December 11, 2009

NIA Declares Silver Best Investment for Next Decade

We are less than three weeks away from entering the next decade. The most important thing you need to know entering 2010 is that silver is the single best investment for the next decade. In our opinion, investing into silver is the only sure way to tremendously increase your purchasing power over the next ten years.

Throughout world history, only ten times more silver has been mined than gold. If you go back about 1,000 years ago between the years 1000 and 1250, gold was worth ten times more than silver worldwide. From year 1250 to 1792, the gold to silver ratio slowly increased from 10 to 15 and the Coinage Act of 1792 officially defined a gold to silver ratio of 15. The ratio remained at 15 until forty-two years later when the ratio was increased in 1834 to 16, where it remained until silver was demonetized in 1873.

The gold to silver ratio remained between 10 and 16 for 873 years! It is only over the past 100 years that the gold to silver ratio has averaged 50. History will look back at the artificially high gold to silver ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they’re all an illusion. Next decade, the fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks.

While the vast majority of the gold ever produced remains sitting in vaults, 95% of the silver produced has been consumed by industry for thousands of applications in such tiny amounts that most of it will never be recycled and seen on the market again. Nobody knows the exact above ground supply of silver today, but most likely it is somewhere in the neighborhood of 1 billion ounces. That’s a total worldwide market value of only $17.4 billion, when the world has over $7 trillion in foreign currency reserves, mostly in fiat currencies that they will need to diversify out of due to rampant inflation.

Besides the fact that the world has been ignoring the monetary value of silver, silver prices are artificially low due to a large concentrated naked short position. It’s not a coincidence that the day silver reached its multi-decade high of over $21 per ounce in March of 2008, was the same day Bear Stearns failed. Bear Stearns was a holder of a massive short position in silver. In our opinion, this was likely a naked short position because there is nobody in the world who owns such a large amount of silver for Bear Stearns to have borrowed.

The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position. Because the silver market is so small and tightly held, if Bear Stearns was forced to cover their short position, silver prices could’ve potentially rose to $50 per ounce or higher overnight. The world would’ve seen how economically unstable our country is and confidence in the U.S. dollar would’ve rapidly deteriorated.

JP Morgan still holds the silver short position they inherited from Bear Stearns. The concentrated naked short position in silver today is the largest short position in the history of all commodities, as a percentage of its market size. Eventually, JP Morgan will have to cover this short position or it could jeopardize their existence.

The best evidence that the short position in silver is naked and not backed by real silver, is the differential between what silver trades for on the Comex and what real people are willing to pay for physical silver on eBay. Every hour on eBay, there are dozens of one ounce silver coins selling for approximately $25. That’s about a 43% premium over the current spot price of silver. With so much demand for physical silver, we doubt the silver shorts in the paper market will be able to manipulate prices downward for much longer. A major short squeeze could be right around the corner and silver could take off in a way that shocks even those who are most bullish.

ADVANCES in technology, increasing focus on reducing human interaction with bacteria, and tracking goods and people are all good news for silver and the price of the industrial metal, which has lagged for so long, says Jessica Cross, CEO of VM Group.

Long regarded as the poor cousin of gold, the metal, which is mainly used in industrial applications as well as to make jewelry, has bright prospects, with off take in a spectrum of new products put at just below 350 million ounces by 2020 (see graph below), Cross argued in a presentation at the LBMA Conference earlier this month.

The silver price is currently trading around $17.30/oz, (TP Note: at today’s pricing 11/23/09, make that $18.60 ± ) a level that it traded around in the first half of 2008 when it broke up to just shy of $21. These two spikes were unparalleled, certainly since 1985, with the metal touching slightly north of $8.50 just once since then.

 Looking at the history of the silver market, Cross said about two thirds of the mined metal is a by-product of other minerals like copper, gold and lead, making it difficult to determine a price at which silver production would fall in a natural supply and demand scenario. Being a by-product, the metal will come onto the market almost regardless what the price is for it.

One of the major users of silver, the photographic film sector, is being particularly hard hit as consumers turn to digital cameras. A graph of silver demand by the sector shows a steady decline since a peak above 200 million ounces in the early 1990s to well below 150 million ounces in 2009.

Another anchor on silver prices, which tend to take direction from the waxing and waning gold price, is that a lot of silver used in a range of applications – like photographic film, electronics and batteries — tends to be recycled, bringing back about 400 million ounces a year of the metal to the market.

But the days of huge recycling could be drawing to an end, Cross said, pointing to a host of technological advances needing silver, including wound care, food hygiene and water, wood preservatives, textiles, solar panels and radio frequency identification tags.

