Friday, June 12, 2015

Silver Dollar

At the very least, the first $10,000
of that figure would represent the current
purchasing power of the dollar today…
we will see that figure even as our economic
function drives all other hard money metals
into the toilet. I'm talking about .50 cent silver.

Yes we will see $50.00 silver in our time,,,,,,
$50.00 for a hundred ounce bar,,,,, that is!
Even if these actual dollar numbers prove
incorrect,,,,,, relative inflation adjusted prices
will show the exact same ratios to gold.
-FOA 2001

There are four new posts up at the Speakeasy, and 900+ new comments. This is one of the posts.

Silver Dollar

Bearing in mind the recent discussion about silver in the comments, and while watching the Peterson Foundation video posted by WillCSoon (which I recommend watching all the way through), it occurred to me that silver and the dollar have some striking similarities. For example, both are overvalued today because of investment demand.

At 42:55 in the video, Richard Fisher says he used to say that the US dollar is the best looking horse in the glue factory. Glue made from boiling horse carcasses dates back to ancient times, so when a sick old horse has to be put down, there's an old saying that it has to be "sent to the glue factory." Fisher wasn't the first to use this analogy on the dollar. Before him, it was used by Erskine Bowles in 2010 and by David Walker in 2005. But then Fisher goes on to say that if we could "get on the stick" (translation: get our shit together), we would be Secretariat at Belmont in 1973 winning by 30 lengths (trivia factoid: Secretariat actually won by 31 lengths).

That little bit, and what he went on to say about the dynamic of entrepreneurialism and free enterprise that still exists in American society, at least relative to other places, reminded me of FOA. It's not about a "hoo-rah" for the idea of "American exceptionalism", but a simple recognition that underlying the mess in which we currently exist, where the dollar is the best looking horse carcass in a world where parking surpluses in horse carcasses is the status quo, underlying that mess, a few solid economic ideals still exist and await the opportunity to rise like phoenixes from the ashes of a fiery transition. And yes, we're still less than halfway into the Year of the Fire! ;D

"American exceptionalism" is, IMO, totally separate and disconnected from America's—and its dollar's—dominant position in the world today. They are entirely unrelated. The common inference that they are related is what repels many from the idea that certain economic principles which, even today, still exist in the American ethos, albeit repressed by the current $IMFS, make America exceptional. Similarly, silver's industrial exceptionalism is entirely unrelated to its current price, and likewise repressed by the $IMFS. (That is, silver's industrial exceptionalism is repressed, not its price. Silver's price is actually elevated by misguided investment demand due to the continuation of the $IMFS, which represses, to some extent, its industrial potential.)

There was one FOA post in particular which came to mind while listening to Richard Fisher's remarks. Here it is:

FOA (4/19/01; 17:50:29MT - msg#65)

Hello again everyone,

I thought it would be a good idea to make some clear comments and replies regarding my perceptions. Using some questions and thoughts from the main forum will also help. This may make it easier for us all as we "follow in the footsteps"!

Auspec makes several points and contention for me to address.


We like to think that the dollar is what it is because we are so good. (smile) But, the truth is that for over a two decade period +, none of our economic policy, our trade financing policy, our defense policy or our internal lifestyle policy has pleased anyone outside these borders. We managed the dollar for us (U.S.) and the rest could just follow along.

Our fiat currency has survived all these years because others have supported our dollar flow in a way that kept it from crashing its exchange rate. We talk and think like we are winning the tug-of-war when, in fact, they just aren't pulling too hard.


You write:

*Comments: Again it is easy to see the dollar as losing a large piece of the action, but hard to see its total demise or its falling out of use. The US as the largest military force in the world certainly has its overriding benefits. The US has enormous resources; physical, financial, and spiritual. American creativity and "know how" has changed the world. This country will not turn over and simply give in! Let's look forward to the next 5 years and place probabilities on what is likely to happen as far as the dollar/euro is concerned. I will rank these various scenarios in what I see as their most likely odds of happening:

Auspec, before I list your most likely odds, I would like to comment on your above.

