Silver Spot

[RockMyAmadeus]

Hullo! Anyone know what's up with Silver? Up to $15.50ish, after floating around $12-$13 for several months....

[jtryka]

Maybe the cartel is losing its grip on the price?

[World Colonial]

No, in case anyone has not noticed, the same general trends that prevailed before October 2007 have returned - temporarily in my opinion - since the March lows in US stocks. Prices for US stocks, many global stock markets, metals and other commodities, foreign currencies and junk bonds have all advanced. The USD is one of the few major assets that has declined. Its a partial reflation of the credit bubble.

 

But while these asset markets have been partially reflated, the economy is still in the dumps and the recovery, to the extent that there is one, has been pathetic. Given the extent of the "efforts" by the world central banks which have been made to stimulate a recovery, its been a dismal failure. I still expect the credit markets to resume their contraction later this year or early next year (loans are still getting harder to get even now) with even worse results that what has occurred to date. If this does happen, then most or all asset prices should fall just like they did until earlier this year.

[Nick Jr.]

Yea, I for one have noticed, & I was fortunate enough to buy in when precious metals were low last year. It is not going to be a surprise when silver hits $20 & more per ounce with little bit of an up and down ride in the mean time.Silver will not be hitting the lows it was at last year & the year before,you will be hard pressed to see it hit $8 anytime soon. Also keep your eye on gold prices within the next couple of years,they may be skyrocketing. Usually when stocks go down precious metals go up & visa-versa, but nothing is really predictable I have seen both go up at the same time.

[jackson64]

I agrre and disagree with parts of what each has said so far...We are being lied to daily by the media and US gov....after record spending and a budget that will absolutely explode the national debt and de-value the dollar ( China already stated they won't buy any more of US junk debt)..it was quietly reported that the first quarter economy--predicted by the Obama administration to show a 4% growth..actually showed a -5.7% decrease....

 

Precious metals always jump when people feel the need to hold tangible assets..

 

If silver doesn't rise too fast and over-inflate, there may not be an over-correction this time...IMO silver should hit about $18 and stall unless there's another precious metal run and then the roller coaster affect will be back on...

[physics-fan3.14]

I'll be the first to call it this time - Silver at $50 and gold at $3000!!!! Everyone buy now! Its the end of the world! Get your hard currency for trade after the global economic apocalypse!!!!!!

 

[Nick Jr.]

Hyperinflation is definately in our future!!! I agree with your comments but I also agree with Physics-fans comment about silver & gold prices.If you own these it's going to be a fun & interesting ride in next few years.But if you have not diversified it could be a costly one when Hyperinflation sets in.

[EZ_E]

True hyperinflation can literally hit overnight. The big question is when not if it will hit the United States.

 

Instead of letting the economy correct itself, the present administration is making short term fixes that is just a finger in the dike. Creating fiat money has never solved economic crises, only slowed down the inevitable.

 

The only thing we can do as citizens is to minimize our debts and attempt to have somewhat of a store of wealth at our disposal. Long time food stores are wise.

 

In post WWI Germany, among other nations afflicted with hyperinflation, people were literally trading wedding rings for a loaf of bread. The only question that beckons to us is which side of the fence we will be on.

 

 

[World Colonial]

Too many people, including those on this board, seem to keep on thinking that the current environment is a rerun of the 1970's. It isn't.

 

The closest analogy to today in the United States and most of the global economy is either 1930 or Japan in the 1990's. It isn't Weimar Germany in the 1920's or irrelevant places like Zimbabwe today and Latin America in the 1980's..

 

There is no precedent for a runaway price inflation that I am aware of in an environment of collapsing asset prices and credit markets. That is what we have now or least did until a few months ago. And for real estate, it is still collapsing with the commercial sector accelerating now. That's what I expect to return shortly to most asset classes.

 

There is also no precedent for runaway price inflation in a credit as opposed to a currency based economy. The examples I just gave are and were currency based economies. What most people consider "printing" is issuing debt and every bit of it is subject to deflation and default. This is even true of US government debt even though I agree there will be no actual default the way most people think of it. Long term government bond prices have been hammered this year by rising interest rates which is contrationary just as if the money supply had shrunk because it reduces it's value as collaterral.