“These new end uses for silver are set to pick up the demand slack left by the shrinking photographic industry,” she said. “But, unlike photographic film, these end users do not generate vast amounts of recycled metal. In general… the metal is going to be taken off the market for good.”

Silver’s time has come, she said.

“The change is coming about as a result of silver’s unique properties as a biocide as well as is superior conductivity,” she said.

“The interesting thing is that many of the world’s worries and woes today are playing right into the hands of silver and this metal appears to be in the right place at the right time in a number of applications.”

Radio frequency identification tags, used in identity documents, passports and stock controls, are growing in use. China, for example is spending $6B to install these devices in identity documents for all its citizens and in transport tickets, she said.

London-based metals consultancy VM Group estimates use of these tags will grow to more than 30 billion by 2020 from around seven billion now. Each tag contains about 10 milligrams of silver on average, absorbing nine million ounces of silver from the 2.3 million ounces currently.

Solar panels and mirrors could absorb another 50 million ounces by 2020 compared to 18 million ounces now. Wood preservative coatings could account for up to 100 million ounces a year as chromate copper arsenic, the existing wood preservative is phased out.

There were no estimates of the amount of silver that could be used in plasters and bandages, which use silver for its anti-bacterial properties. These properties also feed into the clothing and textile sector where body odors and bacteria are eliminated.

Silver is also used in water purification devices and to store food. It could take up around 95 million oz by 2020.

“Superimpose this good news on the tonnages of silver that have gone into the ETFs (silver-backed exchange-traded funds) and you have an underlying strength within this market to justify its current price strength,” Cross said.

The gold:silver ratio is expected to narrow. At current prices you can buy 64.4 ounces of silver for the price of a single ounce of gold.

“The current market conditions indicate that gold has become overpriced and silver has become underpriced, suggesting there will be a shift in assets from gold to silver,” said Jeffrey Lewis, who edits Silver-coin-investor.com.

 “Since 1970, the ratio of the number of ounces of silver you could buy with one ounce of gold has run as high as 80:1 and as low as 20:1, with a mean of 54:1. Today’s ratio is moderately higher than 54:1; in fact, the ratio is nearing 64:1, suggesting that there will be a correction in either the price of gold, or silver will advance to make up the deficit,” he said.

If, like me, you have been watching the spot price of gold and silver lately you would be seeing that your investments in silver have been growing. One of the first things I do every morning is check the spot prices… Naturally, this is something I need to keep on top of throughout the day so that TPS can keep our pricing structure current… but as a fellow silver investor and co-owner now of a gold mining operation, I have a vested interest in watching what is going on.
 

In the last week we’ve seen gold almost reach the $1200 mark… and silver came close to $19. The first thing that this triggers in my mind is the question: “Okay… What’s happening out there?” This, then prompts me to go digging for articles, research, commentary by the experts to tell me what has impacted the pricing spikes or drops (as the case may be). Much of what I discover in this process I bring to the TP Newsletter to keep YOU informed …
 

One of the things that happened this week is that the US Mint has suspended the sale of gold and silver American Eagles. Several people have called me to ask about this. But, before I go further though let me pontificate a little about the issue of numismatic values compared to investment values of precious metals, because this will have a bearing on understanding the rest of this article.
 

Numismatics, according to Wikipedia, is “is the study or collection of currency, including coins, tokens, paper money, and related objects.” So when we speak of ‘numismatic value’ we aren’t necessarily only talking about precious metals.
 

Numismatic values are driven by many factors besides the metal content itself. The following is a list of some of those factors: 

• Year of production
• Design quality
• Condition of the coin/currency at the time of valuation (circulated, uncirculated, scratches, dents, dings, corrosion etc.)
• Minting errors
• Socio-political events
• Rarity
• Quality – proof or burnished

Any or all of these factors can drive up the cost /value of a coin/currency from a collector’s vantage point. Contrast this from an investor’s vantage point. An investor is looking to purchase a commodity of value at the lowest possible cost with the highest possible value to hold until it increases in value, or is able to be leveraged in some way to his/her advantage. In the case of precious metals as one such commodity, the numismatic issues listed above are of little consequence because

1. They drive up the costs artificially and  
2. The value of the metal itself as a commodity is what is important.

Having said that, however, the investor market still holds room for personal preference as to design features and other meanings specific to investor preferences.

So let’s move on to discussing what’s going on with the US Mint. Keep in mind that the Gold and Silver Eagles are Legal Tender (howbeit greatly undervalued with a face value of $1 for silver and $50 for gold).1. As a government institution, the US Mint production of silver and gold products is dependent upon the annual allocation by the Treasury of precious metals purchased under their annual budget. This is a fixed, finite, amount (contrary to private mints or commercial entities that just purchase more when they run out).