We must not confuse a currency's "total demise" or "falling out of use" with a "loss of identity". In our time there have been few major moneys that went away. Today, we have a whole world of national fiats "in use" and "not demised" that still carry their nations identity. They lose value at an incredible rate, are mismanaged to the highest degree, are laughed at and despised. But, still they are "in use" as they function for their governments and economies. Usually, they function along side whatever major reserve currency is in vogue. Today, the dollar, tomorrow the Euro. Make no mistake, the entire internal US sector can and will function as its currency runs a price inflation just like these third world countries. We will adapt as they have by dropping our living standard accordingly and adopting the Euro as our second money. Also:

The prestige that we have the largest military force in the world does not help our money problem. We talk as if we will let any country die that does not use our money or support our currency. I point out that the British also made such comments and it didn't stop their downfall. Nor the Russians. Also:

I point out that many, many other countries also have the same "enormous resources; physical, financial, and spiritual" that we have. But the degrading of our economic trading unit, the dollar places the good use of these attributes in peril. Besides, the issue beyond these items is our current lifestyle. We buy far more than we sell, a trade deficit. Collectively, net / net, using our own attributes and requiring the use of other nation's as well. Not unlike Black Blade's Kalifornians sucking up their neighbors energy supplies (smile). We cannot place your issues up as example of our worth to other nations unless we crash our lifestyle to a level that will allow their export! Something our currency management policy will confront with dollar printing to avert. Also:

NO, "this country will not turn over and simply give in" as you state. But, we will give up on our currency! Come now, let's take reason in grasp. Our American society's worth is not its currency system. Around the world and over decades other fine people states have adopted dollars as their second money, only to see their society and economy improve. Even though we see only their failing first tier money. What changes is the recognition of what we do produce for ourselves and what we require from others to maintain our current standard of living. In the US this function will be a reverse example from these others. We will come to know just how "above" our capabilities we have been living. Receiving free support by way of an overvalued dollar that we spent without the pain of work.

Your "various scenarios" with my notes added :
1}Ongoing MODERATE debasement of US Dollar. {Brisker} Business as {than} usual.
----Near term, yes.-----
2}Gold and/or Oil breaks away from the dollar.
---- Oil is already doing so for a year now. The gold market is in the process of self inflating its paper side of the function. The first minor lease rate signals are already behind us. The ECB and BIS are coming more in control as the dollar faction must either sell its gold also or begin to fold. If they want the game to continue a little longer the US must not put its gold on the market or the BIS and ECB would bid it with their dollar reserves. Ending it all then and there.------
3}Dual and competing reserve currencies. "Co-Currencies" in Reserves. The currency war that is in clear sight {thanks to ANOTHER and FOA}.
----- I would add that the vision of co-currencies is just a passing function as we get from here, dollar reserve, to there, Euro reserve.-----
4}Status quo.
----- We have not been here in our life times (smile).--
5}All out war that distracts/rescues the dollar and extends its life. Wag the dollar.
------ As we enter the down side of our economic function (like we are doing now) the massive money printing by the fed will risk the dollar's slow slide to becoming a super slide if a war breaks out. People run to the best managed world money in a war, not just the one with the current best exchange rate value. In the past the dollar was the one, today the Euro would receive the flow. The US would be risking killing its last bit of dollar timeline with any war today.---------
6}Dollar merged with euro/backed by euro.
------ I know a few people that make a lot of sudden money wealth and give almost all of it to the church (or charity). Others are much more smarter and support the church (or charity) for the rest of their life. Retaining some control over how the charity is used. This is how the EuroZone would handle us. Actually, it's the same way we handled them after the war. We didn't just merge our checkbook into theirs, did we? Net / Net, they will have the wealth to be offered, not us.------
7}Brazillian or Weimar style hyperinflation of the USD, the Big Banana, or the 'little banana'.
------- Full on, wide open, in your seat, flat out! It's in the pipeline!------

