What would really happen were COMEX silver to default? Actually, a better question would be what will happen if ANYTHING physical were to default. For example, what will happen if a corn delivery is not made, or actual hogs or cattle, orange juice or anything else? Broadening this thought process a little bit and making it a global question, what happens if it turns out iron ore, copper, zinc or anything else turns out to not be in the warehouse?
Going even further down the rabbit hole, what will happen if two different people show up at a custodian somewhere and claim the same ounce of gold? What if instead of just two people it turns out to be 10? Or 100? First, in my opinion there will be no difference between 2 people presenting a receipt and one being told “sorry” and 99 being told “sorry.”
How can I say there will be no difference? Because the true “number” whatever it turns out to be will over time be exposed. All it will take is just two guys (or gals) arguing over the same ounce and word will spread. If the true number of “over issuance” turns out to be 10, 50 or even Jeff Christian’s 100-1 it doesn’t matter. It doesn’t matter because every single “owner” believes they “own” the ounce. Even if there are only 10 ounces but 11 people …some type of little white lie fraud has occurred. Please understand that nothing today is done in terms of “little” anything, the current fraud is massive, widespread and will bring question to all markets and contracts.
I want to look at this from several angles. First from the ownership side and then from the “what does it mean” side. From an ownership standpoint, you must wonder whenever you “buy” metal as to whether you will get it or not. There have already been a couple of “belly up” dealers this year where customers paid for, yet never got their metal. You also must wonder about pooled accounts, ETF’s and even COMEX itself. COMEX for example is publicly reporting contracts where 650 million ounces of silver are liable in December for delivery yet they only have 60 million ounces registered for delivery.
Eric Sprott has asked many times regarding the various silver ETF’s “where” the metal came from as the total adds up to more than was known to exist for delivery while current production was already spoken for. Two or three years back, Mr. Sprott did an offering where he added 10 million ounces of silver to his trust, that took several months to fill the order …and it was “only” 10 million ounces.
As for “pooled” accounts, how do you know or have any proof there are not 10 owners for each ounce …or even 100? Because “no one would ever do that” or because you have a piece of paper “saying” you own the metal? Or because the salesman was a nice guy, gave you his word and “pinky swore?” These questions and the amount of trust given truly amazes me because if the currency itself is a Ponzi scheme then why wouldn’t there be others? Lots and lots of others …in many walks of life?
The above leads me to the key word for any Ponzi scheme, pyramid scheme or even something legal like fractional reserve banking … “confidence.” Think about it, in today’s world could anything financial survive if it weren’t for confidence? We had bank runs in yesteryear because people would get spooked if they thought their bank had issued more “notes” than they had gold to back them. We have seen more recently bank runs when it was feared their bank was “running out of money.” The current day has seen “electronic” runs when it was feared the bank either overextended credit to poor borrowers, lost money on their investment portfolio or some other reason for “digital” credits to dry up.
I am convinced that because of the supply/demand and low price (below the average cost of production) causing less production, we will see a “bank run” in the silver market. Yes, yes, tell me silver is plentiful blah blah blah but where is it? Please don’t show me some piece of paper like Karen Hudes has with gold stating “trillions of $” are held and waiting to save the world. Where is it? Where is the gold for that matter? Venezuela just pulled a good one on the west and actually opened their vault for the public view (this gold by the way will probably end up being pilfered by our banks), when was the last time anyone actually saw what was inside of Ft. Knox? Including Congressmen and Senators! 60+ years? This is a long, VERY long time to go based on “confidence” alone.
My point for writing this piece is because everything financial is based on confidence and there is much anecdotal evidence that this confidence is sorely misplaced. Whether it be copper, zinc or iron ore in Chinese ports, silver or gold in ETF’s or exchanges themselves or even central bank holdings including and especially Ft. Knox, they are ALL based on confidence. “Confidence” that the metal is there and not “owned” by more than one entity per ounce.