In the last 2 years, 2008, & 2009, the US Treasury allocated LESS silver / gold than in previous years to their Silver Eagles program. This has several implications:

• Silver/Gold Eagles for these years will be rarer than in previous years.
• With current investment demand being higher due to the economic climate, there will be shortages.
• The US Mint sales currently top 25,000,000 for 2009.
• Because of the shortages, the short-term pricing will carry a higher premium (over spot). This is basic market economics.

2. In 2008, the US Mint also had to suspend sales of the gold & silver American Eagles. I had just begun investing in them in the fall of 2008… and I ran into this very issue myself last year. (Remember, the Treasury had cut back supply of metals in 2008 as well.)

3. Just because the US Mint has suspended sales does NOT mean that you cannot obtain these coins elsewhere from sellers who have had the foresight to stock up or vendors who are resellers for the US mint. But, bear in mind the following:

• Buyers will pay a higher premium
• Buyers will find they may have to wait extended periods of time for delivery after paying for their coins.

The US Mint may produce a few more of the 2009 Eagles yet before the close of the year. On the other hand, they may just be trying to regulate the rate at which they deplete the remaining supply. Since we are approaching the end of 2009, this isn’t too alarming because 2010 is just around the corner; new allocations for the next year will be in place and they will begin minting the 2010 Silver and Gold American Eagles and the cycle begins again.

I do have a source of limited supply for circulated Silver American Eagles from time to time. These will have scratches or small dings, and perhaps need cleaning up if you want to get them in pristine shape… But the premiums are lower and they’re still Eagles if you’re a real American Eagles fan… If you’re interested, drop me a note and I’ll watch for the next stock available in these…

I do still have sources for obtaining Eagles after our current inventory is depleted; however, I, too, will be subject to these higher premiums; so if and when that time comes, I may need to decide not to carry them due to the price point we will have to charge for them. After all, my mindset is more of an investor than collector… and I will want to keep as much of the commodity on hand as possible and not waste precious resources on artificially inflated premiums. Having said that, if you still want Eagles, drop me a note or call, and I’ll be happy to see what I can do… generally speaking, however, know that there will probably be minimum order volumes imposed upon me by my vendors…generally, those are 500 or more coins.

Things to Come for Tea Party Silver

On another note… I’ve shared with you in the past that we will be minting a new 1 Troy oz, .999 fine silver divisible bar (similar to the Stagecoach bars we now carry) … we are still in waiting mode on this, but I will give you a sneak preview of the artwork… I had hoped these would be ready for Christmas, but it doesn’t look like we’re going to make production in time. I will definitely be sending out a note when they come off the production line. Our first run will be in silver; later in the year after we get supply of gold running from the mine, we intend to produce these in 1 oz gold as well.This design is obviously inspired by our Alaska mining venture, but also takes its text from Zechariah 13:9 in Scripture.

“This third I will bring into the fire; I will refine them like silver and test them like gold. They will call on my name and I will answer them; I will say, ‘They are my people,’ and they will say, ‘The LORD is our God.’” 

We felt this text brings together the concept of how adversity distills character as well as references the challenges we are all facing in these turbulent times, which many believe to be ‘last days’ scripture talks about. We also felt that it instills hope in what the future holds and a sense of direction that we need to be taking as individuals and as a country.

Contact us at silver@teapartysilver.org
888-203-2232 x 1

See video at http://www.thefinancialtube.com/video/3551/Interview-with-Adrian-Douglas-marketforceanalysiscom

From Yahoo Group “InvestorsExchange”

I bring to you the following with the specific permission of Alf Fields. I have suggested to you often in the past that once the price of gold reaches into its maximum potential it will not repeat the fall of the 1980s. I foresee gold re-entering the system in a new and unique form that does not include convertibility. It will not be tied to interest rates as it once was in its previous form. I have written to you various times about the Federal Reserve Gold Certificate ratio, modernized and revitalized, which now may well be associated with an SDR form of an International Central Bank. The tie between the ratio and gold would be a measure of international liquidity considered zero or 100 on the day of adoption.

The following is Alf’s statement yesterday, with his permission to post: “Gold cannot decline from its highs as it will be incorporated into the national and international monetary systems at that time.” –Alf Fields, May 20, 2009

Now do you have any questions why Fund Wizard Paulson just got long a few billion dollars worth of Gold ETFs and a few major gold producers? Finally a major event has taken place that is a US dollar milestone. The financing and extremely important event is the arrangement between China and Brazil displaces the dollar as China becomes the major trading partner with Brazil. Since then the Rial has been celebrating and the dollar has been depressed. This is a once in approximately a century replacement of a trading currency that has always meant a dethronement of the deposed and coronation of a new currency king. The last time this happened was when the US dollar supplanted the British Pound as the major trading currency and entity with Brazil 79 years ago. It took the Brits 300 years to supplant the Portuguese Escudo with the British Pound. Only twice has this occurred in 379 years. This is obscure to most but not to Mr. Paulson the hedge wizard. Obscure to most, but not to our gang at JSMineset. The dollar died in Rio and that means everywhere.\ The dollar is in for a very cold winter. There is one thing that is absolutely certain and that is Gold is now headed to at least $1650 and in all probability much higher. This is happening NOW! What more do you need to know?

