possible spam. I’m not always attached to the computer by ball and chain so that means the flagged comment can get hung up for a while.
murray teynnensweig….you bring up an interesting point about the Bakken Oil Field. For those who do not know where the BAKKEN FIELD is located, it lies beneath Montana, North Dakota, and Saskatchewan in Canada. There has been a great deal of rumor of how much Oil is actually there in the Bakken Field.
According to Wikipedia:
The flurry of drilling activity in the Bakken, coupled with the wide range of estimates of in-place and recoverable oil, led North Dakota senator Byron Dorgan to ask the USGS to conduct a study of the Bakken’s potentially recoverable oil. In April 2008 the USGS released this report, which estimated the amount of technically recoverable, undiscovered oil in the Bakken Formation at 3.0 to 4.3 billion barrels, with a mean of 3.65 billion.[11] Later that month, the state of North Dakota’s report [12] estimated that of the 167 billion barrels of oil in-place in the North Dakota portion of the Bakken, 2.1 billion barrels were technically recoverable with current technology.
http://en.wikipedia.org/wiki/Bakken_Formation
Back in the early 1960’s some of the top OIL COMPANIES did drill in the BAKKEN FIELD. What they found was oil….but the problem was, it was oil at the time not ECONOMICAL to RECOVER. Most Oil fields in the USA were pumped by Oil Derricks. The Bakken Formation is Oil trapped in Shale.
Now that the price of OIL has risen, companies such as XTO, Marathon, EOG Resources, Northern Oil, and CLR Resources are exploring and drilling in the Bakken Field.
http://oilshalegas.com/bakkenshale.html
Most of the Production of the Bakken Field comes from North Dakota. As of recently, the state produces about 165,000 Barrels a day. The United States Consumes about 20 million barrels a day. That is about 0.8% of our Consumption….not quite 1%. Yes, there can be more pumped out of the Bakken. But here is the problem.
The Bakken Field has some UNIQUE PROBLEMS. The Oil is locked up between formations of Shale. One has to use Horizontal Drilling along with a system that Produces Heat to extract the Oil. Probelms arise when Heat is injected into the Shale….the Shale expands…puffs up….and the oil gets trapped in the shale. It is a very expensive and difficult field to produce. Furthermore, many of the wells drilled have not produced any oil whatsoever.
To compare the BAKKEN FIELD to the GIANT GHAWAR FIELD…the ELEPHANT of the world is like comparing a 150 Pound Gold nugget to a Small Mountain containing 150 Pounds of Gold. GHAWAR had the best OIL FIELD STRUCTURE in the world. It was literally a SEA of OIL underground. All one had to due was Stick a STRAW in it and the OIL just GUSHED OUT…for years. The Bakken’s OIL is locked in a MAZE of SHALE with POOR FORMATION and EXTREME DIFFICULTY to EXTRACT at HIGH COST.
If you figure the real USGS RECOVERABLE AMOUNT of 3.5 BILLION BARRLES…that is a 6 month SUPPLY for the United States.
Many people want to believe in the FAIRY GOD MOTHER and the TOOTH FAIRY…..its nice to believe in FAIRY TALES…as they are easier to SWALLOW than REALITY.
Why do you think AMERICAN OIL COMPANIES are spending a BILLION DOLLARS on constructing RIGS like THUNDERHORSE, the largest OFF SHORE OIL PLATFORM in the WORLD to start DRILLING the GULF of MEXICO in 2009, rather than DRILL INLAND in NORTH DAKOTA?? Do people actually BELIEVE these OIL COMPANIES rather DEAL with HURRICANES, SALT WATER, HIGH WINDS and THOUSANDS of FEET OF SEA WATER than DRILL on land where it is SAFE?????
Sometimes I wonder why people want to believe a FAIRY TALE rather than except REALITY…and that is….OUR WORLD AS WE KNOW it is COMING TO AN END….PEAK OIL IS HERE.
Yes, I have heard of the MINISTER who claims there is enough OIL in ALASKA to supply the country for 100 years…unfortunately….if it were true…..an AMERICAN OIL COMPANY would have exploited it already. Do you know the SAYING….when something is TOO GOOD to BE TRUE….it usually is TOO GOOD TO BE TRUE.
People at one time thought the EARTH WAS FLAT…..it took time, for science to be SPREAD WIDE enough before the typical JOE BAG OF DOUGHNUTS believe it was not true. The same thing will take place when the public realizes PEAK OIL has COME and GONE….the difference is….learning the EARTH WAS ROUND, didn’t change much in the way people lived. But Peak Oil…..will.
Murray that is not far fetched at all. In fact it makes the most sense. I always thought the real play when we let our oil prod. decline was becuase we could still buy all the oil we wanted with paper dollars and keep ours in the ground.