It won’t matter what it is that gets exposed (my opinion is the silver market), once it becomes known “the bank is in trouble,” the following bank runs will be no different than they were in the past. I will say this, since everything is based on confidence and the foundation for this confidence is not even real to begin with …the “runs” will be bigger and badder than ever before in history. There is more credit, leverage, leverage on top of leverage in the form of every and any type of derivative imaginable, more “money supply” of money that’s not real, faster information and execution of trades than ever before. All of this put together will make the size and speed of the moves caused by broken confidence greater than anything we’ve ever witnessed.
It will also make the “recovery” (you know, the “thing” we’ve supposedly been in for the last 6 years?) that much longer, painful and drawn out. I say this because the financial wipeout will have been bigger and more widespread than anything before AND because of the word “confidence.” It is so easy for confidence to break yet so difficult to regain once broken. Think of confidence as a “client” so to speak. It may take months or even years to gain their trust in order to do business but the relationship severs in a New York minute once a lie fraud or malintention is discovered. By the time this whole thing is done, we will find out and know for sure …our “rule of law” was trashed and governments themselves committed massive fraud. I guess what I’m trying to say is ”If the trust in various governments is broken …will their currencies issued be trusted?”
To wrap this up, ask yourself a question. Were the financial system to come down, what would you trust or accept for your labor, knowledge or goods immediately afterwards? The answer to this question is why you must arrive into the aftermath of a break in confidence with something you have confidence in and would accept yourself!
Bill,
You tell the truth !!!
Our government lies to us and we watch all the banks commit crimes, but yet the 99% keep their cask (I mean toilet paper) in the criminal banking system. Go figure.
I think the 99% do so because the will not accept the truth and those nice local bank tellers seem so nice each visit to the bank. What the 99% are not realizing is those nice friendly bank tellers are not the ones calling the shots at the bank and when their money is gone and the bank doors closed those nice bank tellers will be out of a job and not seen in the bank again.
The 99% do not realize that if “you don’t hold it”, YOU DON’T OWN IT !!!
Do the 99% let their neighbors keep their car in the neighbors garage?
Do the 99% let the neighbors keep their weekly supply of food?
Do the 99% give their neighbors a key to their home/apartment?
When the SHTF the 99% will be sorry they left their toilet paper in the bank and even more sorry they left their wealth in toilet paper!
yes.
Hey RF, I once asked someone “why don’t the people get it?” and that person told me “it is always so with people”. I thought that reply was very simple in itself, but very comprehensive at the same time. I never save messages out of respect for privacy. None. Anyhow, that reply remains well in the mind. Your comment actually put a smile on my face, especially that last paragraph. Good comment. Final thought: I’m quite convinced that the young people have a huge responsibility to man up, wake up and get their act together again. It has to come from their side. Many things don’t reflect reality anymore. What does reflect reality is a .9999 gold or silver bar/coin. And I like that alot.
Great article Bill. What’s the difference between Confidence and an Illusion? The whole world Monetary system is based upon an Illusion (fiat currency). Both Labor and Investment can be and are based upon both Confidence and Illusion and – Both Confidence and Illusion are a mental Figment. So, we have a whole world living out their life in a fantastic Delusion of a false paradigm. No wonder it is said, “Truth is stranger than fiction”. When the “Fairy Tale” bubble pops and Reality grips the World – It will be the Ugliest ending of any story that has been told in All the history of man. God bless.
nothing
Bill,hi,
Sure,and with the “Nixon Shock” August 15,1971 when the U.S. was the worlds largest creditor nation, Nixon stated “that the dollar is still backed the full faith and credit of the U.S.”
Now that the U.S. is the largest debtor nation in the world,whats left but faith.
“Faith means the will to avoid knowing what is
true”-Friedrich Nietzche
very good quote!
Yesterday I happened to walk past the biggest bullion dealer around here. In I went.
There was no customers in the shop while I was there.