I was surprised to find that many silver and gold investors who had been buying the metals for many years still do not know what Metals Leasing is and why it is the single most bullish factor to own either Gold or Silver as 2009 begins.It is my opinion that the metals leasing program is about to unwind for both Gold and Silver and the price effect of this unwinding will be profound and instant.Silver stands as a much better candidate to Gold for reasons explained in this article, however gold will not be left out of the picture either.

Below is a simple, easy to read article on Silver Metals Leasing. In my opinion, metals leasing will play out differently for Gold than Silver, so this article focuses on the Silver aspect, given that it is consumed more and will, in my opinion, will surge much more than Gold as metals leasing unwinds.

Origins – The Bankers “Problem”

Large banks with huge stockpiles of Gold and Silver sitting in their vaults never earned any income from their bullion. After all, the metals intended function was to preserve wealth for the bank, not create it.Greed is a powerful force. Just “having” Gold and Silver wasn’t good enough for the major banks and they scratched their heads as to how they can bleed even more profit from their enterprises, in particular, how can they turn their Metal into money, without getting rid of their Metal!The big banks would never want to just sell their Gold and Silver reserves as it represents and backs their enterprise and is what instils faith in their organisation – but hey who says you can’t make some cash on the side, huh?

The Solution

Some smart banker from the banking Cartels, who no doubt got a promotion after coming up with the idea said “What if we lease the metals?“Lease to the smaller banks for say, 1 or 2 percent per year on the value of the physical metal.This way we could earn more cash, while still keeping legal ownership over all our precious metal! Brilliant!

But why would other banks lease metal just to keep them in their vaults, I hear you ask? Good question… read on.

Crack Open Them Vaults!

Metals leasing was borne, and it was a huge success!The banking cartel opened their vaults and started delivering physical bullion to the smaller banks on lease contracts.And to answer your question from the previous paragraph – The smaller banks had no problem in paying 1-2% for the metals because they sold the metals into the open market and invested the cash into higher yielding assets (assets that paid more percentage points than what the metals were leased for in the first place).

A major windfall for both the banking cartel who started earning money for leasing their otherwise stagnate assets, and the smaller banks loved the few percentage points they made risk free. Everyone happy right?

Before I continue, lets examine the specifics of this.

Silver and Gold are considered fungible. This means that if I lend you 1kg of pure gold, regardless of what happens with that bar of gold, so long as you return ANY gold bar of equal weight, that is considered as good as the original one I lent. This is the only way metals leasing can work. No-one in their right mind would lease anything and then sell it into the open market if they had to get that exact same bar of metal back at the end of the lease.

By selling the metals from the big banks, there is the appearance of oversupply of silver and gold in the market. As will become evident later, this is a fake supply hitting the market, but the metals price depression is a real effect of this fake supply.

The banks who are leasing the Silver and Gold make guaranteed profit as the metals leasing cost (1-2%) is far below what they can make in the open market when they sell the bullion and invest in a 4-5% yielding asset (Government bonds, t-bills etc). When the metals lease expires, generally there is no reason to return the Metal (i.e. buy the metals back from the open market) – it makes more sense to roll the lease into another contract.

A Real Life Example

As a result of this leasing, the price of silver and gold are beaten down compared to where they should rightfully be.To see the effect of this leasing on the market, consider the following example.A Bank owns 500 houses in any given suburb. They then rent (lease) these houses out to tenants who, at the end of the contract promise to return the house or rollover into another rental contract.Now lets say that these 500 tenants decide to sell their rental houses, and invest the money made into other ventures (Yes, this is illegal for real-estate – but allowed for precious metals – go figure!).

What would 500 houses being sold in that suburb do to the price of real-estate in that area? It would fall through the floor. The other houses in the area would be devalued to a large degree. This would also force other sales in the area as investors see the price of real-estate falling and get out of the market – creating a domino effect of plummeting house prices.

This same effect of a price suppression is seen on the price of both Gold and Silver. Through leasing – there is only a fake supply of metals on the market (remember the actual owner doesn’t want to sell the metal, that’s the whole reason why they are just leasing it out in the first place).

