Silver

What The Silver Vigilantes Understand That You Probably Don’t (Arithmetic, Human Nature and other Stuff)

Source: Across The Street

by Mark McHugh

In Open Thread, Silver, stocks finance, Treasuries on Wednesday, December 15, 2010 at 6:03 pm

Sorry about the insulting headline, but every last shred of evidence I can find suggests that the most people remain utterly clueless about silver, despite the efforts of the silver vigilantes, led by Max Keiser and Mike Kreiger.  Their brilliantly simple plan (go get some physical silver) promises to topple the criminally insane fraud that has become US economy.  It doesn’t require politicians or regulators to lift a finger either, you simply take advantage of what is undoubtedly an artificially low price.  I can completely understand anyone who is skeptical of that last statement; I’m sure you’ve been burned before, but that doesn’t mean you should stop seeking truth.

Part 1. A little math.

I’m not sure when performing basic arithmetic made you a conspiracy theorist, but here we are.

The 2009 World’s population was about 6.8 Billion.  According to the Silver Institute, total silver supply in 2009 was 889 million ounces.  That means there was .13 ounces of silver produced for every human being on the planet.  That looks like this:

Yep, your fair share of Worldwide silver production is a little less than the silver content of two pre-1965 dimes.  That’s all.  A bargain at about four bucks when you consider the amazing properties of this element.  FYI: World oil production per capita is 190 gallons.

This….

…represents more than ten years of  worldwide silver mining production divided by 2009 population.  Less than $35, and hell of lot easier to transport than 7,600 quarts of Quaker State.  Please note that so-called “World production” includes government sales and scrap.  Government sales and “scrap” have accounted for more than 25% of  “World Silver Production” from 2000 to 2009.  I’m not sure I believe that one out of every four ounces of silver gets recycled, but understand that without that bonus production, demand exceeds supply by 37%.

Part 2. Who needs silver?

Just about everybody, it turns out.  Sadly, another way to get yourself labeled a conspiracy theorist is by reading government documents like the Constitution, or the Department of the Interior’s 2009 U.S. Geological Survey which states:

The physical properties of silver include ductility, electrical conductivity, malleability, and reflectivity. The demand for silver in industrial applications continues to increase and includes use of silver in bandages for wound care, batteries, brazing and soldering, in catalytic converters in automobiles, in cell phone covers to reduce the spread of bacteria, in clothing to minimize odor, electronics and circuit boards, electroplating, hardening bearings, inks, mirrors, solar cells, water purification, and wood treatment to resist mold. Silver was used for miniature antennas in Radio Frequency Identification Devices (RFIDs) that were used in casino chips, freeway toll transponders, gasoline speed purchase devices, passports, and on packages to keep track of inventory shipments. Mercury and silver, the main components of dental amalgam, are biocides and their use in amalgam inhibits recurrent decay.

 Yet you can actually find dunces out there claiming that digital cameras have made silver obsolete.  You should live so long…

Fun Fact:  Silver (not gold, copper or anything else) is the element with the highest electrical conductivity.

Part 3. People lie…..

“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”

John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”

William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

And…..

Lesson:  When someone says you can exchange paper for precious metals – make the swap before they change the rules.

Since the invention of paper, people have been writing bogus notes, and if there are two time-tested methods to become wealthy beyond your wildest dreams, they are:  1)Selling stuff that doesn’t exist and 2) Selling stuff you don’t actually own.  Unless you believe there has been a sudden outbreak of integrity in the banking industry, there’s no reason to believe these dynamics are not still in play, is there?  As recently as 2007, Morgan Stanley settled a class-action lawsuit with 22,000 clients who bought and paid storage on “phantom” silver (check out the Ted Butler article Money for Nothing).

At today’s prices, a million dollars in gold weighs less than fifty pounds, but a million dollars in silver weighs more than 2,300 pounds!  So ask yourself, how many rich people are storing their own silver?  How many hedge funds hold physical silver in their own storage facility?  Or have they entrusted the storage to the big banks?

