Silver Shortage??????

[Catbert]

I saw this on an investing message board and want to get your opinion on whether you see a silver shortage. Here ya go:

 

Interesting Article on Physical Silver Shortage

Supply and demand figures on silver are about at clear as the Mississippi River. Jason Hommel is a respected author concerning silver. Open interest of the silver futures contract is 155,000. Many will be spreaders but lets say 120,000 contracts are not. This represents 600 million ounces of silver that the major shorts have sold. I have heard of spurratic shortages but not to the extent that this article highlights. Silver longs need to ask for delivery and store in somewhere else than Comex. Should they do this, an 80's style Hunt brothers silver price surge could happen. What is different today than then is government stockpiles of silver was in the billions. Now only about 150 million ounces is left.

 

 

***************************************************************************************************************************

 

Silver Shortage: 19 dealers reported "Sold Out"

 

By: Jason Hommel, Silver Stock Report

 

You know me, I don't send out two emails in one day, so this must be important. Since my email earlier tonight, where I reported that 5-6 major silver dealers (Amark, Tulving, 2 in Vancouver, my local dealer, NWT Mint) are "out of inventory", 13 more reports came in, saying that the dealers were out of silver inventory. Some of these names are big names in the business, Scotia bank, the Perth Mint in Australia, CNI Numismatics in LA, APMEX says they have some items, but are looking to buy.

 

If there are any coin dealers or bullion shops that have an inventory, in stock, of more than 100, 100 oz. bars, let me know, and I'll give you FREE Advertising within 24 hours in my next newsletter.

 

Robert Mish reports that he has 100 x 100 oz. bars still, but he had 250 bars last week.

Mish International

Menlo Park

650-324-9110

 

Now think: How can the silver price drop by nearly $2/oz., when all these reports come in saying that the dealers are sold out, or nearly out, of physical silver? This is the clearest evidence of paper short selling manipulation that I've ever seen since I started watching the silver market back in 1999, and I've seen a lot of evidence!

 

Unfortunately, the COT reports only report through Tuesday. This Wednesday's action will not be revealed in the COT's until next Friday.

 

The public switched and turned buyers after gold hit $1000/oz. The coin shops normally sell to the refineries, and this creates a large part of the ~250 million oz. of silver recycling each year that meets the deficit between ~650 million oz. mine supply, and ~1000 million oz. demanded by inventory.

 

But now, this flow of silver just reversed. And if the refineries are not getting silver from the coin shops, industry will get squeezed, hard, and so will the major short sellers on the COMEX.

 

This is crunch time. Panic time.

 

The unedited reports follow (Names removed for privacy.)

 

===============

 

Coin shop report from St. Louis, MO. I shop at Missouri Coin and have purchased bulk 10oz bars (20 at a time) on several occasions. I went shopping yesterday and they only had 9 10oz bars available and the owner commented that he cannot find more anywhere. He was out of 10oz bars when I left...

 

I ended up picking up a bag of quarters as well since they didn't have the bar stock I was looking for.

 

A crunch is on.

 

J in St. Louis

=============

 

From: Ainslie Bullion Coy [mailto:info@ainsliebullion.com.au]

Sent: Thursday, 20 March 2008 10:53 AM

To: 'Linda Wagner'

Subject: RE: price

 

Sorry, I can’t quote silver until the middle of next month.

 

The supplier won’t quote until then

 

Kind regards

 

Geoff

 

 

Ainslie Bullion Company

GPO Box 1870

Brisbane Qld 4001

Tel: +61 7 3221 0500

Fax: +61 7 3229 1895

 

=============

 

Jason,

 

My coin dealer is in Bakersfield CA. Mike's Coin and Stamp. My wife and I went in on monday and bought 4 100 oz. bars. Said he had a good supply of those. I also wanted some smaller bars and I wiped him out. Only 160 oz total. He says he can't keep them in stock very long before someone comes in and empties his supply. He's having a hard time getting replacements. He's the largest dealer in the area and very trustworthy. We also bought gold. At least some people seem to be taking serious what's going on.

 

 

 

H

 

=============

 

HI Jason:

 

CNI near the L.A. airport at www.golddealer.com is the dealer I have used....They were out of silver today also...