You write and I comment:
Debt is designed for default as fiats are for debasement.
--- My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationist get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms! (bigger smile)
At $30,000 POG the US as we know it will be no more, agreed?
-----Agreed, but still in use. Just like all those Pesos around the world! But remember, at the very least, the first $10,000 of that figure would represent the current purchasing power of the dollar today. We will most likely get there long before price inflation jumps way up. Once the current dollar gold market fails and gives way to a free physical price, we will see that figure even as our economic function drives all other hard money metals into the toilet. I'm talking about .50 cent silver. while gold races past its first grand. When we see it we will understand it.-----------
What advantage would it be to the Power Elite to destroy the dollar.
-------- Wrong context. What advantage does the Power Elite gain by expending assets to save an already failed currency. Better to do what major players have done for centuries and are doing now, buy gold and evolve your power base to use the next reserve.-----------
The end of a currency's lifetime always ends in gold debasement?
---- In almost every case. Sometimes in the open, sometimes hidden.------

Ok, this is going overtime (smile). I will try to cover more (and others) in a day or so. Also, the question of Another at his keyboard? I reword things from him quite a bit for bare readability. But, his delivery is pure. I don't always pretend to understand it. Then, that's a whole other story (smile)


I highlighted that bit at the end about $10,000 gold and 50 cent silver because I want to explain my take on it. On the day FOA wrote that post, gold was $261 and silver was $4.37. FOA was talking about a revaluation, so I think that if we want to get inside his mind and see what he was envisioning, we should pay more attention to the revaluation multiples than the nominal prices he mentioned.

For gold to go from $261 to $10,000 would be a revaluation multiple of 38.3 (10,000/261=38.3). And for silver to go from $4.37 to 50 cents would be a devaluation divisor of 8.74 (4.37/8.74=0.50). Based on today's prices, that's gold at $45K "at the very least", and silver at $1.85 per ounce. If we want to put that in ratio terms by weight (which is a metric that doesn't make sense in Freegold because they will be used in different ways, it only makes sense for things being used in the same way, i.e., as an investment), that's a GSR of 24,324:1. At $10K to 50 cents, it's 20:000:1. And at $55,000 gold, 20,000:1 silver is $2.75 per ounce, one of the slight differences being that the GSR was 60:1 when FOA wrote his post, and today it's 72:1.

I mentioned this "extreme" GSR in a comment in 2012:

Lastly, Joe, I noticed in your video that you observed extreme GSR predictions (on both ends of the spectrum) tending to correlate with the mood of the blogosphere at the time, and that this was the first time you've ever heard such a high GSR mentioned. But I'd like to point out that I first posted the below excerpts and even discussed a potential future "GSR" (that term is not really applicable in Freegold) of 20,000:1 back in 2009 when the GSR was around 70, and FOA wrote the posts more than 11 year ago.

And just in case you thought that 50 cent silver remark was a lapsus linguae, a slip of the tongue by FOA, he precisely reiterated this particular vision four months later:

FOA (08/09/01; 10:27:19MT - msg#93)
"everything to do with a gold bull market"


This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this.

Clearly, the coming drastic constriction in dollar financial trade will trigger a super "print press" response from the Fed. They will not be pushing on a string; rather picking up the ball of twine and throwing it! All the while using the old 1980s "monetary control act" that opens their use of monetizing almost anything and everything. They won't be adding reserves to the banking system in the future; rather buying any and all debts from anyone that needs fresh cash. Believe it!

For the first time,,,,,,,, our industrial production, along with the demand for industrial metals like silver, will fall away even as hyper inflation in prices takes hold.

For the first time,,,,,,,, demonstrating that no other asset is equal to gold, even though promoted to be!

When the coming paper illusion price of gold is destroyed, sending its trading price way up and way down, several times, before shutdown,,,,,,,,,,,,,, the thinner paper markets of lesser metals will be absolutely devastated. Yes we will see $50.00 silver in our time,,,,,, $50.00 for a hundred ounce bar,,,,, that is! No less a relative price decline for the other metals is in store. Even if these actual dollar numbers prove incorrect,,,,,, relative inflation adjusted prices will show the exact same ratios to gold. The gain will truly be in gold!

Gold,,,,,, a wealth for changing times,,,,, a wealth as new as it is old!


To be perfectly clear, I understand FOA's vision for silver, and I agree with it 100%. I remember a disagreement I had with a close associate back in 2011. Following the run-up to almost $50 and collapse back down to around $30, he professed that he thought $30 was the true, fair value price for silver (in constant dollars of course), even in Freegold. I argued for $2.75 using FOA's reasoning, but to no avail.

