I really believe in the ratios. At least the ratios between silver and gold, which did get to 80 to 1 recently. As I write this drivel, the ratio is now 68.5 to 1. I honestly believe it will go to at least 35 to 1, or below. This means that with gold at $400. Silver would be close to $12. Historically, the ratios were 16 to 1, and were so, even in 1980, when the Hunt Brothers & Co, tried to corner the world’s silver supply. At 16 to 1, with $400 gold, silver would be $25. (Hey Hunts, now is the time to do it, because there isn’t much to get!)
That’s correct Jasper, there isn’t much to get. The US government used to have hundreds of tons of silver in its vaults, and many tons of gold too. They’ve got none now. The COMEX has damned little as well, and as a matter of fact, less than half of the contracts they so blatantly issue, are backed by physical silver. This is assuming they are telling the truth about their physical stock and they may not be. It seems as though so many people lie about their holdings, business, fish they catch, mileage they get in their cars, sexual conquests, rate of inflation, and hundreds of US government issued statistics, that no one actually knows the truth about anything. Maybe that’s why I feel so comfortable about physical holdings. They don’t depend on specious facts, questionable statistics, lies, and damned lies. I can touch and feel what I have, whereas holders of papers with ink on them, have to depend on the above.
I do know, however, that the physical stocks of silver are virtually nil. The US government regularly buys silver and gold to make its coins, as I have previously stated, and I cannot stress enough, the beauty of holding physical silver. I do not mean a warehouse receipt. Speaking of warehouse receipts, look at the history of the banking business. Back in the days of money being gold and silver, (they still are), and being used as such on a daily basis, with no paper money in circulation, people got tired of lugging around their gold and silver, so they placed them in a warehouse. Naturally, when placing something in a warehouse, one gets a receipt. If you trust the warehouse, the receipt is as good as the gold and silver. The receipts got to be traded as physical gold and silver, because they were much lighter. The warehouses became banks, and the receipts became checks.
Now look at the bank “warehouses.” When they make a loan, they just fill out the sheets, and deposit it in your account. They don’t have to have a red cent or a red dog dollar to back the loan, as they just created “money” out of thin air. Bank assets, are the loans they have, and your deposits are liabilities. That may be difficult to understand, because when you place your dollars in the bank, they should be assets to a bank right? They aren’t. Your deposits are a bank’s liability, because they owe you what you deposited. When they make a loan to you, that loan is an asset, because you owe the bank. You may default on a loan, and the bank still has it on their books as an “asset.” As a matter of fact, when nations default regularly on loans from the World Bank, IMF, or other such lending agency, these loans are kept on the books as an asset, even though they aren’t worth a plug nickel. See, the facts and statistics of just about everything, are suspect.
The IMF has trillions of dollars in “assets,” and trillions of dollars in failed loans, which they still keep on the books. Enron seemed to be so wonderful, as did Arthur Anderson, and the like, but the facts and statistics were fraudulent, and the stocks went to almost zero. I owned Silverado shares, and some gal blew the whistle on their stated facts, causing the stock to go from 73 cents to 23 cents, almost overnight. Their facts, as the CEO had stated them, were fake. I just love my physical, as it is the product of mines. Mines which have produced, not promised. Mines that turned it out, rather than boasted about their reserves. Lots of mines, many of which may have folded and gone the way of all flesh, but their output exists in the form of physical gold and silver which aren’t dependent on CEO’s lies, EPA, MSHA, OSHA, estimates of reserves, or other gobbledygook.
Getting back to silver and the ratios. Actually, I do believe that there is little silver around. Very little. The uses of it continue to grow, be it in sanitizing hospital heat ducts, (germs can’t live on silver) or wood preservation, silver’s uses grow, and there simply isn’t much of it around. It takes a mine a long time to go into production, and costs a lot of dollars to do so. When silver runs up to the point where it will be profitable to mine it, the time delay between the effort to open a mine, and production may be years. No one is going to start the chain of events that makes a mine profitable, until the price makes sense to do so. That could be a long time, and the lag time can be maddening for the mine’s owners, especially if they are impecunious. If they depend on their stock going up to get the dough to make the mine work, it could take even longer.
When the extant stock of silver runs out, those COMEX traders are toast, because they are trading silver that exists in their mind, not in the vaults. If people began taking delivery of those contracts, it would hustle the ultimate end along very nicely. That ultimate end, will be silver going up much higher, percentage wise, than gold.
Yesterday, I shipped out $39,000 worth of gold, and the postage was $16. At the same time I shipped out $4,000 worth of silver, and the postage was $61. Silver is heavy, and that’s why the spreads are so high about 50 cents per ounce. People do complain about the spreads, but the reason is its weight, compared to its value now at least. Consider: The silver for hundred ounce bars, has to go from the mine to the mill, to the smelter, to the refiner, to the producer, to the distributor, etc, and every shipment costs a bundle, because it is heavy, compared to gold. The insurance is cheap, because its value is low, but the weight makes postage and other shipments expensive. This means that silver has a spread of 10% per ounce now. As the price goes up, the spreads will decline, because the value in dollars will go up.
With silver, you break even at 50 cents per ounce increase, whereas with gold you break even with about a $4 per ounce increase. Big difference. As silver goes up faster than gold, the ratios will go down, and the spreads will too. Meantime, the fed is ’borrowing’ $104 billion this quarter, rather than the $76 billion it originally estimated. Next quarter, they estimate they will have to ’borrow’ $126 billion. In other words, the presses are running, and the money supply is zooming up. No one in Europe is buying Freddie Mac and Fannie Mae stock, and are dumping it like mad, because of the lack of honesty in their bookkeeping, plus they have little in assets, and tons of liabilities. Interest rates are going up, which means the re-fi business is over for the mortgage companies, and this will possibly slow the housing bubble. It is the housing bubble that is keeping the whole thing going. The stock market is going up, just like it did when it burst a couple of years ago. Why? Because the sheeple know nothing, and think they’ll remove their fading dollars from the dishonest banks, and put them in the overblown stock market. The Iraq debacle is costing, they say, a billion a week, and at least a life a day. Is this true, or babble? Whom does one trust? Whose statistics? Whose press releases? Ain’t life grand? Protect yourself.