JP Morgan is the custodian of the ishares Silver Trust (SLV), which now holds over 350 million ounces of silver, provides  sovereign and corporate investors with precious metals solutions (JP’s website), and is the largest short seller of silver in the history of the world.  Berkshire Asset Management’s  Eric Fry writes:

Based on some of the latest conjecture, Morgan’s short position totals a whopping 3.3 billion ounces. If, therefore, the buzz about J.P. Morgan and silver is even half true, the prestigious investment bank could be cruisin’ for bruisin’.

For perspective, 3.3 billion ounces is roughly equal to:

1) One third of all the world’s known silver deposits;

2) Two times the world’s approximate stockpiles of silver bullion;

3) Four times the annual mined supply of silver;

4) 30 times the inventory of silver at the COMEX.

If you can, forget about the conflict of interest, and ponder the enormity of the explosion.

 

Part 4. A little more math. 

Estimates of total silver production since the dawn of man range from 46 to 53 billion ounces (roughly 11x gold production), but unlike gold, we’ve used pretty much all of it (although squandered might be a better word).  It’s in our cemeteries (fillings) and scattered throughout our landfills.  There hasn’t been a significant surplus since 1990.  Ted Butler and others estimate that there is far less silver bullion in the world than gold bullion and they back up their case with numbers  that the paperbugs have never even bothered to refute.  So why does gold trade at more than 45 times the price of silver?  Because JP Morgan, the US government, and every other psuedo-capitalist parasite wants it that way.  But that’s a truth for another day.

Part 5. Other things you should know.

 The Treasury has sold 34 million one ounce American Eagles so far in 2010.  Those sales total less than one Billion dollars. Apple (AAPL) trades about that much every hour the market is open.  Meanwhile the Treasury has issued more than 1.5 Trillion in new debt (1,500 times more) in 2010.  Just for fun, let’s multiply 1500 by 34 million.  A transaction of that size would have equaled every last bit of silver ever discovered at $30 an ounce.    Yet you can actually find people who believe silver is the bubble.

Treasury doesn’t make it easy to buy silver.  They’ll sell you bills, bonds and notes directly online, but not precious metals at anything close to market price.   The mint only does business with  11 Authorized Purchasers (a list can be found here),  Why the lack of savvy?

China can blow up the COMEXs silver market in the blink of an eye, at any moment.  They can do it with their pocket change, as a goof.  And if we piss them off enough, they will.

Part 6. So what’s silver worth.

The short answer is: more.  If silver were priced based on its occurrence relative to gold, it would be over $125/oz.  If it were priced on its availability – somewhere around $2,000.  But if you are content to let the likes of Blythe Masters dictate the value based on truckloads of worthless paper promises, you can expect ultra-low prices until the whole thing blows up.  Of course at that point, we’ll be so busy killing each other for food no one will have time to say, “I told you so.”

The silver vigilantes just want you to re-learn what the phrases like, “cold, hard cash,”  and “payment in full” are supposed to mean.  There not asking you to sink everything you have into physical silver,  just a little.  Silver can’t be printed into oblivion, or stolen by a cyber attack.  Why wouldn’t you want to own some of your very own?

A paper dollar from 1960 is worth exactly the same as a paper dollar in 2010, but  four quarters from 1960 are worth more than $21.  Given the fiscal insanity of the US government, I can’t imagine the US dollar surviving another 50 years, but I’m quite sure that silver will still be useful.  Please consider getting some.

***

 

 

 

 

Update: All indications say this piece is the most widely read thing I’ve ever written.  I would like to thank everyone who helped make that possible especially Max Keiser, Steve Quayle and my friends at Zerohedge.  For the record: ANYONE (except seekingalpha.com – long story) is welcome to my original content here (which is like 99.9% of what’s here).  It would be nice if you mentioned me, but I won’t hunt you down if you don’t.

Some Personal Favorites:

M. C. Escher – Economist   (This graphic in particular)

Giant Leaps  – My best (and most ignored) work.

Tin Foil Hat America (the Eskimo Test) – provides insight into my madness

I can’t believe it’s no Capitalism! – graphic

Candy from Strangers – Who’s buying our debt? (I still don’t know)

“Shut-up And Eat Your Paint Chips, Kid” – Miseducating America (the ZH discussion  was great, and I love the Daily Bail’s graphic (not mine))

Understanding the National Debt (Sesame Street Edition) 

Hopefully there’s other wortwhile stuff here, but I think that’s all the shameless self-promotion any of us can stand.