Some call this manipulation of the markets. I agree, but it also creates an opportunity like never before – read on.

Profits Galore

So back to leasing… the big banks making 1-2% on metals that were just sitting in their vault – they are happy. After all, the bullion being leased to the banks are recorded as assets of the bank as if it were still sitting in their vault – and at some stage will get them back (well, so they think!)The bullion and smaller banks are happy because they are making more money re-investing profits earned from the sale of the metal into the open market.Only the staunch silver investor is unhappy because he is seeing this fake supply of metals decimate his investment.Metals leasing is money in the bag for the banks for as long as the system is in place. But really, we all know that no-one gets a free ride in the long run – especially in the banking industry.Enron Style Accounting

But isn’t these sales of silver and gold diminishing supplies and as such – wouldn’t the price rally on such a force?Well, here is where it starts to get a little shifty. The big central banks consider their lease contracts sold to smaller banks “as good as Gold or Silver” since, legally, they can call the lease in at any time or the bank doing the leasing and return the metal at the end of the lease.The banks have dealt with paper and computer electrons for so long, they forget they are dealing with a tangible asset and no paper trade could ever get the physical metal back into their vaults!So the big banks, when reporting their assets, count physical silver AND silver that is under lease as 1 line item… that is, even if 90% of a banks silver is out on loan, its still appears on the books as sitting in the vault!But what if the Silver cannot be returned – period?

Show Me The Metal!

Here’s the gottchya point. The silver being leased, which is then sold, is gone and cannot be repaid. There is not enough silver above ground to account for the deficit on lease. It is estimated that a full 2 years supply of silver that is out “on loan” has been sold and used in our computers and electrical, our medical industry, our photography, our solar panels, our military equipment and a myriad of other products.You see, Silver (unlike gold) is not just horded for its intrinsic value – it is consumed – its gone baby.Now maybe the big banks didn’t realise just how much Silver would be used before starting to lease it out – or maybe they did but concluded that silver is in abundance and leasing makes sense (as was the case 3-4 decades ago).In 2009 however, there is no even 1 year supply of Silver above ground, yet there are 2 years supply of lease contracts needing to be returned. You do the math!

What’s the End-Game?

I’ve postured below how the end game may play out in Silver Metals Leasing. I cannot say it will play out the same for Gold, but it may. Here are the flags I think we’ll witness before Silver makes its mighty leap.Red Flag #1: The banks leasing the Silver will become concerned about hard inventory levels and the ability for repayment at some stage (its already too late however).Red Flag #2: In order to not create a run on Silver, they will gently increase the Silver lease rates over time as to not scare other banks into the realisation of the same problem they are witnessing. It’s important they do this relatively slowly… the last thing these lenders want is a run on Silver as it diminishes their chances of getting the physical back into the vault.Red Flag #3: As the lease rates increase, it doesn’t make sense to keep the monies earned from selling the Silver in the first place in the open market and lease contracts will not be rolled over.Red Flag #4: Metals will be bought back on market and delivered to the leasing banks.

Red Flag #5: As this starts to happen en masse, Comex and other Silver exchanges will default on delivery and at that time the cat is out of the bag and the Silver rush will ensue.

Lets look at what happened to the price of Nickel when Comex defaulted on that in 2006.

The price went from about $5 to $25 – 500% increase – and that for a non-precious, highly common metal with no physical world shortage.

There are other factors in the Silver market at play than were in play with Nickel…

As my other article illustrates, we have a worldwide shortage, not just one shortage in exchange. Comex will not be the first to default, infact it will be a catalyst for worldwide shortages as other warehouses are asked for delivery.

The US economy is already on tenterhooks. A precious metals shortage discovery would be just the ticket for mass liquidation of US dollars into stores of wealth such as Gold or Silver. We are already seeing this play out in fact… once entire nations start dumping US Dollars however, it’s a bleak outlook from then on.

The paper price of Silver will head towards zero. As most Silver investors are aware, places like comex trade 100′s of times more paper than what is in their Warehouses. These pieces of paper will approach their true value which is determined by the following formula

(Number of Available Contracts / Actual Inventory) * Market Value of Commodity.

If the actual inventory goes to zero – so to does the price. Do not trade Silver on paper and expect to benefit from the shortage, if anything a speculative SHORT is in play for paper.

Before these paper contract reach their value however, there may be a price burst to the upside before the realisation that paper is worthless. Personally, I won’t be speculating on paper at all during this time.

Inflationary concerns are real for the US Dollar. The Federal Reserve is committed to this “quantative easing” policy which Obama has already committed to allowing with his “stimulus” (read: printing) plans. This factor alone is causing precious metals to increase in paper money terms.