I bring this up because I think it's something everyone does subconsciously. We tend to think that the present price of anything is its true fair value price. In hindsight, we can easily see bubbles like the housing and dot com bubbles, but when they're happening, they're a lot harder to see. Likewise, in hindsight, it is easy to see that Facebook was a good buy at $40, but in the fall of 2012, it looked like $20 was its true fair value price, and that those who had recently paid $40 were fools. Today it's at $82.

The point is, you can take a poll at any moment in time and most people will think the current price of anything and everything is its true fair value price, and if it's something they're interested in, chances are good that they are more open to the idea that the present price is a floor of sorts going forward than that it might be more of a ceiling.

Silver is a great example of this idea. Silver is currently at $16.15 as I write, and I'll bet there isn't a single silverbug in the world who thinks that price might be 6 times higher than its true fair value. According to Dan Popescu, "Silver demand today is approximately 56% industrial versus 10% for gold." Here's his chart for silver demand:

And here's another one he uses that shows industrial, silverware and jewelry demand has remained relatively constant while investment demand has risen substantially since 2007:

That "Retail Investment (Coins and Bars)" seems relatively small at 18.4%, right? What I mean is, if FOA is right about silver's future, then 18.4% of demand is going to vanish but the remaining 81.6% of silver demand will remain, so on the surface it might seem that an 83% devaluation is unrealistic if only 18% of the demand is expected to disappear.

The thing is, these demand numbers are put out by the GFMS which, kind of like the WGC, is a metals and mining research firm. The numbers are aggregated from industry surveys and then fit to the supply side which is basically annual mine production plus scrap recycling. It's no coincidence that demand amounts are always within 20% of mining and recycling amounts. And if supply is only new and recycled silver, then it is not counting a single older silver bar or coin sold by investors that year. And once you understand the limitation of the supply side in such charts, the limitations of the demand side should also be apparent. The investment demand is only the minting of new bars and coins, and 18.4% of the new silver mined and recycled is used for that purpose. That's what they call investment demand. So you can see how it doesn't reflect the movements of "old silver".

The basic assumption is that this supply and demand picture represents the relevant margin, the cutting edge where new silver is all that matters, and the rest of the old silver being shuffled around in the world is basically balanced, with a buyer for every seller. This is not a bad assumption normally, but in this case it is. Because if you remove "investment demand" from the big picture, all of that old silver becomes a supply overhang.

So how much supply overhang would be there if investment demand suddenly disappeared. Well, according to this which is a couple years old, 1.4 million tonnes of silver have been mined throughout all of history. Of that, almost half has been lost forever, leaving about 777,000 tonnes of above-ground silver currently in existence. Of that, about 96% is in jewelry, silverware, electronics and other forms that are not easily accessible by the silver industry, but about 4% is. That 4% is about 30,000 tonnes of silver known to be in investment-grade bar and coin form, which would be easily accessible by the silver industry should investment demand suddenly vanish.

Did you ever wonder why I didn't include silver in this video I asked Freegoldtube to make for my Fallacies post?

Here's the original chart I altered for that video, and here's where it came from:

There were a few reasons why I didn't want to include silver. One reason is that it's debatable how tall silver's bar should be in the chart. It could be anywhere from under 1 year up to about 29 years of supply overhang, depending on what existing above-ground silver you want to count and whether or not you count the minting of new bars and coins the same as industrial consumption. Annual silver demand excluding coins and bars was 27,082 tonnes in 2014, and as I said above, there are about 30,000 tonnes of silver known to be in investment-grade bar and coin form, which would be easily accessible by the silver industry should investment demand suddenly vanish. That would be 1.1 years of available stock to flow, similar to wheat.

That may sound like a small stock to flow, but as you can see from the video and the chart, small stocks to flow are normal and not a problem for commodities. In fact, mining and scrap recycling supplied 32,535 tonnes of silver in 2014, 20% more than was used up by industry excluding minting for investment purposes. So as it stands right now, excluding investment demand, we have a new supply flow that exceeds the demand flow by 20%, and a stock, or supply overhang of at least 1.1 years which would continue to grow at a rate of about 18% per year if the mines didn't cut back on production.

