Supply is first to go away… then goes price. We saw back in 2008 the very same scenario as we have today only in a milder form at the time. Supply of metal became very tight as the paper price was crashed, then all of a sudden we made a bottom and higher prices were what came in the aftermath. That was then; this is now.
Then, governments far and wide stood up and “guaranteed” everything from A to Z. Bank accounts, money markets and of course the banks and brokers themselves. They did this because they could. They did this because they had to, otherwise the financial markets would have ended as one big smoking hole of default which would have brought with it a deflation. It would have taken all paper currencies with it. Back in 2008 there was no thought that governments themselves could go belly up or default (I did write a piece titled “Fannie and Freddie in the lap of the U.S. Treasury”). Since then we have seen nothing but a string of default after default. Yes I know, only Iceland, Greece and Cyprus have “technically” defaulted but what do you call what the U.S., the EU, Japan and Britain have done with their money supplies? It is called “default” through debasement of their currencies no matter how you look at it.
Here we are in 2013, right back where we were in 2008… only worse, much worse. The derivatives mountain has scaled higher highs, debt burdens and ratios are far uglier, the collateral to the banking systems more hollowed out and the banks using pure fictional accounting to keep their doors open. Here we are nearly 5 years down the line and sovereign governments themselves are broke. So broke that “saving the banks” is no longer an option because the problems are too big and the treasuries to weak. There will be no more bailouts, now we look forward to governments “dipping” into account balances to save the banks while holding guns to our heads and telling us we can either lose it all or 80-90%. Take your pick.
I started this piece with “supply is first to go…then price.” 5 years out from the 2008 experience brings with it at least 2 things, more money sloshing around and less supply held to take care of the annual shortfall. There is an annual shortfall of somewhere around 1,500 tons per year between the demand of 4,000 tons and mine supply of roughly 2,500 tons. In the last 5 years it is safe to say that somewhere between 5,000 and 7,500 tons of (un)official Gold has been dishoarded. Of course, demand has now exploded again in the sellers face so the deficit is widening and delivery default is becoming a very real possibility. As I mentioned, there is more money sloshing around than there was 5 years ago… AT LEAST twice as much if you look at money supplies, debt outstanding and of course the always pointed to equity markets. More money chasing the same or lesser supply is the equation we have now in a financial system that is on far shakier ground than it has ever been. Like I said, “PRICE” is next to go!
Finally, a voice of reason! Actually, you’ve have a lot of reasoned responses too, but very one sided, I think this guy does a great job explaining the other side. http://sgtreport.com/2013/05/a-note-of-caution-to-our-silver-camp/#more-172104
This guy misses the point entirely, NO ONE knows “THE” day. The longer that paper prices trade at levels where physical gets gobbled up and shipped East, the sooner a default will occur. Look towards JP Morgan’s COMEX inventory drawdown as a perfect example and ABN Amro defaulting on even their “allocated” customers. We “sensationalists” as you call us, if we get just 1 person to purchase metal and they end up holding it to and through the coming collapse…we have done a service. And yes, I stand by what I wrote 2 weeks ago, the COMEX will default…it is only a matter of when. When the time comes, you will either own it or you won’t…are you willing to take the chance?
I’m not taking a chance. Supply is VERY low. I’m loading up on metals, especially with another smash this morning. Can’t believe I can buy Bison for under $30!
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Bill,
Great article as always. I sense there are a lot of people like Bob A. who are tired of people like Jim Sinclair officially calling that the bottom is in just to see paper prices massacred even further. I know I have made many purchases based on the belief of a prominent analyst who stated that prices will go to the moon from here. But I also know that there will come a day where I won’t really care what I paid for my bullion, I will simply be happy to have had the foresight to act and convert my fiat money into real money. I value people like yourself, Ranting Andy and yes the Jim Sinclair’s and Eric Sprott’s of the world because you are all doing a tremendously valuable service in trying to awaking the masses from their main stream media induced slumber. Thanks to Miles Franklin and so many other experts in this industry the word IS getting out to more and more people and that is what ultimately will result in much higher bullion prices. It is beyond me that not more people understand the danger of being “cyprused” or that they don’t understand how little physical Gold and Silver actually reamain during a time when global debt and toxic derivatives are growing exponentially. That’s why people like yourself, Ranting Andy and David Schectman are providing such an invaluable service. Every person who finally sees the truth now has the opportunity to save themselves from financial ruin. I am sure that Miles Franklin through their one-of-a-kind on-going education by some of the best writers in the business will have persuaded countless of individuals and families to protect themselves from an unavoidable financial calamity. And I have no doubt that you will save countless more before this all unravels. I salute you for that.
AK
Thanks, we try. Please see my next article that discusses further “No one could have seen this coming”.
I agree with AK, that thanks is due to Jim Sinclair, Eric Sprott, Rick Rule, et. al., for their message and frank discussions regarding the true state of world economy and he role of precious metals.
I think a lot of frustrated people are at the end of their patience!!! This is all part of the Psy Ops being waged by the powers that be against all stackers. As I have noted, the primary point of owning & holding gold and silver in my posession is – to have a reserve of true value, WHEN (not if) shit hits the fan !
Paper currency or Fiat money will still be used as the medium of exchange, except, it will require more fiat money of higher denominations to buy/sell the same quantity of Real Goods, such as food/energy/water … If we just hold paper currency, we lose a big portion of its value, whereas the gold/silver we keep retains its value (in terms of real goods).
I have lived in a 3rd world country where the money collapsed and prices increased 300% in about 4 months (from August 1983, due to a political event). It means everyone lost 75% of their purchasing power! I experienced going hungry, due to No Money.
When hyperinflation sets in, real goods’ prices go up drastically. WHat does not go up the same percentage is LABOR, especially non-essential/non-critical labor (e.g. massage, hair styling, facial, store clerk, etc.)
I want to stack, but will have to wait 1-2 more weeks before getting some cash to do so. This forced waiting period is very, very, hard!
Both you and AK “get it”.
I get it too of course. What I don’t get is how anyone with intellectual agility superior to that of a metal soap dish can fail to get it? Truly what they have to be able to believe in is something for nothing. They [Governments, the powers that be, The Fed] can prop it up with sticks for a time, but eventually the sticks will snap and it will all fall down. What will shock the citizens will be how fast this all happens, i.e. over night. As the saying goes, “caught with their pants down.”
What scares me is that this time there won’t be any bail outs. The real fix would have been to let things find their true level after the 2008 fiasco. But now the hole civilization will have to claw its way out of will be much-much deeper.
Then we will have true austerity. “If by hard times you mean there is bread but no cake I have no sympathy for you.” Henry David Thoreau