February 2, 2017
We live in the era of the sound-bite. In
our televised news, every subject – no matter the complexity – is presented in
two minutes or less. Our newspapers are the print equivalent of the sound-bite.
TV programs exist which present longer
discussions of important subjects. News magazines exist which provide longer
print features. But no depth of understanding is gained from such sources.
Instead, we are simply bombarded with an agenda: the agenda of the handful of
which control (virtually) everything we see and hear.
For these reasons, most consumers of
information have no time to invest in “learning”. Feed them the bottom-line, or
stop wasting their time. Unfortunately, such an attitude will not get one very
far when investing in silver. Think of silver as a wild bronco. Learn what
before you climb on, or
you’re virtually guaranteed to take a nasty spill.
Why? Why is the silver market a difficult
(and dangerous) market for novices to attempt to navigate? In a word,
manipulation. The facts speak for themselves.
At the end of the 1980’s; the price of
silver was driven to (in real dollars) a 600-year low. While that final crash
in price occurred in relatively recent times, as that chart above indicates,
the assault on the price of silver began over a century ago.
Prior to that, for over 4,000 years; the
gold/silver price ratio averaged 15:1. This is no accident. The supply ratio of
silver to gold (in the Earth’s crust) occurs at a natural rate of 17:1. For
over 4,000 years; the price ratio has closely paralleled the supply ratio – for
these two precious metals.
Then the attack began. Readers wanting to
learn about the early era of silver manipulation can learn most from Charles
Savoie’s detailed chronology,
. After 4,000+ years of rational consistency in the price of
silver and the gold/silver price ratio, we see that ratio being skewed beyond
any rational extreme – at times exceeding 100:1.
In the years between the beginning of the
attack on silver and the present day, silver has become steadily more useful to
humanity – even
more “precious”. What
was the effect of dramatically manipulating the price of silver lower in a
world that still wanted and needed silver?
Simple economics gives us the answer. At a
radical price discount, silver was wildly over-consumed. Meanwhile, as the
price went lower and lower, less and less mining companies could afford to mine
this metal at a profit. By the time silver was driven to its 600-year low in
price, and held there, more than 90% of the world’s silver mining companies had
been driven out of business.
Esteemed silver researcher, Ted Butler,
estimates that over
of the world’s stockpiles of silver
– accumulated over 4,000 years – has
been (literally) consumed. How can a metal be “consumed”?
Silver is extremely potent in both chemical
and metallurgical terms, in the numerous hi- and low-tech commercial and
industrial applications in which it is used. In most of these applications,
silver is only required in tiny quantities. Because silver has been so
extremely under-priced, it has been uneconomical to recycle this silver.
It was “consumed” and then thrown away, in
small quantities, in billions of consumer goods, in land fills all over the
world. When silver and gold existed at a 17:1 supply ratio, the price ratio was
15:1. Today, the supply ratio is (at most) 5:1. Some
now insist that there is less silver in the world today (above ground) than
Given such parameters, a 1:1 price ratio is
not unreasonable. Yet as of the writing of this article, the current price
ratio exceeds 70:1. Many readers may be skeptical that they could/should
rationally expect a 7,000% appreciation in the value of silver
versus gold. Such readers may become
even more skeptical when they are told that the price of gold has also been
severely manipulated lower, making the potential upside for silver much greater
Central banks stand ready to lease gold in increasing
quantities should the price rise.
Testimony of Federal Reserve
Chairman Alan Greenspan,
This “leasing” of gold was above and beyond
the 500 tonnes per year of gold which the same central banks were dumping onto
the market every year to depress the price – until they ran out of gold. On a
pure supply/demand basis, silver is undervalued versus gold by 7,000%, and gold
itself is dramatically undervalued.
However, there is a totally separate metric
which investors can use in order to judge when (if) the price of silver should
ever be fully valued: mine production. For over 4,000 years; the gold/silver
price ratio averaged 15:1. For over 4,000 years; humanity got the vast majority
of its silver from
This is to be expected. With the exception
of extremely rare metals, we have always got the vast majority of all of our
metals from primary mines. We get most of our copper from copper mines. We get
most of our nickel from nickel mines. We get most of our gold from gold mines –
even at the current suppressed price.