Mining is declining due to the recent bashing Silver has taken over the past 6 months. Most Silver is mined as a secondary metal (70% of production). As base metals decline (and they will further in my opinion – however that is not the scope of this article) Silver will continue to be less attractive. It is only after the price explosion coming where Silver will once again become VERY attractive to mine… but the deficit and immediate demand won’t stop the price going sky high in the interim.

With SO MANY factors at play, its impossible to put a price target for Silver. Anyone who does put a price target on Silver is doing so more for readability than truly understanding just how many factors are at play here.

I do believe however that Silver will be worth more than Gold at some point in time, if only for a short period of time.

John Christian.
January 1st. 2009.

In the Eye of the Storm – Weather-proofing your Future
There is a plan and it is a sound plan…

Many of us will look back at 2008 as the year of “The Great Financial … Squall”. A sudden disturbance that has left many of us (some for the first time) experiencing the uncertainties of financial vulnerability.

Moving into the second quarter of 2009 we continue to be threatened by inclement financial weather. But realize this – we are in the eye of the storm. That hard rain in our face is only a precursor of what lies in our path. That is the reality of the situation.

Much has already been written about the US Federal Reserves “surprise move” to buy up longer-term US Treasury securities for their own portfolio. The only thing that surprised me was the muted response when the Fed went on to say it would also expand its purchases of mortgage-backed bonds to $1.25 trillion from the previously announced $500 billion.

Buying up your own debt is one of the last resort strategies, the equivalent of a Hail Mary pass…or in the words of one of my more colourful readers: Buying your own debt is like eating your own vomit.

There are other initiatives the US could have attempted (meaningful across the board tax cuts, stimulus money used only to rejuvenate business-related infrastructure, relaxing restrictions on mineral and energy exploration, etc.) But I think we all knew ahead of time that suggestions such as these would have fallen on completely deaf ears. Instead the plan remains to simply print more money.

Some of the analysts who still cling to the once popular Keynesian economic theory like to harken back to the Great Depression and remind me that America borrowed its way out of that mess. No argument there. But dare I be so rude as to point out that in the 1930’s the US was a creditor nation. Today, the US is the largest debtor nation on the planet. So borrowing on the future by printing obscene amounts of money today has absolutely no chance of working. More to the point, in the 1930’s the US dollar was still fully backed by gold, whereas today it is backed by nothing other than some cool looking dude standing at a podium mumbling promises as he fumbles about looking for his missing teleprompter.

So what is the answer…and why the urgency?

To understand the question and to be aware of the urgency, one must fully understand the situation. To truly grasp the situation, one must look beyond last week’s not so surprising announcement by the Fed. Before we do that, we must swap out Federal Reserve, Treasury Department, etc. The correct word: Washington. Reason: Because of the gravity of the situation, last week’s radical decision to buy their own debt could only have been sanctioned by the highest office and the most powerful elected official in the land.

Due in part to the US dollar’s status as the world’s reserve currency, America has been allowed to live far beyond its means. For years the US has been exporting its debt. To be unfairly simplistic – the world produces whilst America consumes.

With eyes wide open, many countries have become willing partners with America in this scheme. The most conspicuous being China, holding almost a trillion dollars of US debt. So Washington – rather than bite the bullet and freeze spending, cut taxes and work on rejuvenating their business related infrastructure – comes up with a plan of last resort; print and spend incredible amounts of money. In other words, the US has turned its back on the dollar. Washington has debased their currency. Sorry, what is the approved double-speak term for currency debasement? Oh yes, “quantitative easing”.

But let us go deeper. The reality of last week’s T-bill purchase was a clear signal by Washington – demanding their partners become complicit in bearing a share of the burden in bailing out the US economy. And how would they do this? By knowingly, absorbing guaranteed future inflation as the purchasing power of the US dollar declines. The result: America’s once willing accomplices have quickly turned into unwilling (and hostile) hostages.

Based on breaking news over the last few days, it appears that China may be more unwilling than most. China has now called for the creation of a new currency that would replace the dollar as the world’s reserve currency. China proposed an entire overhaul of global finance, putting to voice the growing concerns being felt by developing nations’ and their unhappiness with the US role in the world economy. John Lipsky, the IMF’s deputy managing director, said the Chinese proposal should be treated seriously. “It reflects officials’ concerns about improving the stability of the financial system,” he said.

In response, senior Obama administration officials scrambled to quickly reassure Beijing that the current US spending spree is a short-term effort to restart the stalled American economy, not evidence of long-term U.S. profligacy. Unfortunately, Washington’s actions speak much louder than mere words. No matter how artfully the double-speak is written – and perfectly placed on the teleprompter…or how robustly the words are delivered – Washington refuses to do the right thing by simply reaching over and throwing the ‘off switch’ on the money-printing machine.