 

If my expectations come to pass, I expect interest rates on most debt to soar (as they did last year) not despite deflation but because of it. The one big difference in the next installment of this crisis will be that even rates on supposedly safe debt, such as the US government, may also increase.

 

Most of the purchasing power in the US (and global) economy is debt based. In the US, total outstanding credit is about $50 trillion and currency in circulation is what? About $1 trillion? That combined with the current psychological environment of risk aversion is what makes deflation the greater "risk" now. (I personally want deflation because I consider it normal in a real private market economy.)

 

As to exactly what my post has to do with silver and gold prices, its impossible to say because history never repeats itself exactly. I still expect silver prices particularly to fall in a deflationary environment which is what I think will happen first. The inflation that most people expect now I expect to occur later.

 

The "fundamental" reason for this is that it is primarily an industrial metal and even if speculative demand increases, I do not expect it to be enough. The two most likely factors that would invalidate my expectations are an increase in the velocity of money which would likely cause price inflation even as monetary deflation occurred from contracting credit and the size of the silver market. Its a pint sized market which could rise even as other asset prices collapse. I doubt that will happen but it could.

[Nick Jr.]

Good summation, everything is speculative & nobody knows really what the future holds especially when it comes to the "market" otherwise I would not be here on the board getting some very good constructive info. I would be on beach with a drink enjoying a long & profitable retirement.

[Observer44]

I'll be the first to call it this time - Silver at $50 and gold at $3000!!!! Everyone buy now! Its the end of the world! Get your hard currency for trade after the global economic apocalypse!!!!!!

 

 

You Qualify for a job at HSN

[RockMyAmadeus]

Well....ever since last Fall, I've been quietly buying silver in convenient, government issued coin form.

 

Morgans, Peace, Walkers, and especially Canadian silver (which, oddly enough, often sells for much less than US counterparts. Very odd. It's all silver.)

 

We'll see if this continues, though.

 

 

[Nick Jr.]

Here is the deal, if you by bulk silver that is not from widely reconized mints with reputable mint marks on them when it comes time to sell it may prove to be a task at hand. That is why some silver is cheaper than other especially when dealing with "The Name". I deal with NWTM & I have bought Pan American bars,& coins , & that is a well known name, but it is cheaper than buying Englehard silver, & it is all .999 fine silver,the old saying comes back sometimes you are just paying for the name & still it is all the same. But always make sure any silver you buy like that is always marked with a well known name & stamped .999 fine silver. And NWTM also sells Canadian silver & gold. One good thing about dealing in tangable goods like this, no matter what happens, it can never just disappear you sell when you want to sell & the way it's going, don't get impatient. Most people that buy like this are in for the long haul.

[World Colonial]

For silver coins, I prefer ASE and Canadian Maple Leafs. For bars, I would first go with Johnson Matthey and Englehard and then the Perth Mint. There are others that are acceptable but their name recognition is still much less and I do not consider the risk in terms of price spreads and liquidity worth it.

 

Though I think that silver will fall in the short to intermediate term, I do agree with the consensus opinion in this thread and on this board on the longer term. So by all means, for those who can afford to buy it and KEEP IT under adverse circumstances, they should do so

 

But crowds are usually wrong and I think that the lopsided opinion in this forum on silver's immediate prospects is enough of a reason to expect the opposite to happen.

[Nick Jr.]

Yea, and one thing we know, like I have said before it's going to be a fun & intersting ride & I'm not getting off for a while!! I know for sure, wer'e going to keep watching. But for some reason, I think now a lot of other people will be too.

[jtryka]

Well, for all of you geniuses who keep fantasizing about fiat currency deflation, just keep dreaming as gas is now spittin' distance from $3 and we haven't even hit the peak summer driving season, yet foreclosures are rising right along with unemployment (I think they call that stagflation). I have no idea how old any of you are, but is sure as heck feels like the 1970s where I live!

