Posts tagged silver
China Is On A Debt Binge And A Buying Spree Unlike Anything The World Has Ever Seen Before
When it comes to reckless money creation, it turns out that China is the king. Over the past five years, Chinese bank assets have grown from about 9 trillion dollars to more than 24 trillion dollars. This has been fueled by the greatest private debt binge that the world has ever seen. According to a recent World Bank report, the level of private domestic debt in China has grown from about 9 trillion dollars in 2008 to more than 23 trillion dollars today. In other words, in just five years the amount of money that has been loaned out by banks in China is roughly equivalent to the amount of debt that the U.S. government has accumulated since the end of the Reagan administration. And Chinese bank assets now absolutely dwarf the assets of the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England combined. You can see an amazing chart which shows this right here. A lot of this “hot money” has been flowing out of China and into U.S. companies, U.S. stocks and U.S. real estate. Unfortunately for China (and for the rest of us), there are lots of signs that the gigantic debt bubble in China is about to burst, and when that does happen the entire world is going to feel the pain.
It was Zero Hedge that initially broke this story. Over the past several years, most of the focus has been on the reckless money printing that the Federal Reserve has been doing, but the truth is that China has been far more reckless…
You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!
Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!
I was curious to see what all of this debt creation was doing to the money supply in China. So I looked it up, and I discovered that M2 in China has grown by about 1000% since 1999…
So what has China been doing with all of that money?
Well, they have been on a buying spree unlike anything the world has ever seen before. For example, according to Reuters China has essentially bought the entire oil industry of Ecuador…
China’s aggressive quest for foreign oil has reached a new milestone, according to records reviewed by Reuters: near monopoly control of crude exports from an OPEC nation, Ecuador.
Last November, Marco Calvopiña, the general manager of Ecuador’s state oil company PetroEcuador, was dispatched to China to help secure $2 billion in financing for his government. Negotiations, which included committing to sell millions of barrels of Ecuador’s oil to Chinese state-run firms through 2020, dragged on for days.
And the Chinese have been doing lots of shopping in the United States as well. The following is an excerpt from a recent CNBC article entitled “Chinese buying up California housing“…
At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It’s a rebirth for U.S. construction, but the customers are largely Chinese.
“They see the market here still has room for appreciation,” said Irvine-area real estate agent Kinney Yong, of RE/MAX Premier Realty. “What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.”
Apparently a lot of these buyers have so much cash that they are willing to outbid anyone if they like the house…
The homes range from the mid-$700,000s to well over $1 million. Cash is king, and there is a seemingly limitless amount.
“The price doesn’t matter, 800,000, 1 million, 1.5. If they like it they will purchase it,” said Helen Zhang of Tarbell Realtors.
So when you hear that housing prices are “going up”, you might want to double check the numbers. Much of this is being caused by foreign buyers that are gobbling up properties in certain “hot” markets.
We see this happening on the east coast as well. In fact, a Chinese firm recently purchased one of the most important landmarks in New York City…
Chinese conglomerate Fosun International Ltd. (0656.HK) will buy office building One Chase Manhattan Plaza for $725 million, adding to a growing list of property purchases by Chinese buyers in New York city.
The Hong Kong-listed firm said it will buy the property from JP Morgan Chase Bank, according to a release on the Hong Kong Stock Exchange website.
Chinese firms, in particular local developers, have looked overseas to diversify their property holdings as the economy at home slows. Chinese individuals also have been investing in property abroad amid tight policy measures in the mainland residential market.
Earlier this month, Chinese state-owned developer Greenland Holdings Group agreed to buy a 70% stake in an apartment project next to the Barclays Center in Brooklyn, N.Y., in what is the largest commercial-real-estate development in the U.S. to get direct backing from a Chinese firm.
And in a previous article, I discussed how the Chinese have just bought up the largest pork producer in the entire country…
Just think about what the Smithfield Foods acquisition alone will mean. Smithfield Foods is the largest pork producer and processor in the world. It has facilities in 26 U.S. states and it employs tens of thousands of Americans. It directly owns 460 farms and has contracts with approximately 2,100 others. But now a Chinese company has bought it for $4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America.
For many more examples of how the Chinese are gobbling up companies, real estate and natural resources all over the United States, please see my previous article entitled “Meet Your New Boss: Buying Large Employers Will Enable China To Dominate 1000s Of U.S. Communities“.