One only has to look at the differences in how China and the US are trying to work their way out of the current recession. China has gone on record to say they will be encouraging mining companies to increase the amount of gold produced in that country. Remember: gold and silver are now the most sought after metals on the planet. They represent true wealth, and with the 38 year old experiment in fiat currency in crises, gold and silver may soon become the only trusted measure of security.

The US, on the other hand is once again mulling over HR 699 – a draconian piece of anti-mining legislation that will pretty well spell the end of mining in the US. Furthermore when it comes to energy, the EPA recently announced it was putting hundreds of mountaintop coal-mining permits on hold. Whereas in China the prevalence of coal-fired power generation continues to increase due to rapid energy demand. China is aggressively developing domestic coal and continues to lead the world in coal imports. While Detroit’s automobile industry is on artificial life support, the sale of cars in China has exploded, showing a sales increase of over 25% over the previous year.

So where does the investor fit in….gold and energy is a good place to start
I suspect we are just around the corner from being inundated by a plethora of publicly traded companies that are in the ‘green’ business. And that is fine. I wish them well as they craft the foundations for the next deadly bubble. For me, I’m all about offering my readers suggestions on how to prosper by first accumulating real wealth (bullion) and then looking at the best ways to intelligently leverage their opportunities into creating additional gains. I think many of us have gained both comfort and confidence due to the appreciation of the gold and silver prices.
Speaking about hard gold investments, my hat is off to the folks – the people who were smart enough to see the storm coming and recognizing it for what it was, got out of the rain by taking early positions in bullion.
Relying on basic common sense legions of small investors ignored

The demand for bullion became so great the Royal Canadian Mint has recently quadrupled its production capacity. The Rand Refinery in South Africa has expanded production from 10,000 coins a week to 20,000 and continues to explore ways in how to further production. Mints in Austria and Switzerland are working triple shifts in a vain attempt to remain at least within spitting distance of galloping demand.

A sobering note – while mints around the world are expanding, the US Mint has officially announced the suspension of another slate of gold and silver products. “Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .”

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.

Intelligent leveraging of opportunities simply means adjusting your focus to (once again) visit the world of junior mining. Rather than get into lengthy reasons why this is a great idea, suffice it to say that many analysts have advanced several theories of the relationship of gold stocks to gold price ratio. But cutting through the theories and the rhetoric, the simple explanation is that gold equities are dirt cheap relative to the price of bullion. Thus, they should be bought now.

Interesting times in November, as I was pilloried and mauled by many readers for daring to utter the words that we were in a historic gold bull market.
http://www.larrymylesreports.com/Production_Supply_Demand.htm

Be that as it may, I am happy to report that my original due diligence criteria remains valid and continue to show positive results:

Moto Goldmines (MGL) moving from 0.80 to $3.09 now – $2.77
Novagold (NG) moving from 0.60 to $3.35 (a no-brainer) now – $3.15
Azteca Gold (AZG) moving from 0.02 to 0.15 now – 0.12
Central Sun Mining (CSM) moving from 0.12 to 0.65 now – 0.75
La Mancha Resources (LMA) moving from 0.06 to 0.45 now – 0.40

I will continue to seek out junior gold companies in safe and mining friendly environments, while at the same time keeping my eye on the bullion spot price. Accumulating gold and silver during weakness is a solid strategy as there is no doubt this bull market will be of historic proportion. Again…remember when buying bullion – buy on the dips!    (continued at http://www.larrymylesreports.com/Survive_Squall.htm)

By Jason Hammlin

Silver chat rooms are ablaze with talk of a short squeeze that will send the price of silver back above $20 in short order. I believe it is only a matter of time and not so much a question of if, but when it will occur. The price of silver is far below fundamental supply/demand would dictate and there are plenty of signs of manipulation taking place. But whether you agree with the manipulation argument or not, it is easy to see that the current gold/silver ratio is way out of whack at 72. Historically, the ratio averages closer to 15 and even further from the current ratio is the production ratio around 9 and the geological ratio around 7.

What does it all mean? One reasonable assumption would be that the silver price has some catching up to do in order to return to its equilibrium or more natural price relationship to gold. Using the most conservative of estimates, the price of silver should be fetching around $60 per ounce! Even if you believe the price of gold is overvalued and should be closer to $750, that still gives us a silver price of $50. Any way that you look at it, silver is way undervalued versus gold.