[EZ_E]

I think that we're in a period of deflation right now. Just look at the price of houses in the major cities! They're cheaper than when I bought my house in Vegas in '95. Gas is still much better than the $4.75 I was paying just last year. And interest rates are the same as 1970. But, I think that we're just in the eye of the hurricane and the mustard will hit the fan once the storm progresses.

 

Carter, if not responsible at least he gets the blame for massive high interest rates in the late '70's. What did Reagan do? He tripled the national deficit of that time and gave us a decade of prosperity. But it was all just a bubble which almost popped in 1987 if not for the FED propping up the dollar. But I feel that the bubble is stretched much too thin for the same strategy to work again. Once it pops then we're all going to have it blow back in our faces.

[World Colonial]

Presumably you are directing your post to my comments since I am the only "genius" on this board who has expressed a contrary opinion on deflation.

 

The opinion I expressed here and in my prior posts on this topic is consistent with the historical examples that I am aware of and today is more like 1930 and 1990's Japan than it is the 1970's. But you are free to disagree and explain why you think it is more similar to it if you wish.

 

Since history never repeats itself exactly, I know that whatever happens will not be exactly like those two prior episodes even if my expectations turn out to be correct. I am also aware that the credit deflation that I am looking for is not incompatible with the price inflation that most others are looking for.

 

I still think there will be price deflation on the consumer level, even though it will probably be temporary. The year over year change is already there or nearly so based upon "official" data. (There is also the pointless debate about whether the CPI or any other measure of price inflation is understated or overstated. That is an issue for another day because there is no exact method to measure it even if the current methodology is intentionally dishonest as many believe it is. Its the same issue that exists with measures of unemployment since the "real" unemployment rate reported as U6 is almost twice the "official" unemployment rate known as U3. )

 

One possible outcome is that the debt creation which many mischaracterize as "printing" will eventually be monetized and when it is, I would expect the prices for goods to increase and possibly rapidly, at least in certain areas, even as the prices for assets and "investments" either go nowhere or collapse. Eventually yes, but not now.

 

This would be the opposite of what happened during the credit bubble which is exactly why I think it is a reasonable outcome. During the credit mania, inflation was "low" even as the prices of housing, financial instruments and other physical "investments" such as coins went up, many substantially.

 

The first difference between my expectation and those who expect inflation is presumably in the future performance of "hard" assets". I expect many or most of them to fall in price even if temporarily. That's what happened last year and I expect that again only worse on the next go around.

 

Some assets such as coins should fall for an extended period of time because regardless of whether the resolution is inflation or deflation, coins are a discretionary luxury item which fewer people will be able or inclined to pay many of the current (and sometimes ridiculous) prices. Even under higher inflation, I still expect the purchasing power equivalent of coins to fall for this reason. And if there is one thing that I consider to be a virtual certainty, it is that the standard of living for the average American is going to decline because without access to cheap and easy credit, most people do not have the capacity to maintain their current consumption levels. I expect this to happen regardless of what the government does or does not do.

 

A second difference would be in the resolution of the credit bubble. Under the inflation outcome, the optimal strategy would be to load yourself up with debt or at least fixed long-term debt and have it inflated away. If my expectations come to pass, that will be a path straight to likely financial disaster but anyone who does not agree with me is free to take that risk.

[jtryka]

While I agree that we may experience nominal deflation in the short run, it will by no means last, and will be looked at as a minor hiccup on the path to oblivion we have taken. While superficially this may seem comparable to the 1930s USA or 1990s Japan, the underlying fundamentals are vastly different. For the 1930s, even after Roosevelt's intervention, we were still on a gold standard, and the Fed was still shrinking the money supply from 1929-34 with sporadic liquidity injections. Although we see asset prices falling and unemployment rising, the similarities really end there. In the 1930s, the USA was more like China is today, with productive industry and savings (though at risk of bank failures), today we are primarily a consumer driven service economy with massive trade and budget deficits and little to no household savings (even though the savings rate has come up from negative to 4-5% of late, it's still a far cry from where we once were). Japan in the 1990s is similar in that we have a recession/depression with zombie banks chock full of bad assets, but again, the similarities end there. Japan had a massive personal savings rate coupled with gigantic trade and current account surpluses. If anything, the most comparable example is Germany in the 1920s, we both have struggling economies burdened by a debt that we cannot bear. For them it was war reparations, for us it is the Great Society, and a delusion that we can borrow our way to riches. My guess is that we will embark on a path towards the stagflation of the 1970s on steroids if we can avoid the hyperinflation a la Germany in 1923 or Zimbabwe today. We are a dying empire, and the way most empires die is through debasement, dependency and eventually despair.