We used to get most of our silver from
silver mines, until the Silver Stealers began their undeclared war against
silver, the Western bankers who are permanently, relentlessly manipulating the
price of silver lower. Today, we get roughly ¾ of our supply of silver as a
byproduct of other mining, primarily from gold mines, copper mines, and
If the price of silver was even close to
any rational level, many of the bankrupted silver mines would be able to
re-open their operations, and (eventually) we would once again get most of the
world’s silver from silver mines. This is the second sign post which investors
can use to gauge the relative price of silver.
As long as the world continues to get most
of its silver from byproduct production, it is impossible to argue that silver
has reached anything close to a rational/equilibrium price. It must continue to
rise to such a level to support a resurrection in primary silver mining.
Why? Because if this does not happen, we
will simply run out of silver – and soon. Ted Butler notes that the 90%
destruction of silver stockpiles dates back to the 1950’s. Previous
commentaries have established that the silver market has had a continuous
supply deficit which extends back
, or longer. There can’t be
much silver left.
Either the price of silver must rise to a
level sufficient to restore some level of health to the silver mining industry,
or the silver market will suffer a formal default – and the price will rise
much, much higher. However, there is even more that astute investors can deduce
from mining dynamics.
Because most of the world’s silver supply
comes from other mining, the supply of silver is highly inelastic. Even if the
price of silver rises by several multiples, it won’t cause copper miners to
mine more copper to obtain additional silver byproducts.
What this means is that even when the price
of silver starts to rise rapidly, there will be very little immediate supply
response. Here readers need to only review recent history. Even when the price
of silver spiked to a high of close to $50/oz (USD) in 2011,
the market was still in deficit.
Just as a few, new mines were beginning to
come online, the banksters crashed the silver market again, and many of those
mines never opened or closed again. Since then, costs have risen substantially.
The price of silver would have to rise above $50/oz USD and be
sustained at that level for several years
before we would begin to see a significant supply response from mining.
How many years? It can take up to 10 years
to go from discovering a new ore deposit to constructing and commissioning a
mine. Many of the bankrupted silver mines can (eventually) be brought back into
production. However, with many of these mines having been abandoned for decades,
it can still take 3 – 5 years to bring those back into production.
The supply of silver is highly inelastic.
So is the price. As previously noted, most of silver’s industrial/commercial uses
require only small quantities of silver. Thus even if the price should increase
by several multiples, it would not have a large impact on the final price of
There would be a low substitution-effect as
the price of silver rises, meaning very little drop-off in demand, even at much
higher prices. This is where substitution is even feasible. In many of the
applications for silver, it is considered irreplaceable. The U.S. military is
not going to stop using silver in its cruise missile guidance systems – even if
the price should spike above $1,000/oz.
Inelastic supply, inelastic price. For
investors, it is “the Perfect Storm.”
The price of silver should rise by 7,000% or more, denominated in these (worthless)
paper currencies. Given the unique supply/demand parameters of the silver
market, it is hard to imagine this market ever returning to balance before the
price has risen at least 1,000%.
This leaves one final lesson for investors
to learn in order to avoid being “thrown” from this wild bronco as the bankers
inflict their price-shocks on this market again and again. Why do they do it?
They do it to defend their worthless paper currencies.
have value only to the extent that they are strictly limited in supply.
said this a mere six
years before he
supply of U.S. dollars as Chairman of the Federal Reserve, removing any/all
value in the dollar. Silver and gold, as
, are our canaries in the
coal mine. Their rising prices warn us when corrupt bankers begin to debauch
paper currencies to worthlessness.
Kill the canaries, and it becomes possible for
the bankers to pawn-off their worthless currencies a little longer…until the
silver market defaults. This is the mission of the Western central banks who
have confessed to manipulating precious metals markets and Western bullion
banks which have been
caught manipulating the gold and silver markets.
are all part of a single crime syndicate, known to regular readers as
. These same banks have
of manipulating the
(worthless) dollar higher – going all the way back to 2008.
that the U.S. dollar is currently perched at a particularly absurd extreme
versus other currencies while gold and silver prices are being held down so low
would seem to indicate that this crime syndicate has no intention of relenting
on this racket
until the last ounce of
silver has vanished from global warehouses
. Suddenly, a 7,000% gain doesn’t
sound quite so outlandish.
Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.
The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.