I asked my dealer person, would I have any problem buying $10,000,000 worth of Gold. The answer was no.
Say I was to open an account with Miles Franklin with $10,000,000.
Would there be any problem currently, getting an order filled spending the whole lot on either Gold or Silver?
$10 million is a large retail order and yes we could certainly source your order if you gave it to us. That said, you make $10 million sound like a lot of money in a world where $ billions were the game years ago. Could even $1 billion in silver be sourced today? I doubt it as this would be 60 million ounces which would entirely clean out the COMEX registered category. Could $10 billion worth of silver be sourced? I think not …and it was just last Friday that Alibaba sucked out $22 billion from our capital markets making their company worth $169 billion on the offering and $250 billion by the close.
Open your eyes silversmurfer, $10 billion is barely a ham sandwich in today’s paper markets yet could not in any fashion be settled upon were someone to buy this much silver. Gold is a more liquid market but an order of $10 billion would even upset this market. Wake up, you are talking pennies while the world is trading in $1,000 bills which cannot be settled with metal!
Bill, the reason I picked $10million was because i thought it would be a largish retail order.
Now I have confirmation from two sources that there would be no problem filling such orders, and therefore there is no retail supply problem.
Now if you want to talk about $1Billion orders I am certain that it could obtained,it would take time to source and would be obviously more than $20 an ounce for the silver,a lot more in fact.
You talk like as if the Comex is the only supplier of Silver !!!
PS I am fully aware that the USA is TRILLIONS OF DOLLARS IN DEBT
EVERY TIME THE GOLD AND SILVER RADIO HOSTS THEY KEEP ON REPEATING THE SAME REDERICK.WAIT TILL THEY RUN OUT OF GOLD,BY THE END OF THIS YEAR, NEXT YEAR, THERE IS NO GOD IN FT. KNOX. SO SAYS HOFFMAN EVERY TIME HE IS ON FINANCIAL SURVIVAL.IT GETS TO BE A JOKE, THENE YOU TALK ABOUT O WE HIT BOTTOM AND IT WILL GO UP THEN IT DROPS. ALSO THE AMERICAN PEOPLE WILL NOT LOOSE CONFIDENSE THEY ARE TO DUMB. LOOK WITH THIS COUNTRY GOING DOWN THE TUBES THEY ARE NOT YELLING OUT.IT WILL NOT HAPPEN TILL SOMETHING MAJOR HAPPENS AND IT PERSONALY EFFECTS THEM. UNTIL THEN FORGET ABOUT IT.
um …you said “with the country going down the tubes”? So you obviously understand this part of it, are you angry at us because we suggest you own some gold and silver to survive the ride “down the tubes”. What would you suggest we do? Lie and tell people not to purchase gold or silver to protect themselves and that we believe it is a poor value? Sorry you are having a bad day Tom B.
Bill,
While Tom’s writing needs some work, he does present a valid point, in that until something directly affects the masses they will not care.
I post on my FB page and very few (maybe 5 or 6) out of 1000 real life friends and “other friends” read what I post. Now, if you were to ask me how many of those 5 or 6 actually understand and “get it”, I would say none of them. No one asks any questions, no one posts comments, nada… Just a few likes and maybe a share or two. I check those shares after a few days and none of their “friends” like the shared status either.
IMO, there are very few of us who understand what is happening, but again, none of us know exactly how deep the rabbit hole actually runs.
Until either a default on the COMEX or (what I believe) a derivatives collapse and the pain of a sudden “shock and awe” in the financial sector when banks freeze, the masses will continue to wear their rose colored glasses and blindly follow the MSM, no one outside of the PM space will care.
I thoroughly enjoy the blog here and thank you and your peers for your timely and accurate writings.
Thank you Tim, the “rabbit hole” goes all the way to the core. None of them “get it” because they do not want to …as it is too ugly to think about. Why do you think people are so averse to believing the false flags are…actually false? Because the reality is TOO UGLY to comprehend.