[RockMyAmadeus]

Here is the deal, if you by bulk silver that is not from widely reconized mints with reputable mint marks on them when it comes time to sell it may prove to be a task at hand. That is why some silver is cheaper than other especially when dealing with "The Name". I deal with NWTM & I have bought Pan American bars,& coins , & that is a well known name, but it is cheaper than buying Englehard silver, & it is all .999 fine silver,the old saying comes back sometimes you are just paying for the name & still it is all the same. But always make sure any silver you buy like that is always marked with a well known name & stamped .999 fine silver. And NWTM also sells Canadian silver & gold. One good thing about dealing in tangable goods like this, no matter what happens, it can never just disappear you sell when you want to sell & the way it's going, don't get impatient. Most people that buy like this are in for the long haul.

 

I would imagine "Royal Canadian Mint" is a reputable enough authority....

 

I could be wrong.

 

[Nick Jr.]

This is true, and one of the many things my Dad taught me before he left this earth , "DON'T GET IN DEBT" & if you must keep it to a minimum to where if somthing happens you can pay it off!! And for jtryka comment about a "dying empire" here is something to feed on Crystler was forced into bankruptcy by our government & our government owns %10 of it, as of Monday GM will be Bankrupt & our government will be majority owner, next will be Ford & our government is poised to own that too. And believe it or not the major banks will be soon to follow as in some of the major Insurance Companys, I don't where you come from but where I come from that is classified & called a socialist regime. Take it for what it's worth but our government is out of control & this is what they have fought other countries on, but now because they do it, it is alright. Our government controls more than most people would like to believe when it comes to our financial status & what we pay & what we keep & how the "market" goes. "hard facts for & hard life" And if you think this has gotten off the "silver spot" not really it is all tied together one way or the other.

 

[jtryka]

Here are a few more thoughts to ponder:

 

The Fed is engineering another bubble, this time in Treasury debt, they are buying the debt and printing money to do it. What happens when the Fed eventually needs to sell those bonds? Who will buy them?

 

This one is even more important, since roughly 1987, the Fed has been inflating the currency dramatically, yet we saw tame inflation at the consumer price level because that currency inflation was directed toward asset prices. We entered nirvana as asset prices went up but consumer prices went up at a much lower level. Everyone felt rich with assets like stocks and homes rising, but consumer prices were tame. Now it seems we are entering a period where the reverse may be true, where asset prices are falling and consumer prices are poised to rise dramatically. In my view, this will happen, even if consumers have less money to spend, what happens when input prices like fuel, fertilzer and seed rise but consumers can't pay for higher food prices? Will farmers be benevolent and sell their crops at a loss every year? Or will you have dust bowls as farmers stop growing crops leading to food shortages? Or will the geniuses that brought us globalization rely on cheap imports for food even as many Asian nations face their own food shortages and accompanying riots? We are set up for the mother of all disasters, where we face shortages and rapidly rising costs for food, energy and consumer goods, even as we face "deflation" in asset values. We may end up in a situation where we wish for a great depression like the 1930s or Japan in the 1990s!

[Nick Jr.]

You said it, & the more that it said about this topic, the more you learn, & I could go on about this all day long. It is one of those thing that is not going to go away anytime soon as a matter of fact, all the posts here will be realized sooner than most would think. But I'll leave you with this one to "feed" on, Elected Officials Lavish Lifestyles, that they will never give up & "porkbelly" spending, All & I repeat All with taxpayer dollars, problem with that it has gotten so bad that's not even enough now.This may be a little extreme for some, but I have always said when this is all said & done if it dosen't stop soon the only people that are going to walk away from this pending disaster sitting on top with all the money are politicians, while the rest of us are out in the streets still earning money for them.