 

E

 

(CNI is a major dealer --Jason)

 

=============

 

Jason,

 

Just placed another order with Perth Mint, they are out of stock on everything, however there waiting period is no longer 6 months (Im guessing they received alot of complaints) its now 6-8 weeks.

 

Just got off the phone with them, they have no bullion in stock, its all on backorder, the official excuse is that it takes along time to make the bars and everyone wants them, could be viiewed as a good thing knowing demand is high, but I personaly dont like waiting 6-8 weeks for delivery.

 

I contacted several other dealers in Sydney, only 1 out of 5 has stock...... Everyone has back orders with PM which is the distributor.

 

Regards,

S

 

=============

APMEX reports, at apmex.com

 

Due to the OVERWHELMING demand for precious metals, our online ordering system has been unable to keep up with our customers’ needs. We have had to disable the APMEX ordering system to allow us ample time to upgrade our site to accommodate the increased demand. We apologize for this temporary problem.

. . .

 

P.S. We are actively looking for new bullion inventory to purchase. If you have items that total $2,500 or more and are interested in selling, please call our trading offices at the number listed above. We are paying strong numbers for ALL Precious Metals!

 

=============

 

I want to tell you that your site is very helpfull and,i believe what you are doing,nice job in telling people about GOD money.I am a very smol investor, and i have in my posesion until now around 2000 ounces of silver bars,10 ounces and 50 ounces bars.Tuesday the 18. at scotia bank they did not have enouf silver.I wanted to buy but the vault was empty,they had only coins.And today is 19...19..This evil people work with numbers.They have dates for everything.19 is an important number for the ocult.All the best.GOD bless you and your family.

 

=============

 

Hello,

This past Monday I wired funds to purchase eleven 1,000 oz bullion bars from my dealer who I have purchased & sold sizable silver orders several times before. He called Monday afternoon and stated that none of his suppliers had any 1,000 ounce bars available, but not to worry, the next day they would probably have eleven bars to fill my order.

 

Tuesday, he called again, stating still none had bullion except one person had some, but he would only sell them at a ten cent premium over the dealer stated price or $1,100 more. I am a long term holder so I bought them just to have the silver in my depository possession.

 

By the way, my dealer is a high quality company and individual and he also stated he was flat covered over all day with transactions with people like myself buying silver. I also wonder with this condition, why the silver went down, and can't help to think about Ted Butlers assertion.

 

Cheers

FH

 

=============

 

Ordered 100 oz. from them early Jan. due to deliver this Friday. Way too long. My dealer in Arlington Texas is almost out of silver. Probably only has about 1000 oz. left. I will be taking some of that off his hands tomorrow.

Love your reports!

Have a great day

B

 

=============

 

mEDFORD ORE WAS OUT HAD A LINE WANTING TO PURCHASE

 

=============

 

Mr. Hommel,

 

I live in a small town of 16,000 In S. Illinois. I stopped by my local coin shop to pick up some Silver Eagles, and the cases were empty, except for numismatic value coins. He stated he had sold over 600+ Eagles in the last week and was waiting to receive more. I thought that to be a good indicator for the future direction of Silver. I also want to tip my hat to James Rawles for pointing me in your direction. Your e-mails are part of my recommended reading to my friends.

 

Thank you, RG

 

 

"Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety." Benjamin Franklin

 

=============

 

Jason,

I called the most consistent coin dealer in Memphis Monday. I like junk silver.

I could not buy a bag at any price. I was offered 5 100 once bars, period.

He stated that he hates ordering bags as the cost leaves him with indigestion.

Usually he is buying junk on a regular basis. At this time there seems to be

NO SELLERS.

Your old homie now in the Ozarks,

goatman

 

=============

 

Locally the dealers I've done business with are always in chronic tight supply and several of them recently couldn't fill a tiny $1,000 deal, let alone what I wanted to buy. I have bought hundreds of times but never more than 7461 ounces at a time. Got it from Bill Haynes in Phoenix. I was buying 90% when it was at 3.24x face and know it's still badly undervalued. I almost felt bad when a lady came in with bags of Franklins and she heard me tell the dealer I wanted them, her heart sunk, but it wasn't me that made her sell the gem BU coins. That's how quick the turnaround is. When investors go on waiting lists for hard metal, I believe it will cause the mining shares to finally zoom. We have several stupid billionaires in Dallas-Fort Worth and I wish they'd try to take a big position---it would benefit me!