But more than anything else, the Chinese seem particularly interested in acquiring real money.
And by that, I mean gold and silver.
In recent years, the Chinese have been buying up thousands of tons of gold at very depressed prices. Meanwhile, the western world has been unloading gold at a staggering pace. By the time this is all over, the western world is going to end up bitterly regretting this massive transfer of real wealth.
Unfortunately for the Chinese, it appears that the unsustainable credit bubble that they have created is starting to burst. According to Bloomberg, the amount of bad loans that the five largest banks in China wrote off during the first half of this year was three times larger than last year…
China’s biggest banks are already affected, tripling the amount of bad loans they wrote off in the first half of this year and cleaning up their books ahead of what may be a fresh wave of defaults. Industrial & Commercial Bank of China Ltd. and its four largest competitors expunged 22.1 billion yuan of debt that couldn’t be collected through June, up from 7.65 billion yuan a year earlier, regulatory filings show.
And Goldman Sachs is projecting that China may be facing 3 trillion dollars in credit losses as this bubble implodes…
Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008, Fitch Ratings estimated in September. By the end of 2017, it may climb to as much as 22 percent and “ultimately overwhelm borrowers.”
Meanwhile, China’s total credit will be pushed to almost 250 percent of gross domestic product by then, almost double the 130 percent of 2008, according to Fitch.
The nation might face credit losses of as much as $3 trillion as defaults ensue from the expansion of the past four years, particularly by non-bank lenders such as trusts, exceeding that seen prior to other credit crises, Goldman Sachs Group Inc. estimated in August.
The Chinese are trying to get this debt spiral under control by tightening the money supply. That may sound wise, but the truth is that it is going to create a substantial credit crunch and the entire globe will end up sharing in the pain…
Yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing’s relentless drive to tighten the monetary spigots in the world’s second-largest economy.
The higher yields on government debt have pushed up borrowing costs broadly, creating obstacles for companies and government agencies looking to tap bond markets. Several Chinese development banks, which have mandates to encourage growth through targeted investments, have had to either scale back borrowing plans or postpone bond sales.
This could ultimately be a much bigger story than whether or not the Fed decides to “taper” or not.
It has been the Chinese that have been the greatest source of fresh liquidity since the last financial crisis, and now it appears that source of liquidity is tightening up.
So as the flow of “hot money” out of China starts to slow down, what is that going to mean for the rest of the planet?
And when you consider this in conjunction with the fact that China has just announced that it is going to stop stockpiling U.S. dollars, it becomes clear that we have reached a major turning point in the financial world.
2014 is shaping up to be a very interesting year, and nobody is quite sure what is going to happen next.
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.
Image credit: http://theeconomiccollapseblog.com
A Caesar In Our Future?
What Happens If The Shutdown Causes The Treasury To Run Out Of Money
In a speech to the Commonwealth Club, San Francisco, November 23, 2010, Peter Dale Scott gave a history of the various directives concerned with government continuity during a state of emergency. He showed that these directives could be used to supersede the Constitution. http://www.globalresearch.ca/continuity-of-government-is-the-state-of-emergency-superseding-our-constitution/22089
The ease with which both the Bush and Obama regimes were able to set aside the due process protections of the Constitution that prohibit indefinite detention and execution without conviction in a trial indicate that Professor Scott’s concern is justified that these directives could result in executive branch rule.
Scott describes how the executive branch efforts to provide government continuity in the aftermath of a nuclear attack dating from the Eisenhower administration were gradually converted into executive or national security (later Homeland Security) orders that confer secret powers to the White House for any event that the executive branch considers to be an emergency.
Generally these various executive orders and directives refer to “national emergencies,” or “national disasters.” However, President Bush’s National Security Presidential Directive/NSPD 51 and Homeland Security Presidential Directive/HSPD-20 issued on
May 9, 2007 use the term “Catastrophic Emergency.” http://georgewbush-whitehouse.archives.gov/news/releases/2007/05/20070509-12.html
The directives speak of “enduring constitutional government” which the president maintains by coordinating “as a matter of comity with respect to the legislative and judicial branches,” but it is up to the president and his advisor, the National Continuity Coordinator, to decide what constitutes constitutional government during a catastrophic emergency.