[World Colonial]

The difference of opinion between us I think is really minor. I agree with the end point that you state but disagree on how we will ge there.

 

The government is trying to have it multiple ways. On the one hand, they are trying to debase the USD in a race to the bottom with other countries via "competitive devaluation" to gain a "competitive" advantage even though it is obvious from history that no country has ever depreciated its way to prosperity and never will. Today, I read a news report which if true would be entirely justified, that Treasury Secretary Geithner's Chinese student audience laughed in his face at his double speak about government fiscal discipline. Its a complete farce and a blatant LIE and he knows it.

 

At this point in time, an inflationary debt default would be a bigger financial disaster than a deflationary one, or at least it would be for those who have the greater capacity to influence political decisions. Much if not most of their wealth plus the retirement assets and savings of the middle class would be destroyed. That's another reason I think it will not happen first and this is consistent with prior depressions where a country had significant financial assests. (The US is a deadbeat debtor country, but it still has significant financial assests which are held by the top few percent of the population as the populist demagogues complain.)

 

On the other hand, the government is also trying to maintain the full nominal value of the credit system to keep this ponzi scheme going. They do this both to maintain the value of these debts and so that those who have been living above their means can continue to do so..

 

What I think is going to happen from an observable point of view is that there will be a runaway panic resulting in a deflationary crash. This literally nearly happened last September when Lehman collapsed. The government was able to plug the dyke but that is only because the clueless public was actually still gullible enough to believe in those incompetent insufficiently_thoughtful_persons at the Fed and US treasury. If next time is as soon as I think it will be, they may not and I am predicting they won't.

 

The 50-1 leverage between credit and actual money makes this almost a certainty to me because in a panic, the government will not be able to print or expand the money base fast enough to offset a credit collapse. They have been behind the curve throughout the recent crisis and every prior one and there is no reason to believe they will get ahead of it next time.

 

After this crash, then the US will more closely resemble Weimar Germany because the savings of the middle class will have been wiped out for the most part. Then with much less to lose, I could see the government embarking on a printing press inflation to "stimulate" the economy. But they will not do it until they have to which will be when economic indicators such as unemployment and the deficit are much worse than now and the government cannot borrow at will.

 

In terms of how someone should act, I agree that the longer term trend is for inflation which is why I have stated many times that even though I think metals will fall in the near term (possibly for up to five years), they should still be bought.

 

But I also say that they should only be bought to the extent that the buyer can afford to keep them because in the economic contraction which is likely (whether a "Greater Recession" or a depression), there will be many who did or will buy them but will be forced to sell anything and everything they can in a mad dash to raise cash to pay their bills. They will either lose their job, lose their savings through a decline in stock prices and debt defaults or both. And if someone is forced to sell metals, its possible that they may have to do so at a lower USD price.

[World Colonial]

That is what "they" want you to think but there is the option which I have stated before and will repeat again.

 

For those who have the means, that is to take your money with you, leave the country, get a new passport and give up your citizenship. It is a completely practical and logical thing to do from a standpoint of calculated self interest and only an idealistic incurable romantic would rule it out as an option from the start.

 

What you are describing is what already exists today. The typical person in this country is either a tax and debt slave or a tax and debt serf. Some people have self elected and selected this status through their prior lifestyle choices or incompetent stupidity but even for those who have been prudent and responsible, the tax burden and inflationary policies which increase the cost of living make it essentially impossible for the typical person to gain their financial independence.

[World Colonial]

I do not believe that the Treasury market is in a bubble as bubbles are commonly interpreted, but it will make no difference to the outcome.

 

The recent decline in US Treasury debt rates has been driven by fear in a perceived flight to safety. But either under your expectations or mine, interest rates will eventually rise, because of fear of perceived or actual loss or purchasing power or of default. So unlike most instances, fear will tbe he cause of both the price increase and decrease. In a typical bubble or mania except for commodities (which are driven by fears of shortage), greed is the the driving force while fear causes the bust.

 

As for your comments about a reversal of fortunes, that is something I mentioned in this thread and I expect that whatever actions the government takes, they will make it worse.