“Tell a big enough lie often enough and it becomes the truth”.
I cannot refute your comment and you are right.
What’s striking to me, is that the false flag of the WMD of Iraq was quickly swept under the rug, when no WMD’s were found. Imagine that 😉
However, the elephant in the room that none of the masses knows exactly WHY Saddam was taken out. I’m sure you know, as well as I know about the Iraqi oil for gold and a sudden threat to the petrodollar system, much like Gaddafi was removed from Lybia. The list goes on…
Energy…. And the threat of PM’s to the petrodollar
Explaining to people how the financial system works is like showing them the evidence for what really happened on 9/11. If they don’t want to know, they aren’t going to listen, or even entertain it. At least the 9/11 truthers represent a noticeable proportion of the population — it’s something more tangible.
The human mind is a funny thing, we all have our world views and will generally go to great lengths to rationalize and commpartmentalize away evidence which calls those world views into question. The most dangerous of those world views, or human tendencies, is to have faith in our leadership and to trust that they are working in our best interests. Another widely accepted but dangerous world view is that the relative prosperity enjoyed by the western world over the last 60 years is “the norm”, and when it all comes crashing down people are going to demand a return to it, which will not happen. But the last 60 years were an aberrant, abnormal period of human history and our collective failure to understand what enabled it is what ironically will prevent us from living in similar prosperity in the future. The fact that the average person is ultimately to blame for this (because we didn’t hold our leaders accountable and because of our unsustainable consumption) will never be accepted by the average person.
exactly.
Bill, http://tinyurl.com/lfftpqn thoughts? What would it take for the PM manipulation story make it top of Drudge report for example? Peak confidence indeed! Stack on my friends!
we’ll see, sooner or later the truth will come out.
Bill, now our government has passed the “confidence buck”. Our currency now states “In God We Trust”. God is now the ultimate trustee of our currency.
has been for years.
Tom.
Strange writing on the notes.
Who in their right mind or any knowledge of science could possible believe there is a God?
he meant “gold” …and I personally believe in God.
Bill,
Another great article. Another profound delivery. And again, that last paragraph SHOULD explain things in full. THAT is the reason I stack. Not for the daily price but so that I have something of value to buy goods and services with after the “confidence” is lost and this game is over. Even so, the game does get tiring.
thanks Lenn.
Only the awake and aware have no confidence in the current system. Better to be prepared for the collapse years early than a day late. I’ll be laughing at the fools who thought all of the warnings were just a “conspiracy theory”.
the sky really is falling …5 U.S. banks have over $40 trillion in derivatives each.
Hi,
I’m a new reader of this blog (I think I followed a post on Jim Sinclair’s website), but have followed the silver and gold story since 2004 when I began to wake up to a lot of things. So far I’m impressed with the thoughts and posts by Bill, thanks for putting it out there and making me think.
Thought I would post this since a couple comments above addressed a $10 million dollar order in the retail gold market and this excerpt from the interview indicates the smart people are jumping in now to get physical with orders in gold as high as $40 million.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/9/25_Stunning_Demand_One_Individual_Buying_$40_Million_Of_Gold.html
I personally think a system, such as one built on confidence alone, can only take so many lies and untruth before some catalyst comes along and tips things back to reality. I think the reality is going to come crashing down for a lot of people, just a matter of when. Another person wrote better to be early and I agree. Price isn’t going to matter. It is going to be a matter of survival when things unravel. Just hope the police state put in place unravels with it!
welcome and thanks for posting Mike.
Cash cost for silver 5 dollars. AISC about 16 to 17 dollars. Check out AG quarterly financials. These numbers make sense as SLW right to purchase is about 5 dollars. The awe are some facts. Sticking to the facts will provide credibility to your assertions. Good luck. I will purchase silver closer to 14 to 15 dollars.
don’t think so, industry average AISC is very close to $25, cash costs around $18. Of course none of this will matter when the fiat system collapses.