 

--CS

 

=============

 

Again, to get silver, make sure you go local, take cash, and get the actual bars, if they have any! At this point, it matters little which product, just get any silver that they have that is somewhat close to the spot price, rounds, bars, odd weight bars, anything.

 

http://find-your-local-coin-shop.com/

 

It was for the inevitable time like this that I diligently complied the names of people in the industry who have 100,000 oz. of silver. I have 5 names on my list, but one of those 5, CNI, is now reported to be out. I don't know about the other 4; I've heard no reports about them. See the list of large dealers at http://find-your-local-coin-shop.com/

 

Sincerely,

 

Jason Hommel

 

 

[World Colonial]

I did not read your entire post because it is too long. However, here are my comments to a couple of your items.

 

I do not see how you get the 120,000 short interest out of the figures you cite. In fact, I have never heard of short interest being reported on silver or any commodity and to my knowledge, it does not even make any sense. Futures contracts are temporary contracts. It's not like a stock where once it is issued it exists "forever" where someone can borrow it and sell it short and where the relative change versus historical trends might make the current short interest level meaningful.

 

Futures contracts are either created to speculate or hedge and from the publicly reported numbers at least (open interest and trading volume) it is not possible to know whether any, some or most of it represents speculation or hedging. Now it is true that the open interest can be a worthwhile indicator of interest or lack of it, but not as a shortage of the metal because to my knowledge, most buyer's of silver futures contracts (or most others) do not take physical delivery.

 

In the stock market, "high" short interest can be meaningful because it can lead to a "short squeeze" particularly if the public float is small. With silver, that could only realistically happen if the buyers of these contracts tried to create a "short squeeze" by taking physical delivery which would force the short sellers to actually go out and buy the physical metal to close out their positions. That is a question of intent and has nothing to do with the reported numbers.

 

On your other comments about your local dealer, if this is being used as an example that because his inventory or those of other dealers are "low" and that this is the result of a silver "shortage", I do not consider that valid. I'm not sure how long you have been following this market but what I can tell you is that there either is or at least was a supply deficit for years from at least the mid 1980's to I do not know exactly when; it could exist now. But until 2001, it did not make one bit of difference because if it did, then prices would not have crashed to $3.50oz. This supposed "reason" for a future price increase in silver was a rationalization. Silver prices have been rising since 2001 because of both rising physical demand and far more importatnly, increased speculation. The latter is due entirely to bullish psychology and the "reason" does not matter.

 

 

 

 

[Catbert]

World Colonial:

 

First off, you are right, it was too long a post and I should have summarized.

 

Second, the comments were not mine, just something I excerpted from an investor message board.

 

I was looking for reaction....thanks for yours!

[CHABSENTIA]

This rumor about a scarce silver supply has been going on for abou twenty years.

 

fifteen or twenty years ago , SIlver was going to become scarce becuae of the rising demand for Photography and the fact that it was needed for it. There has always been some rumor .

 

There was a freeze here in Florida about 15 or twenty years ago.It got so cold that people that had such things as Water to AIr Heat pumps had the water freeze in the hose because it got so cold and damaged the water pumps.I knew a guy that owned a plumbing business here. He said that the Plumbers and air conditioning people went out and bought up all the available water pumps as they knew the freeze was coming.

 

When people lost there pumps they couldn;t find a water pump is stock.The few that had them jacked up the prices and others had to deal with the Plumbers etc.

 

Maybe the Dealers with the higher price of Gold and the rise in Silver prices are holding back. The prices that are quoted are the prices of Silver in temporary contracts and they probably see something else more apparent

 

There is a large Inventory of Oil byt the available refineries can only process about 85% of it on the avaerage and when they shut sown for maintenance there is even less pricessing so even if you could trople the supply the prices are going to be high because there is an artificial demand.