What comprises a catastrophic emergency? It is reasonable for a president to regard a government shutdown, which can threaten everything from national security to default and economic collapse, as a catastrophic emergency, and to take such steps as are necessary to prevent it, such as raising the debt ceiling, on his own authority.
The Federal Reserve also has the power to prevent a government shutdown. If banks are too big to fail, so is the federal government. If the Federal Reserve on its own authority can issue more than $16 trillion in loans to US and European banks in order to prevent their failure, the Federal Reserve can issue a loan to the US government.
I don’t expect either of these two possibilities to come into play. A shutdown and default of US debt obligations would terminate the US as a superpower and dethrone the dollar as world reserve currency. Neither Congress nor President Obama desire such an outcome. Also, Congress would not want a presidential directive to be implemented that subordinates their position and possibly eliminates their meaningful participation in governance. Therefore, I expect a resolution of the current standoff prior to the Treasury running out of money.
I did interviews on this subject with King World News and with Greg Hunter. The interviews are played to the sensational side, but I do not expect it to go that far. However, it could.
My interview with King World News is relatively short, but Eric King knows how to bring it to the most controversial point. What everyone should wonder is, “How did we, a free people protected by the US Constitution, become one step away from rule by Caesar?
My interview with Greg Hunter of USA Watchdog is, in my opinion, one of my best. The interview covers a broad range of issues or possibilities and makes it unnecessary for me to write a column about the government shutdown and its implications and possible consequences. http://usawatchdog.com/paul-craig-roberts-obama-could-govern-as-a-dictator/
Reprinted with permission from www.paulcraigroberts.org
About Dr. Paul Craig Roberts
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.
Too Poor To Prepare
Published by TruthNeverTold
Too Poor To Prepare is a short video offering suggestions for all, not only those in financial hard times, how they can prepare and make a positive impact in their life and those around them.
New Interview with SGT Report with Michael Krieger: The Great Awakening
Michael Krieger: It’s been a little while since my last interview with SGT Report, so I’m really pleased to be able release the recording of a chat we had last weekend. I was in an area with spotty internet connection, so you will notice some bad audio quality in the beginning, but I promise it gets better from there. It’s actually mind-boggling to think about all the topics we covered, so brace yourselves for a 27 minute political hurricane. Enjoy!
The Coming Shortage Of Physical Gold That Will Change Everything
Is the paper gold scam about to be brutally crushed by a crippling shortage of physical gold? If so, what will that do to global financial markets? According to the Reserve Bank of India, “the traded amount of ‘paper linked to gold’ exceeds by far the actual supply of physical gold: the volume on the London Bullion Market Association (LBMA) OTC market and the major Futures and Options Exchanges was OVER 92 TIMES that of the underlying Physical Market.”
In other words, there is a massive amount of paper out there, but very little actual physical gold to back it up. And right now, we are witnessing voracious hoarding of physical gold all over the globe. This is especially true in Asia. Just see this article and this article. All of this hoarding is putting a tremendous amount of pressure on those that have made all of these “paper promises”, because the truth is that there really isn’t all that much physical gold on the planet. In fact, Warren Buffett once estimated that if all of the gold in the entire world was brought into one place, it could be formed into a cube that would only be 69 feet long by 69 feet high by 69 feet wide.
As the emerging shortage of physical gold becomes increasingly apparent, the massive Ponzi scheme that the bullion banks have been running for decades is going to completely fall apart. The following is what Egon von Greyerz told King World News the other day…
Governments and central banks have, for decades, leased or sold their gold to the bullion banks. So they are very likely to own very little of the 23,000 tons that Western central banks are said to hold.
But now bullion banks also have a problem: They tried to replenish their (physical gold) coffers during the massive manipulative selling that we’ve seen over the last few months in the paper market. Although they took the price down, most of the physical (gold) that was released by selling from ETFs and hedge funds was absorbed by Asia.
So the bullion banks are still massively short of physical gold.
Right now there simply is not enough physical gold out there and the bullion banks and the central planners are starting to panic. One of the individuals that really has his hand on the pulse of what is going on is billionaire Eric Sprott…
We have seen the COMEX inventories decline rapidly. We know that all of the dealer inventory on the COMEX has already been spoken for by delivery notices, so essentially there will be zero (inventory) if they ever make the delivery.