Categories: Investing/Tangibles, Preparedness, Self-reliance, Silver | Tags: , , , , , | 3 Comments

The War on Silver: “Silver never looked better”

Source: SilverSeek

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July 23, 2012 – 10:32am

It has taken more than 25 years for me to fully comprehend a conclusion that I never wanted to reach, namely, that there is an organized war against the price of silver that has come to include the US Government. I think the US Government involvement came into being almost accidently, but even if it was an accident of sorts, that does not diminish the serious nature of what must be described as illegal activity at the highest levels. I am conflicted between feelings of sadness and outrage.

Starting around 1985, I became convinced that the price of silver was being manipulated by collusive and concentrated short selling by certain commercial entities on the world’s leading precious metals commodity exchange, the COMEX. Having a background in futures trading going back to 1972, it dawned on me that the concentrated and orchestrated short selling was dominating and, therefore, manipulating the price of silver. The very first thing I did after this discovery was to petition the regulators at the CFTC and the COMEX to alert them to the existence of the most serious market crime possible. My petitions fell on deaf ears but I continued to petition them through the present. Since this was in the pre-Internet era, I was limited in convincing others of the silver manipulation due to distribution restrictions. Communication was very different 25 years ago.

Around 1996, I was exposed to the Internet for the first time and began to write in my spare time on that medium about the silver (and gold) manipulation. As a result, more observers came to appreciate the manipulation and took up the cause of exposing and terminating this serious market crime. Were it not for the Internet there would be no broad discussion of a silver or gold price manipulation, even to this day. Certainly, the discussion has led to multiple official inquiries into a silver manipulation by the CFTC over the past ten years. I am unaware of any investigation in any other market based upon wide public contacts to the agency. For sure, there are many who still reject the premise of a silver or gold manipulation; but at least there is a discussion about it now, thanks to the Internet.

So why did it take me so long to recognize a US government involvement in the decades-old silver manipulation? For one thing, I still don’t believe that the silver manipulation (which began in 1983) was a government creation from the get go. I know many believe the motive for the silver and gold manipulation is as a means for the US Government to help keep the dollar strong in currency markets. I don’t agree. Instead, I believe the origins of the manipulation can be traced to collusive and concentrated short selling for profit by large financial institutions, starting with Drexel Burnham, then on to AIG Trading, Bear Stearns and finally to JPMorgan. These were the firms at war with higher silver prices, which the US Government subsequently joined.

The war against silver is not between producers and consumers, as these vital market participants interact in every market, as they must. All commodity producers want strong and consistent demand for their products from financially-healthy consumers who will continue to buy. While all commodity producers desire the highest price possible for their production, no producer wishes harm to the buyers of that production. There is no war between the actual commodity producers and consumers; both interact continuously under the law of supply and demand.

The war has been waged against all silver market participants by a few well-connected financial firms and banks for the purpose of price control. This price control enables JPMorgan and others to capture profits on a variety of derivatives transactions, including COMEX futures and options contracts. This is exactly the same motive that caused Barclays to manipulate LIBOR; interest rates were manipulated for mostly short-term payoffs on derivatives contracts valued by the rates being manipulated. Likewise, JPMorgan and others manipulate the price of silver on the COMEX to capture short term profits on silver derivatives contracts.

An important characteristic of the war on silver is that it is centered in the world of derivatives, as opposed to the actual world of metal production and consumption. The main objective of JPMorgan and the other silver manipulators is to take as much money as possible away from those holding the counterparty and opposite derivatives positions. Nevertheless, all producers and holders of metal are harmed when derivatives manipulation causes silver prices to fall for no legitimate supply/demand explanation, as is a regular feature of the silver market. That’s because the size and intensity of trading in COMEX derivatives has grown to be much larger than the actual market for metal. In a very real sense, actual producers and holders of metal are innocent bystanders and victims of a private gun battle between opposing silver derivatives traders. Real producers and holders are being terrorized by a few derivatives traders, led by JPMorgan.