SRS: Why are gold & silver dependent on oil to establish themselves as money?
There is a slight but significant confusion as to what constitutes money.These days its rate of evaporation is making it sound ephemeral. When Greenspan was asked recently what constitutes money? He answered “I don’t know”. A U turn obviously from his Ayn Rand days. and there were rumors that he took his retirement entitlements from the govt. in gold.
OK what is money? And is gold & silver money? I don’t think so. Why? For the simple reason that they aren’t legal tender. Even historically, you had to surrender your gold to the king’s treasury following which his royal highness would issue gold/silver coins after discounting a cut called the seigniorage . These royal coins were money & legal tender. When the king changed the coins were changed. This point is important because it is important to realise that there IS ALWAYS a fiat component to money. The other component that the Keynesians & Marxists have usurped is the gold component.
Money & its correct understanding is so imp because everything else is valued w.r.t money. even today goldbugs talk about the dollar price of gold - even as they say that the USD is toast. this is in fact an ode to the fiat component of money. every goldbug probably has a secret exit strategy for gold/silver.
having said that i will agree with anybody that gold is STORE OF VALUE. and it has wonderfully maintained the standard of living of the few goldbugs throughout history.
Now coming to the question of its relation with oil. I admire all your spirit. but if you ask me & if you pay attention to your previous posts you will agree that OIL does not figure ANYWHERE in this traid of MONEY, FIAT & GOLD. To say that the US depended on OIL to issue & propagate its SCRIPTS is in error. I mean, did rome have OIL when it issued unlimited scripts? NO. If OIL is not existing, US would have invented it to propogate the USD. What caused the Roman empire & the US to propagate their paper currencies was MILITARY POWER or FIAT.
All this extraordinary bias for oil stems from the western notion that if you subtract oil from civilization you will end-up being a caveman. SORRY, I beg to disagree. If you take away all the oil from all the earth still vibrant, functioning cultures can exist. The Egyptians, the Romans, the Indians, the Chinese lived & prospered for centuries without OIL. Ok you will miss your pizzas, burgers, discos & gas guzzling SUVs but mankind can still survive. Ok most of mankind would get wiped out because of a significant fall in mother earth’s carrying capacity [food shortage because of lack of chemical fertilisers which are gas produced].
but with a little luck & some gold you can see the other side of Armageddon. And who knows you - might like it too.
The “spot price” is real, deals are done in the wholesale market for physical delivery every day on it. See http://goldchat.blogspot.com/2008/10/price-finding-mechanism.html for further info.
Keseri…….let me clarify. I did not say that Silver or Gold depending on Oil for its worth. What I have said, is due to the CHEAP OIL FIESTA over the past 100 years, Precious Metals have been mined at a much cheaper rate as they have in the past. It took a great deal more HUMAN and ANIMIAL LABOR to mine GOLD and SILVER in the PAST than it did today. What it took the ROMANS to mine an ounce of GOLD in HUMAN LABOR was much greater than the HUMOR LABOR TODAY. It has been transfered to CHEAP OIL. One fella driving one of the LARGEST DUMP TRUCKS in the world supplying SILVER or GOLD ORE to a LEACH PIT or whatever can handle a much greater amount than HUMANS were able in the ROMAN TIMES.
I was using this to convey why SILVER has been priced CHEAPER. Historically it has been tied to a 15-1 RATIO with GOLD. Today because of the NOTION of “ECONOMIES of SCALE”, silver is being produced at a much cheaper rate today as MINES are able to PROCESS BILLIONS of TONS of ORE……pulling out silver in GRAMS PER TON. This will not last as PEAK OIL has arrived.
As for you ASSUMPTION that I believe we are heading back to being CAVEMEN DAYS……I believe, that is your CONCLUSION and not mine. I never said we would head back to being CAVEMEN. Unfortunately, even if we wanted to, we don’t have the TYPE OF TEETH or DIGESTIVE TRACT that the CAVEMEN had for chewing more RAW MEAT and GRAINS.
What is more likely to me is a more LOCAL HIGH TECH lifestyle when the DUST SETTLES. That is…..ONLY IF HUMANS take the HIGH ROAD. If we take the LOW ROAD…..you can see us heading more toward what happened to ROME in the following 1,000 years after its collapse….and that is the DARK AGES. Today ……the notion that Humans will always take the HIGH ROAD….has been proven in the PAST, not to be the case.
As for you statement that GOLD and SILVER are not MONEY….it is not LEGAL TENDER….might be true in the MINDS OF SOME MEN….but not in GODS terms. God does not have LEGAL LAWS….just LAWS of the UNIVERSE. All FIAT currencies do not last. They all head to ZERO. Because Gold and Silver is not used as wide spread LEGAL TENDER today does not mean that it is NOT MONEY. It just means that a FEW CRAFTY individuals figured out a way to RAPE the PUBLIC by HOODWINKING them from believing otherwise. You cannot RAPE the PUBLIC as easy on a GOLD STANDARD then you can on a FIAT.