And the central planners (also) went to India and said, ‘Look, you’ve got to do something about all of this gold buying in India.’ So we’ve had ten different steps by the Indian government to try to curb demand — a 2% tax, a 4% tax, a 6% tax, an 8% tax, and a ruling that banks couldn’t lend money for people to buy gold.
They also convinced the Jewelers Association that as of July 1st they couldn’t sell gold bars and coins. Just last week there was a new rule implemented that if you are importing gold you have to prove that a certain amount is being re-exported. We’ve probably had ten or twelve things (restrictions) happen in six months, all of which is a huge attempt to get the second biggest buyer of gold in the world, after China, to decrease consumption because the gold isn’t around.
The central planners have arranged all of these things. I think it’s just been one big scheme to try to get people dissuaded from owning gold and to cause supply to come out. As you mentioned, because of it (central planner actions) we have the gold forward rates (for gold) being negative, backwardation, and inventories plunging, all of which have been manifested because there is a shortage of gold.
Already the emerging shortage of physical gold is starting to cause some very unusual things to happen in the financial markets. A recent article by Reg Howe did a good job of explaining what we have been witnessing lately…
By undercutting normal gold lease rates, these super low interest rates have forced central banks to reduce their lease rates to nonsensical levels in order to prevent gold futures from going into overt backwardation. Recall that GOFO, the gold forward rate, is the interest rate for a given maturity less the lease rate for that maturity, and that a negative GOFO represents backwardation. See Gold Derivatives: GLD and Ass Backwardation (5/24/2010); Gold Derivatives: The Tide Turns (5/25/2009). Passing the argument that widely reported premiums for spot physical delivery represent a form of backwardation, figures from the LBMA have now shown a negative GOFO at the shorter maturities for almost three weeks (July 8 through July 25) due to a surge in lease rates, which still remain below more normal historical levels.
Indeed, this unusual event has attracted considerable attention even from those outside the narrow world of gold. See, e.g., J. Skoyles, Backwardation, negative GOFO and the gold price, The Real Asset Co. (July 24, 2013); M. Kentz, Gold futures hiccup indicates demand outpacing supply, Reuters (July 19, 2013); G. Williams, What If, Things that Make You Go Hmmm, Mauldin Economics (July 15, 2013).
The bottom line is that there is a very serious shortage of physical gold, and as this becomes increasingly apparent to the rest of the world, this is likely to cause a tremendous amount of instability in the financial markets in the months ahead.
For much more on this, please see the recent interview with Alasdair Macleod of goldmoney.com that is posted below…
Right now we are also witnessing tremendous demand for physical silver as well.
For example, the U.S. Mint is going to break the all-time record for July by a very wide margin, and it is being projected that sales of Silver Eagles will likely be above 45 million for the entire year.
And remember, unlike gold, silver is used in thousands of different consumer products. So silver is continually being used up and taken out of the overall global supply.
Image credit: http://endoftheamericandream.com
We’re Going Into the Greatest Depression: “They Will Not Be Able To Pull Off the Stimulus Game Again”1
Posted by Judy Morris
We’re Going Into the Greatest Depression: “They Will Not Be Able To Pull Off the Stimulus Game Again”
Look around and you can’t miss it.
The world is on the brink… politically, economically, financially, monetarily, and militarily.
Events are accelerating. Over the last decade trend forecaster Gerald Celente has been blaring the alarms.
If you’ve been paying attention, then you’ve heard them. You know we’re going under.
And this time they’re not going to be able to stop it.
It will be worse than the panic of ’08. It will be deeper. It will be more painful and there’s a reason why… because they will not be able to pull off the stimulus game again.
Everybody got hip to it and it didn’t work. You read even the Financial times, the major media, CNBC, Bloomberg… everyone will now admit that the stimulus only bought borrowed time. So the stimulus game doesn’t work anymore, and the governments are so in debt they can’t have the fiscal policy. So you have no monetary policy and you have no fiscal policy to stimulate the economy.
We’re going into the Greatest Depression.
But they will try to boost it some way. And that’s when I believe gold and silver prices will again skyrocket. They can stay low, I believe, for another several months… even a year. But I don’t see them staying down forever.