I suppose some might say that this is the silver big league and that there will always be winners and losers. I can understand that, but that implies a level playing field and no cheating. Quite simply, the game is rigged and JPMorgan and the others do nothing but cheat. The proof lies in the hugely concentrated short position held by JPMorgan ever since its takeover of Bear Stearns in March 2008. Throw in the crooked High Frequency Trading encouraged by the CME Group and you have all the ingredients necessary to prove manipulation and end the war on silver.

Yet the war on silver has persisted, despite the clear evidence that this market is manipulated. The reason it has persisted is because the federal agency whose primary mission is to prevent manipulation has decided to look the other way. I know that my discussions of market structure and concentration can get complicated and confusing to many, as much as I try to simplify it. But what I allege that is happening in silver is not over the heads of the CFTC. I take pains to explain it to them in their own terms and legal perspective and by using their own data. Because of those explanations, the CFTC has said it has been investigating for a silver manipulation for almost 4 years, but with no conclusion reached. By any standard, that’s way too long.

What finally convinced me that the CFTC is aligned with JPMorgan and the other silver manipulators on the COMEX rests on a few specific facts. One is that the agency has continued to ignore the glaring concentration on the short side of COMEX silver by JPMorgan and a few other traders. Concentration is not some term I dreamed up on a whim; it is the CFTC’s most important frontline defense against manipulation. That is why the agency publishes and monitors highly detailed concentration data every week for every regulated market in the Commitment of Traders Report (COT). The Commission doesn’t publish this data on my request; the concentration data are the most important feature of the COT. What the COT report has documented for years is that COMEX silver is the most concentrated major market of all on the short side. That the agency won’t address this fact is beyond troubling.

The second fact is the two unusual silver price events of 2011. In the first week of May 2011, the price of silver fell more than 30% and later, over a three-day period in September 2011, the price fell 35%. For a world commodity to fall that much in price within days is beyond unusual. It may be unprecedented, as I don’t recall many or any such price drops in my 40 year experience with markets. Certainly, for such a price decline to occur in the same commodity within six months is unthinkable. Further, all the circumstances surrounding these two price plunges in silver point to these being manipulative moves, as nothing occurred in the real world of silver supply and demand to account for them. These price drops were shocking in that world commodities don’t move like that for no reason.

I had been waiting for the CFTC to file enforcement charges against JPMorgan and the CME Group for these deliberate silver price smashes; or at the very least, for the agency to make special reference to these two unprecedented price declines. It would be impossible for any other world commodity under the Commission’s jurisdiction to fall 35% in days without the agency commenting on the price fall. Yet there has been no statement and no enforcement filing from the CFTC in silver. At some point, one must conclude that the CFTC does not intend to file charges or comment on what transpired in silver. By reaching that conclusion, one must also assign an alternative explanation for the agency’s lack of action. The most plausible is that the agency has thrown in with the likes of JPMorgan, the CME and the other silver crooks.

As I indicated previously, my best guess is that the CFTC was compromised in dealing appropriately with the silver manipulation by interference from the US Treasury Secretary who oversaw the takeover of Bear Stearns (and its giant silver and gold short positions) by JPMorgan. It now appears clear that JPMorgan extracted guarantees of future immunity for manipulation as a condition of the takeover. The Bear Stearns takeover gave JPMorgan a free “get out of jail” card from the US Treasury Dept for the continued silver manipulation. In the political pecking order, the CFTC is many rungs below the Treasury Dept. It was a deal structured that was not in the best interest of the American investing public

To recap to this point, there is a war on silver being waged by JPMorgan, the CME and others on the COMEX. This war necessarily includes innocent casualties throughout the world of real silver producers and holders, even though US commodity law strictly forbids such artificial price setting. Worst of all, it is now apparent that the prime market regulator and public protector, the CFTC, has thrown in with the crooks. This is so bad, on so many levels, that one must carefully consider the future investment merits of silver. Having already done so, please allow me to share my thoughts, especially in light of the ongoing wave of almost daily revelations of impropriety and probable criminal behavior on the part of the big banks. We certainly live in an unusual time.

