THEN AND NOW

George Offerman

After having several very interesting conversations in the last few days about the state of affairs in this country, and the recent up moves in the precious metals, I have given into a temptation to write a post exclusively on the metals, which I have not really done up to this point. So, if you are not interested in this topic, skip this one and come back on Monday.

There are those who still believe that Gold is a ‘barbarous relic’, and is currently in a bubble, due to the fact it has gone up fivefold from its low in 2000. There are even more that believe silver is just an ‘industrial’ metal, and as well, is near bubble status, having gone up slightly more than fourfold from its 1999 lows. In both instances, the skeptics cannot be more mistaken, and sadly enough for them (to be discovered VERY SOON) they will have major regrets that they did not get on this train before it pulled out of the station. Even at today’s rate, gold is still a bargain, and silver is practically being given away.

The last major run of both metals ended in 1980 when gold hit $850 per ounce and silver $50 per ounce. Without getting into great detail ( and the reader must do research on this) the main upward pressure for gold was Nixon’s closing the gold window August 15, 1971, thus ending what was then known as the Bretton Woods agreement, and the subsequent running of very high inflation and the oil crisis of 1973-4. However, silver had a different story and set of circumstances. Two very wealthy brothers who were in oil had figured out that inflation was going to steal their wealth in a stealth like manner, and decided to accumulate a large amount of physical silver as a ‘hedge’ against inflation. This accumulation took several years, but hit critical mass in mid to late 1979, shooting the price up to nearly $50 per ounce. The Hunt brothers (who really would be considered HEROES if the truth were known) nearly crashed the silver market (and would have destroyed the money powers on the spot) and exposed the fraud that the COMEX actually is. The Hunt brothers ‘crime’ as the SEC and others allege, was demanding to take delivery of the physical silver that they LEGALLY BOUGHT AND OWNED. Had they done that, the manipulation of the precious metals that has been very well documented by GATA and Ted Butler would have ended, and the true price of the metals would have continued higher until they reached their true value.

What killed the silver price at $50 was intervention on the COMEX markets by the government, when they disallowed ‘long’ contracts from being purchased, and threatened to flood the market with silver (which at the time, the U.S. gov’t had a stockpile of 2 billion ounces). Within a day, the price collapsed by $15, and the Hunt brothers were ‘out of business’ and on their way to vilification and trial. After this episode, the COMEX through the CFTC instituted caps on long contracts, but not shorts, thus creating the current situation of manipulation in silver by the well known short holder JP Morgan.

The interesting thing back then was silver was making moves of $3-5 per day, and that was when there was a known world supply of around 10 billion ounces, with the U.S. government holding the world’s greatest hoard of silver. There was truly no shortage back then, but by virtue that silver is money (as God deemed it to be) there was that ‘herd mentality’ of getting some before it was gone, thus driving up the prices in very short order.

Now, fast forward to 2010. The government used up their hoard, and have been net buyers of silver for at least the past 5 years. There are no governments that have been net sellers of silver, and the largest known hoard is in India, at 200 million ounces (and they will not part with theirs) the world supply (estimated) is down 90% from 10 to 1 billion ounces. Silver is a necessity for the modern electronics found in cell phones, computers and virtually all other components that need to be spark free and heat sensitive (the two facets of silver not found in ANY other metal known to man). Silver has anti bacterial properties that are now utilized in everything from clothing, to medicines, and these facets consume around 40% of all annually mined silver. The USGS has estimated that known ground reserves of silver will be exhausted in 14 years. There are more points to make concerning silver’s use and consumption, but the point is that there is little supply of silver left, and the money powers have NO RECOURSE left when prices take off.

The largest feature of all though is the fact there are now thousands of little “Hunts’ out there, who will not let go of their silver at nearly any price, and they are very clear who the villains are, unlike 1980. The U.S. government has no silver left to threaten to flood the market with when the price finally breaks free. The major forces that killed the last silver run have been neutralized, and it is CHECK MATE for the greedy money powers. There is no greater joy in the precious metals camps than the idea that these ‘useless eaters’ have to watch their scheme crumble right in front of them, and they can’t do anything about it. What goes around comes around.

The prices of the metals, especially silver will be absolutely stunning. There will be thousands of folks who will be ‘instant millionaires’ when this starts, and it will be in the truest form of money that God created. The price increase will not be a moon shot; it will be more like a super nova. No one will be griping about having bought, and then seeing it go down by some cents or even a few dollars. There will be people that only have modest amounts that will see daily increases in the 5-6 figure range during the height of the ‘mania’, and their only dilemma will be when or if to get out of the market and buy up the real estate that will be had for back taxes. This truly is a ‘once in history’ chance to get into something that is still available on the cheap, but the door is closing fast and the ride is about to commence.