Read the rest at SHTFplan.com, here.
from Gold Silver Worlds:
MOSCOW EXCHANGE WILL OFFER PHYSICAL PRECIOUS METALS TRADING – A GAME CHANGER?
We have reported extensively about Russia’s love for gold, for instance here and here. The Russians are not too happy with the violent gold price crash since mid-April. It is widely known that the price decline was induced by the COMEX futures market. Russia is now leading the wave of reactions by launching a physical precious metals exchange. The exchange will start trading gold and silver by the end of this year. Platinum and palladium trading will be launched in 2014. Russia has so far only been trading futures on gold and silver, not dealing with real metals.
RTwrites: “Trading physical metals is expected to boost liquidity in the market and attract more participants.” Furthermore, “the Moscow stock exchange plans to transport precious metals from production companies, keep them in its own stores and deliver to the buyer the next day. The launch of trading in gold and silver on the Moscow exchange will boost liquidity on the market and attract more participants by these new financial instruments.”
Read More @ GoldSilverWorlds.com
LBMA GOLD FLIGHT, 580 GOLD TONS PURCHASED, SILVER & MORE
“However, by manipulating the gold price lower through the foreign exchange interventions, they’ve succeeded in forcing 600 tons of ETF redemptions, COMEX capitulation, and drawn in an unprecedented level of fresh managed money short supply. This has now successfully allowed the bailout of the bullion banks to the point where they have been able to get net long (gold) futures. The two primary bullion banks that we all know about are net long.
But from a cash forex trading (currency trading) point of view, we are definitely still seeing aggressive official intervention, including the post-Bernanke smash (in the metals). Any time he speaks we get the same thing. The problem is this cash market intervention is also causing precious (metals) bullion inventories to deplete at a much faster rate than if gold was priced at $1,900.
Editor’s Note: This clip below was relevant to the above…
The Golden (Sentiment) Rule: If It Isn’t Off The Chart Now, It Soon Will Be
Submitted by Tyler Durden (ZeroHedge) on 06/28/2013 – 19:49
Remember: what is unsustainable, can never crash…
Dubai Gold Demand Off the Charts as Price Plunges
Only in the gold market does huge demand equal a price collapse! I suppose the problem is they don’t buy Comex contracts in Dubai and India. As I mentioned on Twitter earlier today, the pile-on from gold bears is reaching extreme proportions, something like you’d expect near a bottom. I bought physical silver today for the first time in over a year.
From the UAE’s The National:
The price drop led to a rush of buyers for Dubai gold from the Middle East, South East Asia, the Balkans, Turkey and parts of Europe according to Tarek El Mdaka, the managing director of Kaloti Gold in Dubai.
“I cannot find a place for transporting gold on Emirates, on BA on Swiss Airlines this weekend,” Mr El Mdaka said. “I am shipping in one-and-a-half to two tonnes of gold every day and it is going straight out.”
Mr El Mdaka added that gold is in such short supply in Dubai that he is able to charge a US$3 premium per ounce. “In the last week or so that has gone up from $1.25, $1.50 to $1.75. But now it is $3. We are really squeezed.”
Full article here
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Image added to original post.
Silver At Less Than 19 Dollars An Ounce? Are You Kidding Me???
The day that silver traders have been waiting for has arrived. On Wednesday, the price of silver dropped another 5 percent. As I write this, it is sitting at $18.55 an ounce. On Wednesday it hit a low that had not been seen in three years. Overall, the price of silver has declined by 34 percent this quarter. That is the largest quarterly move in the price of silver in more than 30 years. So what does all of this mean? It means that we are looking at a historic buying opportunity for those that are interested in silver. Yes, gold is undervalued right now as well, but it is absolutely ridiculous how low the price of silver is.
At the moment, the price of gold is about 66 times higher than the price of silver is. But they come out of the ground at about a 9 to 1 ratio, and unlike gold, silver is used up in thousands of common consumer products. Those that want to invest in silver should be shouting for joy that prices have fallen this low. If you have been waiting and waiting and waiting to “load the boat”, your moment has arrived.
In my previous articles, I have warned over and over again that we would see wild swings in the prices of gold and silver. For example, I wrote the following back in April…
As I mentioned above, gold and silver are going to experience wild fluctuations over the next few years. When the next stock market crash comes, gold and silver are probably going to go even lower than they are today for a short time. But in the long run gold and silver are going to soar to unprecedented heights.
