Doesnt gold have a world price and isnt the price determined by the world and not necessarily by self absorbed narcisstic Americans? I think that most wealth in the world is outside the US, most disposable money is outside of the US, and that the gold price is determined mostly by non- American behavior. Further, it feels like a selling frenzy in the US because of constant advertisements by pawn dealers etc to "come in and sell your gold." Still further, I understand that (am I wrong?) the Chinese government is accumulating gold as fast as it can and actively encourages its citizens (via the media) to buy gold. Why arent these other factors more important in determining whether there is a gold bubble? I am not under the impression that the newly rich hard working value creating Americans are leading the world in bidding up or bidding down prices with all of their new found disposable wealth. I wonder if gold is in a renminbi bubble or even rupee bubble, while simultaneously perhaps not in a dollar bubble.
Mirv,I had a very similar thought (post #11) and Davos answered it reasonable well (post #13). I found the video Davos linked in that post to be quite helpful. It seems reasonable to me that the price of gold would increase sharply (based on fundamental reasons, not psychological) given all the currency that’s been printed in the world since 2008. More currency plus relatively constant gold supply leads to higher prices, right? Perhaps gold was just way undervalued amidst all the good times, and it is now correcting as more and more people become aware of the critical condition of the global economic situation. If you believe that we will return to some semblance of a gold standard, then gold is currently greatly undervalued given the amount of currency in circulation. If you don’t believe we will ever return to a gold standard, then you may want to figure out all the psychological and historical factors driving its perceived value. I can’t quite get my head around all that, but it does seem clear to me that dollars are not a good way to store wealth (dollar bubble?!?).
In a real SHTF situation I am convinced that a value for each coin denomination would quickly be established and I would accept them in exchange for one of my bottles if Jack Daniels.
Different coin dealer, different blogger, different results. Hmmmmm.
http://silverdoctors.blogspot.com/2012/03/local-coin-shop-open-thread-doc-visits.html
I agree with jbariz that the use of junk silver would be easy to re-establish. The coins are familiar and in most cases worn in a way that would be difficult to counterfeit. At least it would add an extra step into the process and discourage most metal scammers.
When and if we do trade in PMs the potential to be gypped is mind boggling.
Great post Davos. Don’t forget the ultimate bubble though that NEVER gets discussed in the MSM: the bond bubble (marketed as "the safest asset class of all), culminating its 30 year bull market with 0% interest rates that cannot go any lower.
Gold bubble? You have got to be kidding me.
Silver bubble? It will probably get hammered harder in the interim due to its industrial status but has higher long term appreciation prospects.
The ONLY things you need to have concern about in buying physical PM’s are: 1) will you be able to weather the storm without being forced to sell before they skyrocket, 2) confiscation / taxation issues (but you’d have taxation on any hard asset you buy to carry you through hyperinflation – that’s why debt may be an attractive option), 3) making sure someone doesn’t steal them.
I am curious what the ratio of buyers / sellers of PM’s would be in a more prosperous Western country like Canada with fewer distressed sellers.
[quote=cmartenson] During the 1980 silver spike, all forms of silver that were not in .999 form were discounted by dealers that had to contend with a very serious problem.
<snip>
Your choice, as a business-person is to either keep tying up your capital in a growing pile of unrefined silver even as prices are making you nervous, not accepting any more sub-0.999 silver, or offering a discounted bid.
While this next mania may well play out differently, and there may be less demand for COMEX deliverable material, we thought there would be some value in listening to a very smart man who happened ot be there, right in the thick of it all during the last mania.
Finally, to those that are jumping right over an entire stretch of probable history to "we’re going to be using junk silver for barter’ I would suggest that it’s quite likely that there’s a lot of territory between here and there, if we ever get there in our lifetimes. Also, if we do go there more quickly than I am thinking, then I would next suggest that we’ll have other more pressing problems than what the putative dollar exchange value of our coinage might be. Such as, there won’t be a dollar to compare our silver against and our economy will have largely collapsed.
As always, if a piece of information creates an emotional response it means that a belief is in play. Finding out what that belief is, and whether it is a limiting or enhancing belief is a good practice in these interesting times.
[/quote]
The peak in 1980 was caused by the Hunt Brothers trying to corner the silver market. Could they possibly have succeeded given the huge supposed stockpiles in government warehouses? (Remember that there were billions of ounces of silver in pre 1965 silver coins.) Were the Brothers to attempt the same feat today, would it be possible to succeed? According to Harvey Organ’s site http://harveyorgan.blogspot.com/
According to http://about.ag/futures.htm, a primer on financial terms "COMEX 101: All About the Gold and Silver Futures Market" (lots of interesting definitions here …), here are a couple of definitions:
[quote=about.ag/futures.htm]
Eligible - When referring to silver in a warehouse, it means that the silver is eligible for delivery (to a long that has a warehouse receipt, and is paying storage fees). See also Registered.
Registered - When referring to silver in a warehouse, it means that the silver is owned by COMEX and/or bullion banks, and can be bought by shorts for delivery. See also Eligible.