Perhaps perversely, because of the ongoing silver manipulation and evidence that the CFTC may be complicit in illegal behavior, I believe the future price prospects for silver never looked better. Huh? Please hear me out. The continuing flow of news pointing to widespread wrongdoing by the big banks, including interest rate manipulation, increases the chance that silver has been manipulated. It appears to me that the punishment for institutional wrongdoing is quickly moving towards a criminal phase, which will likely include jail time. It would not surprise me if some regulators or self regulators were included in future criminal findings. Certainly, those swearing an oath to protect the public are not above the law. But how can I be positive about the future price prospects for silver in such an environment?

The simple fact is that silver has been manipulated for decades and that has not prevented it from climbing, at times more than any other commodity. The war on silver rages on, but it does so in starts and fits, with notable price advances having been recorded along the way. The silver war cannot be considered to be in its infancy. After all, I’ve petitioned the CFTC about it for more than 25 years, which is an extraordinarily long period for such a thing to exist. Like all widespread financial frauds, they become undone when a critical number of observers recognize the scam and adjust accordingly. Therefore, since the silver manipulation has been in place for so many years and is now more widely discussed because of the Internet, the odds favor it ending sooner, rather than later. I know that it feels like these crooks can pull it off forever, but common sense and historical experience suggest otherwise.

More importantly, this war on silver will eventually be decided on the physical level. Even though it is the derivatives world dictating (false) prices to the actual world of silver presently, it is impossible for that circumstance to exist indefinitely. Paper can overwhelm physical only as long as there is enough physical silver to go around. The point at which the current tight supply situation in silver slips into the slightest shortage, additional paper short sales won’t satisfy new buyers of physical silver. That’s not a theoretical discussion for silver any longer, as it had been prior to April 2011. For years, it was thought there would always be a sufficient amount of silver available, given the large world supplies thought to exist. But shortages were starting to come into place last year, which accounted for the run to near $50. Yes, the deliberate price smash on May 1, 2011 broke both the silver price and the budding shortage; but it could have easily gone the other way and if it did, we would now be looking (way) down at the $50 price mark. My point is that having come so close to a genuine silver shortage last year only increases the odds that a shortage will reemerge. The conditions that existed in the spring of 2011 are more likely to appear again than not.

While it is unfortunate not to have the CFTC as an ally in the fight against the silver manipulation, there never was any previous support from the agency. Instead, time after time, the Commission always sided with the big short silver manipulators. Undoubtedly, those past denials of a silver manipulation would create embarrassing questions about the agency’s historical competence if it were to admit to wrongdoing in silver now. Still, I admit to a particular disappointment in Chairman Gensler and Commissioner Chilton since they had offered so much hope through their public statements about manipulation, concentration, position limits and the need to protect the public.

The war on silver is real and ongoing. Because it has lasted so long, it may feel like a war without end. Because the war mongers appear so powerful and well-connected, it may feel like they are invincible. But feelings do not always project fact. The fact is that the silver manipulators have been in retreat. This can be seen in the overall rising price and the fact that previous silver short kingpins like Drexel, AIG and Bear Stearns have truly bit the dust. The recent news surrounding the current big silver short, JPMorgan, seems to project weakness and trouble, not invincibility. Since the CFTC never aided silver producers and investors in the past, there is no great loss in the agency continuing not to do its job.

If you are going to be in a war, I would think it is better to recognize that and react accordingly. That means immunizing yourself against the artificial pricing as much as possible. The best way to do that is by holding fully-paid silver positions and no margin. The worst way is by playing the very derivatives used to manipulate the price. This war is coming to an end and when it does, the wisdom of owning silver will become obvious. Lastly, it never hurts to let the regulators know what type of a job they are doing.

Ted Butler

July 18, 2012

Categories: Barter, Investing/Tangibles, Silver | Tags: , , , , | Leave a comment

Stop Bad-Brain-Think: Strategic Investment in Tangibles

Q: Why does stupid create bad results?

A: Evolution.