Investing in gold and silver is not for the faint of heart. If you cannot handle the ride, you should sit on the sidelines. We are entering a period of tremendous financial instability, and holding gold and silver is going to be like riding a roller coaster. The ups and downs are going to shake a lot of people up, but the rewards are going to be great for those that stick with it the entire time.
Right now, a lot of people that bought silver when it was 25 dollars an ounce or 30 dollars an ounce are probably feeling discouraged.
Don’t be. You will be just fine. When the price of an ounce of silver hits 100 dollars an ounce you will be very thankful for the silver that you stored away at those prices.
We are moving into a time when we will see more volatility in precious metals prices than we have ever seen before. That means there will be some tremendous opportunities to make money. But in order to make money, you have to buy low and sell high.
The current decline in the price of paper silver does not have anything to do with the demand for actual physical silver. In fact, demand for physical silver is higher than it ever has been before.
For example, sales of silver coins by the U.S. Mint have set a brand new all-time record high during the first half of 2013.
Last year, the U.S. Mint sold 33 million ounces of silver for the entire year.
This year, the U.S. Mint is on pace to sell 50 million ounces of silver for the entire year.
So don’t be alarmed that the price of silver is falling.
Instead, be very, very thankful.
Hopefully it will go even lower.
And you know what? There is a decent possibility that the price of silver may go down a bit more. This will especially be true during the initial stages of the next financial panic.
When the price of silver does dip, it is a perfect opportunity to load the boat, because even many mainstream analysts are projecting that the price of silver is headed into the stratosphere over the long-term. For example, the following is what Citi analyst Tom Fitzpatrick told King World News the other day…
Again, if you look at silver going back to the 2008 correction, we got down to levels below $9, then we saw the silver price multiply by a factor of over 5 times. So assuming this marks a point near the end of the correction in silver, then our bias would be one that would take silver not only to new all-time highs, but we would look for a target as high as $100 for silver
A chart illustrating the projections that Fitzpatrick is making can be found right here.
There are so many reasons to own silver (even as opposed to owning gold). The following is an excerpt from a recent article about silver that really caught my attention…
7. Silver is way below its nominal record price of $50 in 1980. It is even further below the government inflation adjusted level of $135. And if you use REAL inflation adjusted numbers, like Shadowstats, the REAL 1980 inflation adjusted price of silver would have to be $450! Silver is a precious and depleting resource and when you look at the price of housing, cars, education, food, energy, taxes, insurance back in the 1980′s, it is insane to think that silver is so cheap on any level. Especially when the uses of silver have skyrocketed since the 1980’s. It is now used in technology on a massive scale and is even now said to cure cancer. Heck, they did not even have Silver Eagle sales back then, or the Silver Bullet Silver Shield for that matter.
8. This time it is going to be much larger! None of the problems from the 2008 Banking Crisis have been solved. In fact it is orders of magnitudes worse. What started out as an institutional problem, is now a sovereign nation problem. This collapse will not be a puny multi – billion dollar corporation like AIG disintegrating, it will be the Trillion dollar economies of the nations of the world and the Quadrillion dollar derivative monster markets cracking apart. There is no financial, political or social safety net left. We destroyed all of that in 2008 and are on a debt based junkie delusion.
The collapse of currencies will affect every counter-party, debt based asset in the world. Your cash, stocks, bonds, Real Estate, pensions, insurance, all of it. The collapse of financial contracts will lead to the collapse of all political and social contracts. The Anger Phase of humanity is coming and only real assets with no counter party risk will be worth anything. Most commodities have storage or degradation issues leaving only precious metals as a real store of wealth.
9. 1:65 Ratio makes silver the only choice. The current gold to silver ratio is: 1 ounce of gold is worth 65 ounces of silver. These come out of the ground at a 1:9 ratio! That means just to get back to the natural mining ratio, silver would have to out perform gold 600%. This is regardless what happens to the dollar value of gold. If gold goes to $13,000 an ounce, silver at a 1:9 ratio would be $1,444 silver.
