The US Mint Resumes
While Silver Bars Disappear
By Dr. Jeffrey Lewis
The U.S. Mint
resumed sales after a week of suspension as silver coins sales for January
almost doubled compared with the month before. An all-time high of over 7.4
million Silver Eagle coins were bought in January from the U.S. Mint, which
substantially exceeded the former record set in early 2011. Gold coin sales were
also the highest seen in almost three years.
All of this
excitement in the coin market is happening against the backdrop of currency
wars, debt ceiling debates, and some of the most blatant price controls
implemented in years.
One can almost
hear the whispers about the end of QE as the world patiently awaits the fate of
Europe’s coming recapitalizations and the rise of the Eurobond.
Industrial Demand Overpowers Investment Demand
users of silver have benefited from unnaturally low prices for decades.
Nevertheless, the artificially low prices have led to destruction of inventory.
percent of the silver stockpile has now been worked through since the
demonetization of silver in the United States in the early 1960’s.
One can only
wonder if the remaining silver longs who have withstood the egregious price
management are now standing for delivery, leaving industrial concerns suddenly
in a pickle over their just-in-time delivery practices they have taken for
granted for so long.
anecdotal evidence has surfaced indicating shortages of silver bars for
industrial applications. Also, well publicized announcements have started
appearing, such as the news that HSBC has been sourcing silver from Poland
rather than what would appear to be ample supply elsewhere or in the warehouses
they run as custodians.
demand for silver has been fueled in large part by high profile investments over
the years — including renowned investor Warren Buffett — and the creation of the
big silver ETF (SLV), and the silver market has blossomed as the great financial
storm approached and passed over the world.
Return to a Crossroads for Silver
policy has shifted and become more aggressive, more fuel has been fed to the
fire smoldering under silver, while authorities attempt to manage public
perception via complicated data interpretation, propaganda and even perhaps
covert market manipulation.
It seems more
and more likely that silver has now come to the crossroads, as the world economy
enters the age-old stage of currency wars where the masses come to accept open
ended fiscal monetization in the name of export improvement or as a matter of
just such a juncture means the merits of commodity backed market standard money
will once again be held to experiment. Perhaps this will involve dramatic
steps, such as removing the big naked shorts from the metals markets,
nationalizing the CME and allow the market to re-price itself based on
silver derivatives fallout would be a shot heard around the world, but the
market would finally return to valuing real money, and the price of silver and
gold will be much, much higher.
and Deflation: Comparing Like With Like
inflation or the deflationists have one essential flaw — they tend to look to
history to gauge the likely outcome, although during most of those times, the
U.S. dollar and other currencies were backed by gold.
People who like
to talk about deflation by referencing prior periods of deflation are usually
looking at countries that were operating under a gold standard, rather than a
solely fiat currency system.
are currently operating under a gold standard, so their analysis is largely
irrelevant. The fiat currencies have no standard, and their value is only
measured relative to each another and to the price of valuable commodities,
which have been manipulated for years.
you look at countries that have taken on tremendous debts in a world dominated
by fiat currency systems, it has never been a deflationary environment in terms
of the fiat currencies.
contrary, such situations have always resulted in massive inflation, commonly
referred to as hyperinflation. Deflation may only exist in such a situation if
you measure prices against a currency that did not collapse or against something
of intrinsic value like gold or silver.
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