Gold and Silver have been money for thousands of years. Because it is not money for the past several decades does not mean it is not money. It has been a TEMPORARY DELUSION.
Lastly, Jim Sinclair mentioned to the CEO of Bear Stearns back in 2000 that the DERIVATIVES MONSTER including CDS, will destroy his company and the FINANCIAL SYSTEM. The CEO did not listen to JIM SINCLAIR as the LURE of EASY PROFITS were too GREAT.
Furthermore, Matt Simmons, Richard Heinberg, and James Howard Kunstler to name a few have been warning about PEAK OIL and the END of SUBURBIA for several years now. Those who listen, make changes…and prepare will be much better off than those who wait until the end of this decade when the MAD EXODUS out of the SUBURBS begins.
US Pilots have an emergency pack if they have to crash land. And in that pack contains a CUBE of GOLD. Why??? Because if they need to bribe someone or need someones help in a foreign country…..ALL PEOPLE in the WORLD KNOW GOLD IS MONEY.
CLARIFICATION of last post….I ended it by saying ALL PEOPLE know GOLD is MONEY….I meant to say…..just about ALL PEOPLE….there are some INDIGENOUS TRIBES that might not, but besides that FRACTION…most people do.
Lastly, I type very quickly to get my ideas down. I do go back and try to edit words, spelling or grammer. But it is not HIGH on my list. I rather get the point across than WORRY if some of my words are incorrect.
Tom
All markets up, Paper Gold and Silver down big,dollar index down…….the ‘Sonz of B***z’s are fighting to the death! .
Bullion shortages reported in Austria and Germany.
Seriously any damn fool who still trades gold and silver futures continues to be taken to the slaughter house run by House Of Morgan namely JPM!
TODAY MONDAY 13 OCT 08
Redemptions……margin calls……hedge fund liquidations across the board but only for gold and silver……BULLS**T!
I’ve heard of gold being the thermometer of the financial system and gold lease/forward rates being the barometer of bank /interbank and credit market stress, but what bunch of bull….. with so many diclocations and broken mechanisms within the financial and monetary system?
So just imagine your driving along and you notice smoke is pouring out the bonnet/hood of your car but the temperature gauge level needle is falling…..indicating cooling….. clearly your engine temperature gauge is not just faulty but has been wired by design to give confidence to the driver that all is well…..this example reprents the gold futures market and it makes me wanna puke!
FOR THOSE who are PANCKING I give you words from BILL MURPHY of the GATA….Gold Anit Trust Action Com:
We know demand for gold and silver will soar in the future as supply becomes more restricted ? even mine supply is on the wane. So the prices for gold and silver in the real world are not going to come down in the months, even years ahead ? which means investors can lock in 20%+ profits by taking delivery of gold and 50% to 100% profits in silver. All you have to do is take delivery and then offer the gold and silver for sale in the free market at prices below what people are able to buy the stuff on EBAY, etc.
Emails from his Readers:
Bill, I talked to the chief broker in charge of the precious metals dept. of one of the largest metals banks in the Netherlands this morning. He told me that his bank had no gold in the vault for the first time in one hundred and forty seven years of its history! He had clients waiting in line for bullion coins of any type, and for the first time in his career, he had No supply! None, zero, zip, nada! I called a broker in West palm beach, fl. and he confirmed he also had no supply! He also said he had funds of two and one half million dollars in his acct. from one client, and could not find product to fill his order! Bewilderment is a term he used! He asked me how silver and gold could be so cheap in the markets when there is no supply! That discussion I will have with him another day! Paul
This as well:
CARTEL CAPITULATION WATCH
Chuck checked in?
The NY Times remains the ultimate barometer. At the very top of the market, it had a full separate section on New York and the “New Guilded Age.” Today, it doesn’t have a major headline on the crisis. The lead article is on North Korea and a San DIego restaurant that bans tipping. It is the pinnacle of cluelessness. I think we are going down to about 5,000 on the Dow, perhaps a little lower. They must stop trading before this move is done and it might be this week judging by the utility and Goldman charts. It is so significant that Goldman was down almost 30% on Friday and no one noticed. Chuck?
Bill:
It’s incredible that every bit of advice is to wait this out or buy because we are near or at the bottom. Still no fear except that blowhard Cramer. Tip of the hat to him. They are going to have to close down everything and try to put in some kind of plan to stop gold. Maybe it will be that everyone who owns gold must sell it at $100 to Goldman. It’s coming down the track. C
And for his fourth BOW, my good friend Chuck Cohen for an encore, who has been so prescient about the stock market?