 

 

 

What ou might see is an artificial shortage.

[CHABSENTIA]

World Colonial is correct. People vary rarely take physical possession of this contracts if at all.

 

I would also be very suspicious of anything I read on an Investor Board.Many are unknowledegeable and some have questionable intentions.

[RWB]

What holy drivel..."pump & dump"

[jtryka]

A minor point on World Colonial's post, commodities can be shorted, and unlike the stock market, for every long contract, there must be a short side to the trade (I won't bore you with the details of how dealers hedge the short exposure). A short commodities contract requires you to do one of two things before expiration, either 1) deliver the commodity specified in the contract or 2) repurchase the contract at a later date at the then-current market price to close out the trade. Most hedgers and speculators opt for #2, however opting for that basically requires that the ultimate investor on the long side also opts for #2 rather than taking delivery. If for example, every long contract holder wanted delivery of the commodity, the short side of the trade could not effectively close out their positions without bidding up the price to huge levels where the longs would take the cash instead of the commodity. In this case the shorts would have to buy good deliverable commodities in the cash market to make the delivery (or if they were a bona fide hedger, to just make delivery from their production). That is the danger of a concentrated short position in any commodity.

 

Oh, and as for a shortage, I was at our coin club's annual show on Saturday, and of the 10 dealers there, only one had any 2008 silver eagles.

[World Colonial]

You are correct. You just said it better than I did. For every "long" position in futures, there is a corresponding "short". Its impossible to have one without the other. That is why I consider any analysis of "short interest" in commodities to be meaningless as opposed to stocks.

 

I also agree that that the intent of this type of message board needs to be questioned. Just like other areas or industry organizations (think National Association of Realtors), you will never meet a metals outfit that does not think that the best time ever to buy is right now.

 

Whether there is a shortage of specific silver such as eagles or small bars, there is no shortage of silver in total as long as pricing is set by the market. That's how supply and demand are kept in balance in any market. CHABSENTIA's comparison to the oil industry is a good one and a similar reason could account for why particular items are not available.

[jtryka]

The main difference in the original post is the assertion that because about 8 major firms make up the vast majority of the concentrated short side, that the market is in fact not determining the price, rather the shorts are determining a "market price" that is below what the true market would bear. Whether you believe that or not is up to you. To me, the biggest evidence for the short manipulation is that there is vastly less supply of silver available from official sources today than there was during the Hunt brothers' fiasco. If the mint still had a billion or so ounces of silver, then I would say we are overbought, but they don't, and have been buying on the open market for the last 5 years or so. You can believe what you want and buy what you want, but in my opinion, silver is still vastly undervalued.

[cladking]

There is probably less silver in the world than gold!!!

 

This has come about so gradually that few noticed. People are starting to notice and they are buying metal. There is not enough metal to supply all those buying at this time.

 

So long as investment demand continues to grow there is no foreseeable time in the future that there will be enough silver. Indeed, at some point users are likely to try to increase their holdings because most have only a few day supply.

 

There are more than 400 million ounces of shorts on the marjket. Of course every one of these short contracts is matched by someone who in long. These longs believe they own silver and will profit in a run up but this would not be possible if silver had an explosive price increase because there is NO SILVER backing these contracts; just a promise to deliver. These promises will go unfilled if the issuer goes under. For years the issuers have just steadily increased the amount of silver they sell to keep the price in check.

 

This ploy is failing.

[CHABSENTIA]

I was out of the Country when the Hunt Brothers tried to corner the Silver Market and came back in the midst of it and was really not as experienced as I am today, I did have some Morgans that I sold at the top of it and that I wished I had not sold now.

 

My Understanding of it was that the Hunt Brothers had the Money to commit to it which would not be the average situation and that the Government changed the rules which resulted in its collapse.At any rate, it was definitely a deliberate artificial rise.There was also some specuation that they were singled out because of their Political beliefs.

 

 

I have noticed on Teletrade that there are a much less proportion of Silver Eagles being offered than Morgan Dollars but I don't know if this is the Norm or not.I have noticed on Ebay that there is plentiful offerings of the Bald Eagle Commemorative in both Proof and Mint State. I suspect that is because it is the most recent in production. I have noticed that there is not as many 2007 Silver Eagles as there was last year by a large percentage.