What would happen in this Freegold scenario is that the price of silver would decline to a level that constrained silver mining at the margin. Now there are two kinds of silver mine production. There is primary silver mine production, and secondary or silver production as a byproduct of mining other minerals. According to the Silver Institute website, 31% of global silver mining supply comes from primary silver mines at an average cost of $7.74 an ounce. So if the price drops below that number, then we lose the primary silver mines, but we still have the 69% of silver-as-a-byproduct mines, which brings us back down to production levels we saw when silver actually was less than $7.74 an ounce, which was as recently as 2005. And don't forget that it got as low as $8.88 in 2008.

That level of production, combined with scrap recycling which was actually higher in 2005 than it is today, covers about 93% of today's industrial silver demand, a shortfall that's just about right IMO for drawing down the overhang for a while. And that, by my runes (to quote you-know-who), covers a price range of about $3.90 - $7.75. That's based on the fact that many secondary silver mines have sold the perpetual right to purchase their future byproduct silver at $3.90 per ounce through silver streaming contracts, even as recently as 2009 when the POS was obviously much higher. The more recent range of such contracts is $4 to $6 per ounce.

I'm certainly no expert in this stuff, but it seems to me that if silver is a byproduct of the mine, then most of the cost of production comes not from the mining operation, but from the refining of the silver. Now I can't find a good reference for the cost of refining silver as a byproduct at a copper, zinc, gold or lead mine, other than it must be considerably less than $3.90 per ounce. And that probably gives us an idea of how little it costs to refine scrap silver. I wonder if it could even be lower than $2.75 per ounce.

If you look around on the internet, you'll find plenty of articles that put the cost of silver mining at anywhere from $17 to $27 per ounce. But notice two things about those articles. Notice that the author was usually a silverbug, and also notice the date of the article and the price of silver at that time, i.e., the point they were trying to make was usually the upside potential for silver. Here's a great example.

The article was at Silver Doctors, and the date of the article was April 2, 2013, when the price of silver was $27.96 per ounce, a couple of weeks before it plunged from $27 down to $23 over one weekend. All in the same article, the author put what he called "the complete cost per ounce" at a primary silver mine at $27.12 (very close to the spot price at that time), arguing for great upside to the price since we were just above the "break-even area" where US Silver Corp. would start showing a loss, and he also argued that a secondary silver miner, Hecla Mining Company, who claimed its "cash cost" for silver as a byproduct was only $1.15 per ounce in 2011, actually had a "complete cost per ounce" of $23.88!

Here's a short excerpt:

"Miners use the CASH COST to compare just how cheap it is to mine silver.

They arrive at their CASH COST by adding all the by-product revenue against an ounce of silver. For example, if a miner has some Gold, Lead and Zinc in a ton of ore, they take the revenue received from those by-product credits and get an INSANELY LOW CASH COST. In 2011, HECLA had a CASH COST of only $1.15 an ounce for silver."

Wow! At a $1.15 per ounce, $2.75 would be a 139% profit margin! But if the author was right about the "break-even area" for silver, then how on earth did mines produce 20,000 tonnes of silver (and scrap refiners another 6,300 tonnes) in 2005, when the price of silver ranged from $6.39 to $9.23 per ounce? And how did we ever survive 2003, when the price ranged from $4.37 to $5.96?

Since I started my blog in 2008, the price of silver has ranged from $8.88 to $48.70! That's some volatility! Commodities aren't supposed to be that volatile. The warehouseman and the speculators are supposed to absorb the volatility so that the producers and the end users don't have to.