Now before you write me off as some nut case or evolutionist who believes we evolved from monkeys, let me explain. The effort here is to highlight our need to rethink bad ideas. When we continue to follow bad advise promoted by government, schools, churches, or any other person or entity, bad turns to worse. Darwin’s theory of evolution should wipe out bad ideas. However, bad brains that create bad ideas seem to be winning the battle.

Here’s a few bright ideas spread by bad brains. Save and invest your money in the stock market (only if you are a well-connected insider like politicians and elites). Buy real estate (you never really own real estate, you just rent it from the government collective – don’t pay your property taxes and watch for the black boots to come knocking). Eat according to the USDA food pyramid (only if you want to be sick and die early). I know, we all want a little slice of the American dream. The dream is becoming a nightmare many. What to do?

My solution. Turn everything you’ve been told about investing on its head. Think for yourself. Train your mind to question everything. Look at what is not seen.

There’s not enough time here to delve into the cause of bad brained ideas. Since we can’t get rid of the bad brain collective, here’s a way to minimize the effects of their stupid ideas…until the evolutionary forces take over and they die along with their ideas.

There is a pronounced tendency when confronted with important questions to consider only what is seen and ignore that which is not seen. Frédéric Bastiat

In 1980, John A. Pugsley wrote Alpha Strategy. It’s a free download and worth printing a hard copy. We see prices of food, gas, and other basic commodities going up. I graduated from high school the year Mr. Pugsley penned his book. Oh to have known and practiced his Alpha Strategy then. It’s not too late. Start now.

Since the debasement of our money began with the creature from Jekyll Island (The Federal Reserve) and removing the gold standard, the age of inflation was born and is here to stay. Hiding paper money under the fireproof mattress is like building a pine box to cache food under the earth. The elements and environment will destroy the value. Inflation is our greatest enemy. A day of reckoning is coming. How do we prepare for the dollar collapse? Invest in tangibles.

James Wesley Rawles of SurvivalBlog gives sage advice below on how and what tangibles to acquire. Read the full article here.

Which tangibles? I recommend buying farm land, common caliber ammunition, guns, hand tools, good quality knives, silver bullion coins, and gold bullion coins.

To spell this out in greater detail, I recommend:

  • Productive farm land that is in a lightly-populated region with plentiful water and rich topsoil.
  • Factory made ammunition in common calibers (“ballistic wampum“) such as: 308, .30-06, .30-30, .223, .7.62×39, 12 Gauge, .22 Long Rifle (rimfire) .45 ACP, .40 S&W, and 9mm Parabellum (Luger). For your investment and barter stockpile, buy only name brands like Winchester, Remington, and Federal–and perhaps Hornady and CCI.
  • High quality guns from name makers, chambered in common calibers. Good choices include M4geries, AR-15s, Steyr AUG-A3s, HK91 clones, HK93 clones, Galil Golanis, Ruger Mini-14s, FN-FAL clones, M1As, .308 Winchester bolt actions, Glock double column magazine pistols, XD pistols, Colt and Kimber M1911 .45 pistols, and Saiga 12 gauge shotguns.
  • Well-made hand tools, with an emphasis on 19th Century technology tools, such as: shingle froes, scythes, adzes, draw knives, axes, crosscut saws, and so forth. BTW, many other old-fashioned tools are available from Lehman’s.
  • Well-made knives, such as: Swiss Army knives (of various models), CRKT knives, and Cold Steel knives. [Sherpa Note: ESEE Knives are great and made in the USA]
  • Silver bullion coins should probably be 1 ounce or less. Either buy 1-ounce bullion “rounds” from a name brand supplier like Northwest Territorial Mint or Tulving, or pre-1965 circulated US. silver quarters from a company like AMPEX.
  • Buy gold bullion coins only after you have secured at least 500 ounces of silver bullion coins. (Always prepare for a “disaster barter” situation first, and then move on to buying gold coins as a long term investment and inflation hedge.) In the U.S., I recommend buying only the most readily-recognizable gold bullion coins: American Eagles, Canadian Maple Leafs and Krugerrands.

It is difficult to predict when substantial inflation will emerge in the United States. There are too many variables that cannot be predicted. Some of them are essentially political, such as debt monetization, currency pegs, bailout programs, and changes in tax laws. Just be watchful for signs of resumed inflation, and be ready to act swiftly to get the balance of your investments out of dollars.