 

What seems strange is that this has been relatively sudden in the last few weeks which I suspect is a combination of people hoarding silver and silver related items as a result of its rise and a possible artificial shortage by at least some dealers sitting on Inventory in the hopes of a better price.Remember the long gas lines when people thought there was an increasein the price or a shortage? Look at Hurricane prone areas where people know a Hurricane is imminent.

 

What I don't know is the percentage of the various combinations that are contributing to it.

 

 

[jtryka]

The irony is that the 8 largest shorts have a position that dwarfs the Hunt Brothers by an order of magnitude, yet the regulators don't see a problem with that! I have also heard a rumor that the mint has ceased production of silver eagles due to a shortage of planchets.

[World Colonial]

I doubt that and I would like to see the evidence to prove it. Its true that most gold is stored in fabricated form while silver is used in industry, that's why gold is a monetary metal while silver is more industrial than monetary metal.

 

But if and when silver prices rise "significantly", then a lot of it that is believed to be "lost" will become available on the market. Much or most of it will be scrap which is currently not worth bothering with but will be with higher prices. Countries such as India have also been rumored to be hoarders of the metal.

 

The comments you make about the longs I agree with in one sense. Owning a paper equivalent is never the same thing as owning the metal and yes, its true that in a "buying panic" that those who thought they owned the metal will find out that they do not.

 

I'm also not sure what you mean by the issuers keeping the price in check. Its possible that some hedge funds or other speculators are increasing their bets and trying to keep prices lower.

[World Colonial]

My opinion on silver is that it is "overbought" from a technical standpoint shorter term and from a historical standpoint, the recent parabolical move in its price is consistent with that opinion. So is the recent "correction" which was sharp and quick.

 

Longer term, I am bullish and I have said so in many prior posts on this topic. I've also said that if someone wants to buy it as a form of money, that they should do so. But if someone is interested in speculating on the USD price of the metal, I would advise against it at today's prices because I believe they are likely to find a better entry point. I'm not interested in taking the same side of the trade as the 97% of the speculators who were bullish in the recent Commitment Of Traders Report.

 

As for silver being undervalued,, I agree that it is relatively undervalued against the USD and other fiat currencies. Even at a price of about $17, its less expensive in purchasing power terms than it was in May of 1976. I remember picking up a local coin dealer's price list and silver was selling at about $6.

[cladking]

 

I'm also not sure what you mean by the issuers keeping the price in check. Its possible that some hedge funds or other speculators are increasing their bets and trying to keep prices lower.

 

 

I'm referring to the issuers of the paper. ie- the shorts.

 

They sell these contracts into the face of rising demand in order to decrease the price. When the price falls they make huge profits by buying back cheap silver to fullfill the contract. This worked well for many years and they made lots of money but every year there was less silver in the world. This real shortage has relentlessly led to higher prices. Certainly other trends have been at play as well to drive prices higher in dollar terms. As prices increase they are trapped by their mammouth position, apparently, to continue to push this paper.

 

The biggest problem might be that people are waking up to the real situation. Since the silver doesn't exist they are demanding the physical metal which is severely crimping supplies. There are still a net 400,000,000 Oz long position which is likely to be either liquidated or repudiated that could come into this market almost overnight.

 

It's too early to say with certainty that silver must go much higher but it's difficult to see how this can unwind any other way. Obviously the bulls can be stampeded and a recession can reduce demand and effectively increase supply but both these scenarios seem unlikely. The total value of silver in the world is a mere pittance compared to capital markets or other commodity markets. It simply wouldn't take much demand to stand these markets on their ears and this seems to be happening right now.