These abnormalities are typically caused by some form of artificial interference and always have a way of working their way out and returning to levels dictated by free market economic forces. From the current price of $12.71, silver would enjoy a 372% price increase to reach $60. While this sounds a bit far-fetched, it could happen more rapidly than you can imagine. Paper short positions in silver (up to 800 million ounces) are several times larger than all of the annual physical investor demand for silver (50-100 million ounces). And the majority of these paper shorts are held by only a few investment banks, with JP Morgan being the principal culprit. So, if investors start to demand delivery and paper shorts scramble to cover, $60 silver is suddenly not such a far-fetched theory. I will direct you to the archives of Jason Hommel or Ted Butler if you want to dive deeper into the numbers. And be sure to check out GATA for a wealth of information and documentation supporting the manipulation argument.

Another bullish indicator for silver is the current backwardation that has been running for nearly 40 days. That means that the price for immediate delivery has been consistently higher than the price for future delivery. Gold and silver occasionally slip into backwardation, but rarely for this long. Two articles referenced in the following paragraphs provide more information on backwardation and why it is bullish for precious metal prices.

So we have an extremely out of whack gold/silver ratio, paper short positions that cannot be sustained or delivered upon and backwardation running for nearly 40 days in a row. The manipulators are simply holding down a spring and the more hands (paper promises) that join in attempting to hold down the spring, the stronger the reaction will be when they are finally overwhelmed. It creates the potential for a truly explosive move in silver that will provide little warning and little time to jump onboard. You need to be positioned before the spring pops or kettle explodes as the volatile nature of the silver market will not provide a gradual ride that you can simply jump aboard at your leisure.

James Turk reports on the extraordinary amount of stress in the silver market, saying:.

No one is stepping in to sell physical silver in exchange for future delivery, so there is only one possible conclusion. There is not sufficient physical silver available at current prices to meet demand. So unless the shorts can somehow come up with the physical silver they need to meet their obligations to deliver and thereby relieve the backwardation, the price of silver needs to climb higher. It needs to rise high enough to induce holders of physical silver to sell their metal, which the shorts need to buy to meet their obligations to deliver.

Ted Butler, who I had the opportunity to hear speak recently, also wrote an article a few days ago suggesting that it was crunch time for silver.

Allow me to summarize what all these micro and macro signs of wholesale shortage mean to silver investors. Quite simply, it means that the price of silver should explode soon. If the short-term signs I see, both micro and macro, are true representations of what is occurring with supply and demand, then it may be crunch time in silver. If that’s the case, buckle up and get ready for the ride of your life.

I sincerely believe fortunes are going to be made by those holding silver mining stocks over the next two years. The kettle is about to blow the top off and it has been a long time coming.

But enough of the underlying reasons that the silver price is headed much higher. If you are reading this article, you are probably already bullish on silver and convinced of its investment potential. What you really want to know is the best way to profit from the upcoming price explosion.

First off, it is recommended that you hold a foundation of physical silver. ….. (click on link at top of this page for the rest of the article…)

COSilverado’s comments here:

An Easy way to get your own physical silver is through Silver Snowball…
www.silversnowball.com/242 …   I also have it available through my shop at www.shopit.com/silverado and through my business partner in Montana.

Call me at 888-203-2232 x 1 for more information.

Last week I updated our readers about a video shot at the Orlando Money Show. This week I have two videos where we discuss the ups and downs of the silver market and how silver differs from gold as an investment.

Gold gets most of the press and silver always seems to be in second place, and it will probably stay that way until we get to the blow-off phase of this precious metals bull market. During the panic buying phase or mania that accompany the blow-off phase, gold will be outside the price range of many people. Anyone seeking any protection from the destruction of the U.S. dollar will buy whatever they can, and that is silver.

Silver is far more volatile than gold but, in my studied view, has far more potential than gold. As I see it, both metals should be owned, although silver can give you one heck of a ride, as most silver investors are well aware.

We also discuss new applications for silver in laptop computers and in the health industry.

Click here for the Silver Video

Later we discuss the gold market and how gold is holding up better than other asset classes and actually was making new highs in some currencies, although it did fall back, in U.S. dollar terms. This was just a few months ago, when a huge demand for U.S. dollars surfaced as a result of the credit crisis.

As the host points out, eventually the chickens will come home to roost, and with all the money flooding the system it is only a question of time before this “new” money hits the system and manifests into more inflation.

My view is a bit reserved and those who follow my work carefully know I am actually looking beyond the inflation/deflation question to the question of a currency destruction.

However, that is getting a bit ahead of the story. For the time being, you can watch this video and learn why it might take a bit longer to see all this bailout money boost the gold price to the next level.

Click here for the Gold Video

I want to be cautious here, because both of these metals can take off to the upside at any point, and making a short-term call is difficult at best. Longer term, most of the gold community are not in agreement with the policies set forth by the major nation states of the world and see the metals are going far higher.