As an addendum to my earlier article today, “Official Policy,” I would like to add this:
It now appears that premiums on junk silver are well over $2.70 over the “spot” paper (soon to be a big smudge?) price of silver and well over $3 for Eagles. This represents between a 10-12% premium BEFORE a fair mark up! So what does this mean? It means that the “powers that be” have sold the paper market price down so far that it will soon be irrelevant. Physical “owners” are NOT WILLING to sell at the current price to make up the continual deficit between supply and demand. As always happens, Mother Nature is “fixing” the problem (deficit of supply) with a premium in price.
Do you remember hearing the story of 2 butchers with shops across the street from each other? One has a sign in his window for filet mignon at $5 per pound and the other $20 (the original story was $1 and $4 but that was many inflated years ago). A patron walks into the store with a sign for $5 per pound only to find that he is sold out (and never had any to begin with) and then he walks into the other store. He asks if the butcher has any filet mignon and then complains that the price is too high. The butcher retorts, “Good luck waiting for that $5 per pound filet mignon.”
The point? As I mentioned earlier today, they are riding the brake and flooring the gas at the same time by trying to create “velocity” while at the same time breaking the thermometers (suppressing the prices of gold and silver). This cannot work for any length of time because “stirring up the herd” cannot be stopped once started. If (when) they actually do get some “velocity” of money, some of this will naturally (already has and is) find its way toward the precious metals. The problem is this, if the shelves go bare and investors find that metal is not available, human nature will make them want it even MORE! Nothing will create demand in a bigger fashion than when something is unavailable which is exactly what unnaturally low prices will do!
We need to watch this event very closely as the entire paper system cannot be held together if the lid blows off the physical market. I have thought all along that the physical market would overwhelm the paper market. It came very close in the fall of 2008, this looks to be the beginning of a second swing at it.