Bill:
I thought I would dig up a comparison of the past 5 days to show how differently the bond market has reacted to the past 5 days of intense selling in the market. Note from the charts that from its bottom, 10 year bond rates have actually gone up about 40 basis points in the face of a 1500 drop in the Dow (actually 2200 points if you go to the bottom of this Friday.
Take not also that the Utilities appear to have fallen off a cliff during this same time, from 425 last Friday to an amazing close of 325 this Friday, and with an intraday low of 290 or so. That means instead of rising during this crushing deflationary environment including an enormous fall in oil, the conservative and low-beta utilities have dropped almost 30% and this in just 5 days. This total disconnect between bonds and the utilities a shocker, and hints strongly that something unthinkable is coming down the pike.
The other thing I saw is, that unlike an impending crash bottom, the volume in the Dow stocks has not increased as would be expected. As you can see in the one month Dow chart, the volume is actually less than what it was last month when the average was over 2,000 points higher. This is very unusual and very scary behavior. I would suspect that the bottom whenever and wherever it comes will be accompanied with amazing volume with perhaps only the world governments being the buyers.
If you are reading and listening to the mainstream coverage of what is happening, you can tell that there is still absolute calm and courage by the pundits. Almost all, except Jim Cramer surprisingly, continue to advise invesors not to panic and to stay the course because the bottom is just around the corner. They don’t want you to miss out on the first fruits of the bounce.
If you will access the front page of my consummate mainstream barometer, the New York Times (nytimes.com), it is clear that the bottom in terms of distance is far away although very likely not in terms of time. Today there seemed to be more coverage on the San Diego restaurant that prohibits tips and on the style issues in Paris than there is on this historic event. It is like watching a Tsuanami coming at you and saying “What a huge wave!” Our once vigilant, great nation is totally lost and absolutely unprepared for what is about to hit?
This frightening event is not going to announce itself to the yet cheery mainstream financial bloggers. You can be certain that the day the bomb really hits home, it will be headlines seen only at historical events, and it will be even featured on the clueless Times. Chuck ikiecohen@msn.com
The TIDE is changing…..PHYSICAL BULLION is now starting to set the price. The reason why SILVER is up today is because BILL MURPHY has told people to buy SILVER CONTRACTS and take DELIVERY:
My best advice is for the right thing to do now is buy a December silver contract and wait for delivery. It would give them time to make decisions. At $10 silver, it would cost $50,000. They can open an account right away with a brokerage, if they don’t have one. Dont know what the margin is now, but will probably have to put up around $5,000, or so … paying $50,000 when they get delivery.
Why do I like this? Because to buy silver in other forms now costs at least 50% more than that.
AS TOM SAYS….ITS THE END OF THE WORLD AS WE KNOW IT.
SrSrocco,
NYTimes as a barometer!…….anyway, just in…. Cnbc presenters rejoiced…. gold is down!…….the fear trade is over!…..lower lows!….. they are trying their very best to install confidence to the public masses.
Hoarded gold and silver has no chance of coming to market at these pathetic prices i personally beleive gold and silver will bypass the futures market and we will see the beginings of a international blackmarket for the PM’s.
SRS: I still don’t get how Oil has made it more cheaper to mine ONLY silver in gold terms [ if you care to use this as a metric for assessing production cost]. Yes labour productivity for production for Ag has dramatically improved. But I fail to see how ONLY cheap OIL could be given credit for it. The real credit goes to TECHNOLOGY. In fact, two technologies - 1)froth flotation for ore beneficiation & 2) cynaide leaching have reduced the cost of Ag & also Au production [in gold terms] significantly.
to paraphrase another example, Napolean’s wife was using Aluminum rings for bracelets instead of Ag/Au/diamonds since Al was more expensive to produce in those days. Bayer-Hall-Heroult changed that and that too before the advent of cheap oil & mass transportation. these guys had cheapened the metal production in the mid to late 19th century much before Ford was changing his nappies. So where does Oil figure.
Also I fail to see the relation between cheap oil & Ag:Au ratio. In fact, it is often cited that gold is a store of value and there is a constant relationship between all commodities vis-a-vis Gold. Thus, Au:Oil, Au:Cu etc are quite fixed so much that traders have been using it for arbitrage whenever the ratios deviate. How come oil has only influenced only silver.
btw, your oil centric universe ignores another low EROEI fuel - COAL.
SRS: You nailed it on your analysis of Ag holding itself while gold sells off today? btw is it possible that Ag has bottomed ALSO because of the marginal cost of production being equal to the current market price. Whatever maybe the reason, Ag is the ROCK BOTTOM NOW!!!!GOBBLE GOBBLE GOBBLE.