[just-john]

Shortages in Silver or Gold are false .The price for silver and gold don't pay enough to make mine profitable .80+% of all the gold and silver is still in the ground.Heck it's a byproduct in Arizona copper mining at Freeport-McMoRan Copper & Gold Inc.,When the price goes up and stays up you will be able to buy all you want

GOLD /SILVER are up for one reason people are scared of the future.When the government gives everybody a 3 to 6 hundred dollar rebate and tells them to spend it??Not save it or pay off your credit card dept but spend it .That means their scared too

[cladking]

If silver is a by-product then the implication is that the miners are making much more on copper. If they are making so much on copper then why would they mine more silver and cause the copper price to crash with all the increased production? Won't they always get far more copper than silver?

 

If you're scared of the economy then consider that a weak economy would cause copper prices to plummet and even if silver went up then supply would still go down.

 

Indeed, products containing silver tend to be a little more recession proof so we could see investor buying, greatly decreased production, and consumption which is hardly affected.

[World Colonial]

I do not believe there is a shortage either in the sense that there is less of the metal available in total, what is happening is that people are hoarding it including for some of the reasons mentioned here.

 

I completely agree that the price rise is primarily based upon psychology, especially for gold. This is a reflection of the lack of confidence in fiat currencies and the financial system as a whole. It isn't really that the financial system is in actuality less stable than it was before though that is widely believed. The system we have has always been a house of cards and a giant ponzi scheme that I believe is destined to collapse. It a question of how and when.

[cladking]

I do not believe there is a shortage either in the sense that there is less of the metal available in total, what is happening is that people are hoarding it including for some of the reasons mentioned here.

 

I completely agree that the price rise is primarily based upon psychology, especially for gold. This is a reflection of the lack of confidence in fiat currencies and the financial system as a whole. It isn't really that the financial system is in actuality less stable than it was before though that is widely believed. The system we have has always been a house of cards and a giant ponzi scheme that I believe is destined to collapse. It a question of how and when.

 

 

 

I don't disagree but see this from an entirely different perspective.

 

If no one wanted silver except the users then it would probably take two decades or more before they ran out except for new production and the silver would have to be rationed. But people do want silver and the primary reason is that they are coming to see how scarce it is. Everybody has to compete for it through price. This is related far more to the growing awareness of scarcity than to peoples' concerns about the economy. If the primary concern were currency or debt then they'd be concentrating on gold and beef futures, not silver.

 

Since the amount of money dwarfs the amount of silver there is some possibility that the price move can be explosive.

 

Given time, everything fails, just as the US hard money system failed in 1913 and the vestiges were removed in a series of steps until 1971. It has hardly been established that our currency is failing since it still buys Yen, Rubles, and Pounds. If it does fail then you can put the blame square on we the people who willingly decide between those who would increase spending and those who would cut taxes to lead us.

 

Fiat currency is actually far more stable and less disruptive to the economy than any hard money currency could ever be. The confidence in hard money can evaporate overnight but fiat currencies always go out with a whimper. In a modern economy when all the necessities of survival come from factories which run on currency which would you rather have?

 

 

[CHABSENTIA]

I just received my Silver State quarters via my subscription from the U.S. Mint Yesterday.They are still selling the Bald Eagle in both the Proof and Uncirculated Silver $1.00 versions . They are still selling the S.A.E Eagle as of yesterday.I have heard nothing or received nothing that suggested the U.S Mint has ceased production of anything for any reason.

 

The Hunt Brothers claimed at the time that they were singled out because of Certain Political views. I know of no prrof either way on that. I guess it would depend on the people in charge of the show such as the S.E.C. I have no confidence in any of them The SEC has allowed the process of "naked shorting" to go on for soem time in Stocks.

[CHABSENTIA]

Silver is seen as some as "the poor mans gold".In Italy gold is used as a means to an end for many things,The Italians are big hoarders of Gold for many reasons. In Italy when the first male son is born to a family it is the custom to buy them something made of gold. All economic levels hoard it. Vacation time at the Beach is a big deal during the summer and people will hock their gold at a pawnshop and then when they come back to work they will buy it back.This is just one of the many uses. They turn up their nose at the the 18K gold which they refer to as inferior,.

 

 

I suspect that you are correct in veiwing the recent trend as technical but it is a combination of many different things.People that can't afford to pay $1000.00 an ounce for Gold are buying Silver as a hedge against inflation and what they see as a further price rise so as to make a profit.I beleive that Silver and bullion for the most part are sold as 1oz. and 10 oz bars. This would expalin a shortage by a previous poster in this form.