Let's now expand my range from $3.90-$7.75 to $2.75-$7.75. If you happen to like silver, or even if you still have a bunch but don't like it that much, you're probably subconsciously rationalizing why the price of silver shouldn't hit the bottom of that range. But if you throw in a little economic deflation, what FOA called "our economic function" which will decrease the industrial demand for silver until much of the global malinvestment is cleared away, along with a little price overshoot to the downside and a sprinkling of all that supply overhang competing with the miners and scrap refiners, I think $2.75 might even be a little conservative. ;D

I don't think silver will stay that low forever. As I said at the top of the post, it's an exceptional metal with many great industrial uses. So, like America, where "a few solid economic ideals still exist and await the opportunity to rise like phoenixes from the ashes of a fiery transition," I think silver has some fantastic industrial uses and will rise like a phoenix (more or less) after spending some time at around $2.75 per ounce (in constant dollars of course. As FOA said, "Even if these actual dollar numbers prove incorrect,,,,,, relative inflation adjusted prices will show the exact same ratios to gold."). ;D

I want to add that this doesn't apply to copper, zinc, lead or other commodities. When FOA said "all other hard money metals," I don't think he was talking about copper. I think he was talking about platinum and palladium, since, like the dollar and silver, they are also overvalued today because of investment demand. It also doesn't apply to really old silver coins with numismatic value. They will retain their numismatic value regardless of their melt value.

In the comments, Canadarob wrote:

"As a small after thought, I believe it was Sam who mentioned something about “only a fool would trade usable goods for a metal during a crises”

Made me think that metals like aluminum/copper may be even more valuable than silver in a panic."

Let's be clear about this. Today copper is trading at $2.74. But that's per pound, not per ounce. That's about 19 cents per ounce. Copper will never be more valuable than silver. Its price will probably decline a little bit because of the "economic deflation/malinvestment clearing" factor, but it's not overvalued by investment demand anywhere near the extent that silver is. Yet even though silver is now, and will be then, more valuable than copper, you'd still be better off hoarding copper today. But you'd be even better off than that by hoarding toilet paper, though at some point it comes down to a question of storage space, as MdV pointed out in his comment about the youtuber who uses PVC pipe to store and hide his TP stash in the rafters of his garage "where no one would think to look." :D

Now let's look at the absolute difference in return between silver and gold given the Freegold scenario from FOA's post. Let's say you have $100,000 to invest in either silver or gold. In gold, your nest egg revalues 38.3X "at the very least" for a total of $3.83 million in constant dollars (which means "in real terms"). And in silver, your savings devalues by a factor of 8.74, so divide your $100,000 by 8.74 for a total of $11,442. Now, divide $3.83M by $11,442. The answer is 335, but what does it mean?

Let's say toilet paper holds its value in real terms while gold revalues by a factor of 38.3. That means gold was 38.3 times better than toilet paper in terms of a return on your investment. It's also better because it can store a lot more value in a small space, but that's not what we're looking at here. We're simply looking at the return on investment, and gold would be exactly 38.3 times better than toilet paper, and 335 times better than silver in this particular Freegold scenario.

In this comment, I suggested three potential euro devaluation scenarios: "I don’t know how much the euro will devalue in real terms. 25%? 50%? 66%? But I would guess it will naturally devalue at least enough to reset debt levels and nominal obligations back to relatively sustainable levels."

Just for fun, let's run through each of these scenarios and see how an investment in euros would compare to gold, toilet paper and silver. ;D

Scenario 1 – 25% devaluation of the euro

Toilet paper will be our baseline or our fulcrum. A 25% devaluation of the euro means a euro will only buy 75% as much toilet paper as it did before the devaluation. In other words, it will take four euros to buy what three euros used to buy. A euro is now worth 3/4ths of what it once was, which means the devaluation divisor for 25% is 1.334 (1/1.334=0.75 or 3/4ths). Gold revalues by 38.3 ("at the very least") for a total of $3.83M, and the euro devalues by a divisor of 1.334 while silver devalues by a divisor of 8.74. 38.3x1.334=51. So gold is 51 times better than the euro in terms of return on investment, and toilet paper is 1.334 times better than the euro. But 8.74/1.334=6.5, which means that, as an investment, silver is 6.5 times worse than paper euro fiat currency in this scenario, and of course it's still 8.74 times worse than (unsullied) toilet paper.

Scenario 2 – 50% devaluation of the euro

The divisor here is 2 for the euro, because it will take twice as many euros to buy the same amount as before. 2x38.3=76.6, so in scenario 2, gold is 76.6 times better than euros. And 8.74/2=4.37, so euros are still 4.37 times better than silver for a return on your pre-transition savings.

