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Silver dipped below $36/oz. this morning, down about 8% from yesterday, and
down about 27% from the high last week of about $49.50/ per troy ounce.
(A Troy oz. is about 10% heavier than a the more common international
avoirdupois ounce.)
Some people are saying
"this is like 1980 all over again" and that silver will now
crash. Nothing could be further than the truth.
The truth is that the amount
of money they have printed up since 1980 is ten times higher, so if you
adjust for inflation, the peak price from 1980 should be more like $500/oz.
in today's dollars.
The next key difference is
that in 1980, interest rates, the amount paid on bonds, rose to over 20% per
year. Today, interest rates are close to zero. Interest rates
make holding bonds more attractive.
The next thing is that the US
government money printing driven inflation is just beginning, it's not
remotely close to ending. The US annual budget is about $3.8 trillion,
and the government collects about $2.2 trillion, leaving a gap of about $1.6
trillion that is met by money printing, which makes the value of the dollar
go down. (http://tinyurl.com/3ozdljx
(April 7th news item))
$1.6 trillion of new money can
also expressed as $1600 billion, or $1,600,000 million.
For comparison's sake, new
investment demand for physical silver last year was only 250 million ounces,
at, let's say an average of $35/oz., was just under $9 billion, or only $9000
million.
Silver is not in a bubble in
terms of prices.
The bubble in stocks in 1929
was caused by debt financing.
The bubble in housing in 2007
was caused by debt financing.
You cannot borrow money to buy
silver. Thus, silver is NOT in a bubble.
Exceptions: Yes, you can
borrow money to speculate in silver, but no silver is ever purchased at the
time that you purchase futures, or options on silver. And the futures
market is known for having an overall open interest of over 800 million oz.
of silver, while less than 40 million oz. of silver are available for delivery!
Yes, also certain private
firms, who have horrible reputations in my opinion, will let you borrow money
"to buy silver", but you must keep the silver with them, and it's
doubtful that they ever actually purchase the real silver either.
In silver's case, the
availability of debt, and use of leverage is used to prevent you, distract
you, dissuade you, from actually buying silver. This makes silver an
"anti-bubble"; the opposite of a bubble.
This article claims that
silver was worth about $1218/oz. in the Ancient Roman World!
http://networkedblogs.com/hojgP
One article last week noted
that "8 years of global Silver supply changed hands last
week". He could not calculate how much silver traded hands in the
OTC or "over the counter" markets that are unreported and
unregulated, which are typically 20 times larger than the visible markets
like the COMEX and the ETFs.
That article shows that the
amount of paper trading of silver has recently grown to perhaps 1000 times
larger than the real silver market.
At last week's rate of about
one year of global silver supply traded in a day, with 250 trading days in a
year, suggests 250 times as much paper silver trading than real silver, but
that's not counting the much larger OTC markets.
Again, with all the flurry of
news articles on silver this last month, nobody has mentioned the BIS report
that I've highlighted for the past 1-2 years that shows that world banks have
liabilities (that's debts) in "other precious metals" (mostly
silver) of anywhere from $100 to $200 billion, and that was way back when
silver was $20/oz. That's about 15 years of annual world production,
with swings into and out of the banking system of 8 years of annual
production in less than 6 months.
Thus, mostly all of the silver
in all major LBMA banks in the world is thus likely fake silver, all
fraudulent paper silver, nothing is real there. I would love to know
how much real silver they do have, as obviously, they have to have at least
some silver to function with their "fractional reserve silver
banking" that they do.
Thus if a bank holds your
silver, I'm 99% certain that they don't physically hold YOUR silver for you,
and that you know nothing about the real fundamentals of the silver market.
When you read that an
commentator or analyst is "long SLV" you can know for certain that
that commentator knows almost nothing about the silver market.
When debt is used to actually
buy real silver, the extra buying would artificially push the price up.
When banks actually owe silver
that they neglected to actually purchase, their lack of buying artificially
pushes the price down.
Again, silver is the opposite
of a bubble.
People have not yet learned
that silver is payment in full. Silver is not a promise to be
paid. Owning a promise to be paid in silver is about as bad as owning
paper dollars -- the value of both of which has (primarily and fundamentally)
only one way to go, which is down.
Government is in a
bubble. US paper money is in a bubble. The US bond market remains
in a bubble.
Somebody just posted to my
facebook, "everybody is selling out", "Soros is selling
his gold", etc.
No, the opposite is
true. Nobody was ever in.
The real fundamentals of
silver show that less than 6% of 1% of paper money in the USA even bought any
real silver last year.
That means that silver buying
would have to be 20 times more, just to get to about 1% of people buying
silver!
Silver the opposite of a
bubble. This dip will be brief. Silver at $200/oz. is still a
"price dip" compared to where the silver price is headed.
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