10. The historical stockpiles of silver are destroyed. We know implicitly that gold has been treasured and kept secure. While silver has been used and abused as a cheap, industrial metal like tin. Since the price of silver has been under attack since the Crime of 1873, silver has been used in such small quantities that it has been destroyed. The US government in 1950 had 5 billion ounces of silver in its strategic stockpile, now it has ZERO. So if gold and silver come out of the ground at a 1:9 ratio and gold has been treasured and silver stockpiles destroyed, logic would dictate that the end of this silver bull market will find the gold to silver ratio BELOW 1:9 and I think it will come close to a 1:1. Either way, we are a long way away from those levels which makes silver so exciting right now.
It is the destruction of huge stockpiles like this that explains the decade long supply deficit to the growing demand of silver. Do not forget that we are only 7 years away from the United States Geological Survey’s prediction that if we continue to consume silver at these rates, silver would be the first metal to become extinct. When I challenged the USGS on that statement, they said that only a massive revaluation of silver to bring on more production and wiser use of silver would stop the extinction. I don’t think we will ever run out of silver, but I do believe that the free market will crush this paper manipulation and that anyone holding physical silver on that day will then have a lottery ticket in real value.
You can read the rest of that excellent article right here.
Do you want some more reasons to own silver?
The following are some excerpts from an excellent article by Mark Thomas…
The amount of silver consumed annually and bought for investment exceeds currently exceeds total annual mining output and has for years. That gap has been filled by sellers willing to sell from existing inventories and as prices rise. As time passes this will naturally push prices significantly higher until this fundamental imbalance reaches a true equilibrium price where supply is closer to demand.
Both industrial and investment demand for silver is growing in excess of the annual increase in mining production growth. The available inventory is low and will get even tighter over time. These two factors will lead to a continued tighter supply-demand situation going forward.
Silver is an industrial metal with over 10,000 commercial applications. Because it is one of the best electrical and thermal conductors, that makes it ideal for electrical uses such as switches, multi-layer ceramic capacitors, conductive adhesives, and contacts. It is used in some brazing and soldering as well. Silver is also used in solar cells, heated automobile wind shields, DVD’s and some mirrors.
Silver is an essential element in the electronic gadgets that are a growing part of our digital age. It is in every cell phone, smart phone, tablet, computer keyboard, solar cells and every radio frequency if ID device (RFID). This makes it an essential element going forward as the world becomes more addicted to gadgets. The growth and rising living standards of people in the emerging economies will drive long-term growth of new customers that will demand more and more electronic gadgets.
Silver’s industrial demand should increase 60% to 666 million ounces per year by 2016 from 487 million ounces in 2010. Current annual mine production is only around 700 million ounces per year growing a few percent annually.
Of a total of fifty billion ounces of silver that have been mined in history, only two ounces (estimate) or 5% remain in above ground inventories available to be bought and sold. This is due to silver being used up in industrial applications in very small quantities, which makes it unprofitable to recycle at today’s prices. A lot of silver is used in minute quantities in industrial products which are used up and discarded without being recycled.
The total amount of silver available to trade in the physical silver market is only about $70 billion versus the total gold market which now exceeds $4.3 trillion. As you can see from these numbers, the total market size of the silver market is only 1.6% of the size of the entire gold market. This lack of liquidity and use of extreme leverage in its respective futures market produces wild volatility in price fluctuations of silver.
You can read the rest of his excellent article right here.
Are you starting to get the picture?
Let us hope that the price of silver stays below 20 dollars an ounce for as long as possible, because once this opportunity is gone we will probably never see it again.
It is important to realize where we are in the greater scheme of things. The world is moving toward another major financial crisis which will usher in a brief period of deflation. Unlike many others that are talking about the coming economic collapse, I have always maintained that we are going to see deflation first and then the response to the crisis will give us the rip-roaring inflation that so many talk about. The following is an excerpt from one of my articles where I talk about this…
So cash will not be king for long. In fact, eventually cash will be trash. The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.
That is why gold, silver and other hard assets are going to be so good to have in the long-term. In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.
During the initial stages of the next major stock market crash, gold and silver will not do very well. But that is okay. Dips are buying opportunities.
As the coming economic crisis unfolds, governments and central banks all over the world will desperately attempt to resuscitate the global financial system. We are going to see money printing and “stimulus packages” on a scale that we have never seen before. Crazy things will happen with stocks, bonds and currencies.
When the dust finally settles, those that are holding “real money” will be the ones that will be in the best shape.
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