Scenario 3 – 66% devaluation of the euro

This means it will now take three euros to buy what one used to buy. This is the "Iceland 2008" or "Argentina 2002 scenario" for the euro. The devaluation divisor is 3, so 3x38.3=115, and gold is ("at the very least") 115 times better than the euro in terms of return on investment. Buying silver, however, is still (8.74/3=2.91) almost 3 times worse than buying euros.

Let that sink in for a moment. In this Freegold scenario laid out by me and FOA, buying silver today is 3 times worse than buying Argentinian pesos in December of 2001, or Icelandic Krona in August of 2008. That's pretty bad, and that's why I did this little exercise.

Silverbugs don't like me at all. And from my count, it seems like there are three basic types, even though they overlap. There are the Hard Money Socialists (HMS) who, even though they distrust and dislike their government, want it to control the exchange rates of gold and silver to their liking and to their benefit, and submit to the control over government spending said government price-fixing supposedly inflicts. Yeah, dream on, right?

Then there are the "repeat of the 70s run-up" traders, who are usually into the mining shares as well (another reason to not like me, FOA or Freegold). You know who they are. They are the "experts", fully invested in technical analysis that confirms their belief that this is a repeat of the 70s. And finally, there are the conspiratards. You know who I'm talking about.

The conspiratards hate me and think I'm a shill for the central banks. Here's what one of them wrote about me just last week (red marks on the picture, highlights and brackets are mine, to highlight what he doesn't like):

Submitted by Pining 4 the Fjords on June 2, 2015 - 9:09pm.

For the record, I made this one and posted it here November 2012, and my opinion hasn't changed since:

At the heart of it, I believe Freegold is an attempt to "save" central banking as a concept and thus keep the Keyensian dream alive after its utter failure becomes apparent to all. It tries to wrap a few truths (unlimited fiat printing destroys the store of value function of currency, gold is the true store of value, etc.) around a new-sounding reiteration of the present system we already have. Another was a European central banker, after all.
[Nope, I don't think so!]

Look at the core concepts: gold is already a store of value (and doesn't need Freegold to make it so), fiat already can be printed in unlimited amounts (and you don't need Freegold to so this), and the value of fiat already "floats" freely against gold (and doesn't need Freegold to do so, this is why gold trades as an FX currency).

Like Gramsci's "false consciousness" nonsense was an attempt to save Marx from the utter failure of his predictive scheme, so Freegold is an attempt to save Keyensian central banking from its impending failure. No sale.

You don't have to like central banks to understand that they have lots of gold and no silver. Same with the real old money giants. You can be an activist with your savings if you want, but I'm not. And I'm not a shill for anyone. I don't hate silver. As I said, I think it's quite exceptional as an industrial metal, and, just like America, once it sheds its overvaluation due to investment demand, I think it'll soar like a phoenix, not as an investment for savers, but as a stable and thriving industry. But if you're following the narrative of these conspiratards who think that silver will break the banks because they don't have any, then you're not betting on Secretariat at Belmont in 1973 winning by 30 lengths [or actually 38.3 lengths ("at the very least")], you're betting on the likes of these carcasses who were sent to the glue factory back in 2011:


I apologize for having the comments turned off here, but this post did bring in a lot of comments and contention at the Speakeasy, like:

"Are you saying the demand for silver as an investment will be close to 0 post transition because everyone will just want gold?"

"Hasn't the silver market been papered over like gold?"

"Won't silver rise with everything else in a hyperinflation?"

"Isn't silver commonly used as a currency and store of value during hyperinflation?"

"JP Morgan has been accumulating silver more and more in recent times. What accounts for these purchases?"

I personally responded to each of these questions and more in the comments section, as did many others. I doubt you'll find discussions like we're having at the Speakeasy anywhere else, and I'm not shying away from controversial topics. The three prior posts this past month also covered topics that are contentious even within the Freegold community, like mining shares, two-tier and peak oil. So no, it's not just a big brainwashed cult member circle jerk, although there is an old 2013 post at the Speakeasy titled "The Circle Jerk". ;D I think it's a lot like my blog was in the early years, only better, and with no trolls monopolizing the discussions!

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