 

I have been thinking of selling off some of my superflous silver coins but am going to hold off for now. I am reasonably sure that others are also holding off suspecting that the price of Silver will rise further.I suspect that some large dealers are also holding off for the same reason and actions by Ampex is to consolidate and sell only to their previous customers both to prevenr anybody and everybody from accumulating silver at the expense of their regular customers.

 

Then we have the Futures and Commodity exchanges where people are Specualating for different reasons.

 

So I think we are seeing a combination of things that have come together at the same time creating an artificial shortage. The problem is if enough Silver Producers produce more silver to fill the gap seeing it as a real shortage instead of an artificial one and all of this extra silver comes into the market at the same time.

 

 

 

 

 

 

[jtryka]

The discontinuation of production I referred to was the business strike silver eagles that are sold to distributors, not the ones sold to the public (these outnumber the proof and W-uncs by 10-1).

 

As for Cladking's statement:

 

"Fiat currency is actually far more stable and less disruptive to the economy than any hard money currency could ever be. The confidence in hard money can evaporate overnight but fiat currencies always go out with a whimper. In a modern economy when all the necessities of survival come from factories which run on currency which would you rather have? "

 

I could not disagree more. Name one time in the history of mankind that people suddenly and without explanation lost confidence in gold or silver, if you are talking about gold backed currencies that depend on the trust of the people in the issuing authority, that happens frequently, but never in history have people been handed an ounce of gold and have them afraid to take it.

[EZ_E]

Demand for silver is way down in the medical diagnostic imaging field since most hospitals are going filmless. Now, instead of printing 10-15 sheets of film for a cat scan, we simply burn the images on a 25C disc. We will occasionally print hard copies of x-rays for the patient in case of broken bones, etc.

 

When you multiply the number of hospitals and diagnostic imaging centers across the nation, that adds up to a whole lot of silver!

[CoinZip]

If there is a shortage this should come in handy.........

 

[World Colonial]

And I agree completely with your last statement. Fiat currencies have been an unmitigated disaster unless someone is looking at it from the standpoint of envy filled populist demagoguery and is a supporter of government policies which use credit inflation to STEAL from producers, savers and creditors for the benefit of deadbeat debtors, consumers and spenders.

 

The impact of a fiat currency is to impoverish the former groups I mentioned over time. To give you an example, my grandfather died in 1987 and left $600,000 that he had accumulated over a lifetime as an independent business owner. This actually resembled real money at the time. Today, it sounds like a lot of money to most people but it is a relative pittance. My mother inherited half of it and can barely support herself now which is why I must help her. To most people who are used to inflation as a "fact" of life, it is normal. In another 20 years, it will be worth much less. Contrast this with how purchasing power was maintained prior to 1913 in the US. So yes, if the goal is to redistribute income, then fiat currencies are a great "success".

 

How the economy would run today without the fiat currency monopoly we do not know. However, there is no basis to believe that the modern economy could not exist without it. That is, unless someone means by "modern economy:" a situation such as in the US today where we have the greatest debt bubble in history which permits a substantial portion of the population to consume more than they produce at someone else's expense. If anything is unstable, that is it and it deserves to collapse.

[cladking]

 

I could not disagree more. Name one time in the history of mankind that people suddenly and without explanation lost confidence in gold or silver, if you are talking about gold backed currencies that depend on the trust of the people in the issuing authority, that happens frequently, but never in history have people been handed an ounce of gold and have them afraid to take it.

 

Generally you are correct; most all of the economic disasters caused by gold backed currencies were the result of shenanigans on the part of the issuer of notes and gold itself retained value.

 

However there have been huge inflations caused by gold discoveries with the most recent being California in 1850. There was locally so much gold that you could hardly give the stuff away.

[cladking]

So yes, if the goal is to redistribute income, then fiat currencies are a great "success".

 

It is not the nature of fiat currency to cause inflation. It is the nature of politicians to cause inflation. So who would you have us vote for; the guy who lowers taxes or the guy who increases benefits and government? We can't blame the currency, and we shouldn't blame the politicians. We should be looking in the mirror and at a third rate educational system that allows so many people to not see a problem with the situation.