[/quote]
NOTE: Total inventories = Registered + Eligible
Currently, the silver price is $33.67 per ounce. To drain the "registered" silver out of COMEX would cost $1.16 Billion and to get the total inventory would cost $4.38 Billion. To put it in perspective, the US government has been borrowing approximately $4 Billion per day every day for the last several years.
I’m continually astonished that someone like Soros, Buffett, or China hasn’t tried to corner the market. I must be missing something (and I hope someone can point out my shortcomings.)
Nevertheless, I trust gold and silver much more than federal reserve notes. I use FRNs to transact business because they are still accepted and I’m not willing to part with my PMs yet. In order to currently use PMs, I’d need to sell them first to get FRNs. I’d then be liable for the taxes on the nominal increase that I realized by selling my PMs. Were I to directly use silver or gold bars, trinkets, or foreign coins, it would be considered barter and again, I’m liable for the net dollar value increase.
I have a mixture of gold and silver, but I’m more heavily weighted in silver simply because I expect silver will appreciate more than gold. I am more heavily weighted in pre 1965 coins due to the familiarity and potential for avoiding (not evading) taxes when I choose to spend (not trade) these coins. To accomplish this, I need a seller/vendor/merchant willing to reduce the sales price because my coins are worth more than paper promises or the "sandwich" currency that has been minted since 1965. Can they reduce the sales price? Sure. Will they? Sometimes, but not always. Am I at a serious disadvantage for choosing coins rather than bars? Perhaps, but unlikely. I can always walk away from the terms of their deal.
Are there downsides? Absolutely. You can’t eat precious metals. If nobody has what you need, you won’t be able to buy it … regardless of how much PM you have. Silver is much bulkier than gold. Fleeing with gold is much easier than fleeing with silver. Who knows what will be the preferred medium in the future (coins, bars, ASEs, Krugerrands, etc.)? Will silver be accepted for trade? — Nothing is risk free.
Bottom line - if you’re comfortable with the state of your preparations and you’re trying to save some of your current wealth to be used sometime in the future, what media are you going to use? I don’t see it as an emotional issue.
Grover
I wouldn’t put too much weight on COMEX numbers, they are likely heavily manipulated. I presume that the reason no one forces a default is because of intimidation and because silver is still being mined out of the ground. They are trying to accumulate while they still can. Just my thoughts.
[quote=Grover]
[quote=cmartenson]
I’m continually astonished that someone like Soros, Buffett, or China hasn’t tried to corner the market. I must be missing something (and I hope someone can point out my shortcomings.)Grover [/quote]
Grover, I think those 2 are afraid of Blythe the queen master of paper with an unlimited digitial line of FR credit—who essentially trades the amount of physical silver actually available for investment, 891 times over each day!
Also, who the heck knows what China is buying. They are framing out a 25% renewable power supply—to acheive this they are buying silver, copper and other resources directly from mines.
Davos, that’s why I thinik that in the medium to long term it won’t matter what form your silver is in because of its high demand from industrial users. If our only realistic alternative energy strategy going forward is solar then the demand for silver from that application alone will be astounding. So in the short term, yes we may find that junk silver might not be accepted as much as we’d like during a crisis, but in the long term, silver is silver so even lead free solder may become very valuable (3% silver).
I haven’t been following CM for very long, but IMHO this topic or discussion has provided some of the best ever of CM forums.
I think I’ve learned a lot, although I’m still not sure that I know anything!
BTW: Let’s don’t forget silver still underground.
Sherman,
You are probably right. The queen demands much respect. Nevertheless, if all the available inventory were to be removed from COMEX, wouldn’t her magic wand magically turn to rubber? Her clothes would suddenly appear to be invisible. What other mainstream PM viaducts are there?
Mark_BC,
I agree that the COMEX is manipulated beyond belief. Unfortunately, most of the decision makers look to see which tune COMEX is playing. That alone means that COMEX controls much more influence than they deserve.
I agree that China and India and other accumulators are gathering as much PM as they can without trying to attract attention. When (or if) do they decide they have enough in their possession (meaning that it isn’t worth prolonging the charade to gather more) and start the end game so they can cash in their winnings? That is what I’m waiting for.
Grover
+1
Physical will determine the price.
Link to Jesse’s Cafe’ for the entire read. Ms Masters gained notoriety for pioneering credit default swaps, blamed by many for the financial crisis. She acknowledged in a 2008 speech that she had been branded “the woman who created weapons of mass destruction”, although she defends the products, saying the people using them were at fault.
✓ “One thing we know about people individuals high in psychopathy, through the literature, they don’t think there is anything wrong with them—it’s just the rest of the world that is screwed up.” (Source). Just saying…
"Blythe … with an unlimited digitial line of FR credit – who essentially trades the amount of physical silver actually available for investment, 891 times over each day."
Yeah, all that computer automated trading by the huge moneys. WTF (pardon my English). Whither The Fundamentals? And then the CDSs. Some dollars are more equal than other dollars.