That is, unless someone means by "modern economy"... ... If anything is unstable, that is it and it deserves to collapse.

 

By "modern economy", I am referring to the way goods are produced, distributed, and brought to market at the current time. In 1929 when the economy collapsed it didn't affect the currency to any extreme degree. Things still functioned but activity was suppressed. At that time there was plenty of open area and a mere 150,000,000 people in the country. Some were able to live off the land and the MAJORITY of people already lived on farms.

 

Today food comes from factories. If the factories shut down for any reason we'll be eating the seed stock within months. We'll quickly relearn that all human endeavor not related to farming is only possible with surplus. Population declines could be massive if things got out of hand.

 

On the bright side we'd be rid of the republocrats.

[World Colonial]

You are correct that it is not the fiat currency per se, it is actually that every fiat curency is a monopoly.

 

As for the politicians, I do blame them and the voters. I blame both of them; the politicians for being populist demagogues and the voters for wanting a free lunch at somebody else's expense and being gullible fools for actually believing that there can be more than a few "winners" at this "game". And no, I do not believe it is possible to change this through education. This is a mindset not a lack of knowledge.

 

In terms of the moden economy, I do not see that what you described would be any different under one system or the other solely as a result of the currency. Perhaps those who believe so have this opinion because they believe there would not be enough credit in the economy.

 

The credit extention which exists to day is not "normal". It is as actually the greatest miallocation of capital the world has ever seen. The latest example was the real estate bubble. This is a combination of many things and though removing these distortions would cause major problems (temporarily), the ones you cited as an example would not be one of them solely as a result of the currency system. If these examples you used did occur, it would be because of someone's incompetent stupidity (probably a politician's).

[just-john]

Even with the poor monetary habits of our government do you think they would still be minting 10 of millions of silver coins if there were a shortage

in Arizona = 80% of the state's silver was a byproduct of copper mining; other silver came as a byproduct of lead, zinc, and gold mining.[3] The most productive silver district in Arizona that was mined primarily for silver was Tombstone in Cochise County, discovered in 1877.[4] In 2006, all the silver mined in Arizona came as a byproduct of copper mining.

In California Most of the silver produced in California has been a byproduct of mining other metals, such as copper (Copperopolis), tungsten

almost all the silver produced today in New Mexico comes as a byproduct from the two large open-pit copper mines in southwest New Mexico.

Today almost all the silver produced in Utah comes from the Bingham Canyon Mine, which produces silver as a byproduct of copper mining.

 

IF the price of Silver were to reach $30 o/z their would be so much of it. The price would drop in line with lead and copper

[jtryka]

 

I could not disagree more. Name one time in the history of mankind that people suddenly and without explanation lost confidence in gold or silver, if you are talking about gold backed currencies that depend on the trust of the people in the issuing authority, that happens frequently, but never in history have people been handed an ounce of gold and have them afraid to take it.

 

Generally you are correct; most all of the economic disasters caused by gold backed currencies were the result of shenanigans on the part of the issuer of notes and gold itself retained value.

 

However there have been huge inflations caused by gold discoveries with the most recent being California in 1850. There was locally so much gold that you could hardly give the stuff away.

 

Yes, you are correct that large gold discoveries did cause large localized inflation since gold was temporarily plentiful, while whiskey, shovels and flour were not, soon the producers of those goods responded, increased supply and the inflation abated. In no case did the barkeeps cease accepting gold dust for whiskey, they did however stop accepting gold coins that were rumored to be debased, which is a similar problem to the gold backed currency issues when confidence in the issuing authority wanes. Ultimately, $5,000 gold dollars (at the original $20.67 peg would be about 242 ounces of gold) still buys you a nice house, while $5,000 face in paper notes from 1928 probably would only get you a down payment even with the numismatic premium of the older notes!

 

As for this being all the politicians fault, I can buy that, however they wouldn't be able to do it without the fiat currency. It's a sick twisted symbiotic relationship, so I wouldn't let the currency off as easily as you seem to imply.