The NYT guy has written about this, whether gold follows the ‘laws’ for commodity markets or the ‘laws’ for currency markets or the Hoteling model – one of many problems with the concept of a gold standard for the 21st Century. The gold standard … and that’s how we will get to markets that are not manipulated by TPTB ??? Meanwhile, I guess everything follows the "laws" of Queen Blythe.
I watch the gold-silver price ratio. To me, that’s what it’s all about. There’s like one of those lines – is it resistance or is it support? I mean gold-silver at 50.
BTW: About unlimited digital line of FR credit. Check out this little-known provision of the American Monetary Act – YES, eliminate FR banking! What a concept!
Check out recent pre-publication online release of a chapter from upcoming book by Greg Coleridge on impact of the FR banking system (to be published by American Monetary Institute) –
createrealdemocracy.blogspot.com/2012/02/banking-political-influence-how.html
beginning with this quote –
"And the banks – hard to believe in a time when we’re facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." – Dick Durbin, US Senator, Illinois, 2009
I wanted to post this somewhere and here looks pretty good. I get a free newsletter that offers advice and seminars on ex-patting (not in the cards for me). She posted these three example, with number two being possibly relevant to a bunch of CM readers. Then Google "structuring" and see how the IRS is screwing guy #2. Are we living in a developing fascist state or what?CS
"Here are three examples from my experience. There are hundreds of similar cases being argued throughout the United States right now.
Example #1: Offshore Account
"I know a single father of three who makes about US$80,000 a year as a self-employed consultant. Eight years ago, he moved some money offshore, to diversify and for asset protection. He never filed the necessary IRS forms, and he failed to report the account on his tax return.
"Unfortunately for him, the account was at UBS Switzerland. He was reported to the IRS, which has decided to prosecute him.
"Here is the rub: He did not have any unreported or untaxed income…which is to say, the account did not earn any interest, and the guy would not have had to pay any additional U.S. tax had he reported it.
"That’s irrelevant now. In settlement negotiations, the man is facing up to one year in jail and a fine of US$540,000.
"He has little money left and will never be able to pay the fine. What is the point of the prosecution? The IRS gets to issue a press release showing a conviction in this city. This press release will forget to mention that there is no tax loss in the case, but it may induce many others to come forward…thereby increasing revenues on the back of an everyday citizen who made a mistake.
Example #2: Cash Transactions
"A retired U.S. citizen I know, living in California, age 60, is concerned about a major devaluation of the U.S. dollar. He decided a while ago that he wanted to purchase gold. He owns a condo with some equity and has a few hundred thousand dollars in retirement money.
"As a regular guy, he can’t afford to buy large amounts of gold bullion, so he purchased gold coins from a local dealer. He paid cash for these coins so the dealer would not have to wait for a check to clear before handing over the merchandise. He has never sold any of his coins, thus there is no tax issue.
"What did he do wrong? He took cash out of his account once or twice a week, always less than US$10,000 at a time, to make the gold purchases. To the IRS, this can qualify as "Structuring," which is a crime.
"The man’s bank sent two suspicious transaction reports to the IRS and closed his account. He had been a client of this bank for more than 30 years, yet the bank made no effort to warn him in advance of the reports they made to the IRS or to offer any assistance. They just turned him in.
"As a result, the man is looking at a fine of up to US$100,000 and possible criminal charges that could incarcerate him for up to five years. Add to this a minimum of US$100,000 in potential legal fees, and the reality for this guy is that he and his family could be wiped out. Again, this is all the result of an innocent mistake.
Example #3: Dual Citizen
"Another client is a 55-year-old engineer who has been working at the same job for 20 years. He is a dual citizen of the United States and the United Kingdom. When he moved to the States, he rented out his U.K. home. Ever since, he has deposited this rental income in a U.K. account.
"The man has filed tax returns in the U.K. reporting the rental property, but he did not report it, or the U.K. account, to the IRS. Had he reported the property and the related rental income all along, it would not have made any tax difference in the United States. In fact, reporting the rental could have reduced his U.S. tax, thanks to the depreciation he could have claimed.
"In 2009, this man learned of the requirement to file an FBAR form and entered the IRS Voluntary Disclosure Program. As a result, this story has a happier ending than the others. This guy will not face criminal charges. He will, though, pay a fine of approximately US$22,000.
"Cases like these and the hundreds of others currently being argued have changed the way that tax attorneys deal with clients. While we once would say, ‘Come clean, be honest, and let’s get through this,’ now we advise, ‘Be afraid…be very afraid.’
"It is this culture of fear that is pushing many Americans to look around the world for places where they might live better, freer, and less fearfully.
"I’ll note that these changes are not the result of one political party or another. They represent a permanent change in perspective by the U.S. government in general, in how both parties view their citizens. Changes to the tax laws, and in the ways the laws are interpreted, began under George Bush II with the Patriot Act and continue under Barack Obama with the Bank Secrecy Act and the HIRE Act.
"In the face of a troubled U.S. economy and out-of-control spending, the U.S. government desperately needs to expand its tax revenues, and the IRS has decided that it can raise more money with fear and violence than with honey.