I’m thankful that my parents had the foresight to buy productive farm land 40 years ago. They bought over 200 acres at $200 an acre. It’s worth $5,000 an acre now. Of course, we’re not selling. It truly is a priceless family heirloom!

Develop a strategy that fits your individual needs. Get creative. And don’t forget to enjoy the process and journey.

Doing the stuff,

SS

Categories: 180 Mind Set Training, Barter, Economic Collapse, equipment, Firearms, Gold, Preparedness, Self-reliance, SHTF, Silver | Tags: , , , , , , , , , , | 2 Comments

Wake Up: Rainbows and butterflies DON’T come from baby gnomes!

Source: SurvivalBlog.com

Silver and Gold Bartering, Now and Post-Societal Collapse, by T.R.

Over the last few years, since awaking from my slumber that rainbows and butterflies come from baby gnomes, I have been preparing my bean, bullets and bullion for what ever may be on the other side of the eye of the hurricane, so to speak. Whether that event is the eventual collapse of not only the US dollar but currencies globally or some apocalyptic end of society as it currently exists. In that time I have found great interest in the financial aspect of this scenario. As a project manager I find that some variables in a project are non-linear and can not be evaluated on risk because of not knowing what you don’t know, this is not the case with the global nature of macro-economics and fiat currencies.

I plan a project by evaluating variables and risks to the scope and timeline of completion, that being said I have approached my preparation in similar manner. Since the more information you can obtain on particular variable it allows you put in place contingencies to mitigate the effects of a variable, such as a global financial/currency collapse, you can therefore weather the disruption that variable creates. Risk areas such as EMPs, natural disasters, terrorist activities etc are variables that you can only have so much information in regards to planning-unless of course your brother-in-law happens to work for the NSA or other alphabet soup agency that track such things and evaluate the probability.

But the information on our financial condition is well documented and there are many well respected economists and analysts that provide commentary on our situation no only as a country but also from a global connection. My journey has begun and continues to be how our US Dollar has fallen to the state of every other fiat currency throughout the ages. Whether it was the Romans debasing their gold and silver coinage or the Weimar Republic printing Marks like Rumplestilskin spun gold-in fact I am not too sure that Ben Bernanke is not our very own Rumplestilskin, just that he is not spinning gold. Prior to the creation of the Federal Reserve our dollar was backed by Constitutionally mandated Silver and Gold, at the onset of this vile organization the average wage was around $1,800 per year. (That equated to approximately 90 ounces of gold.  I would like to suggest everyone read G. Edward Griffin’s book, The Creature from Jekyll Island, to get a true sense of how evil and sinister this corporation is, ) That $1,800 average salary in 1913 equates roughly to today’s average wage of $42,000 per year. If you were to be paid in gold and silver as your great grandfather was, today you would only receive around 27 ounces of gold for your labor. (At the current Spot Gold price). Interesting over all this time that the Federal Reserve has had control of the US Dollar each generation really has not been better off, in fact I would argue that I would rather have my great grandfather’s wage of 90 ounces of gold per year, equal to $136,000 USD. The Federal Reserve has expertly stolen our wealth with out it being a crime.

At this point you are probably wondering where I am going with this. I know I am preaching to the choir on this subject of owning and holding physical silver and gold, but that is only after you have made provision for the beans and bullets. Once those are in place I highly recommend that you purchase and hold silver and/or gold (preferably in fractions of ounces, 1,2,5,10 grams and 1/20, 1/10, ¼ ounces) I say all of this because I believe we are currently in the eye of the hurricane. For those that don’t live in a hurricane zone, the front part of the storm is the initial wall of wind and water, it is scary and can be devastating, but as the eye passes over your location, you can go out look up and see nothing but blue sky, no wind, no rain and you may actually see a butterfly. To those that have not experience a hurricane you may believe it was nothing but a bad rain storm, but I can tell you the storm is not over and in fact the worst is yet to come. I believe we are currently in the eye of the storm, the initial wall of water and wind was the housing bubble of 2007 and we have endured the storms leading edge to now all seems quiet, calm. Stocks are steady, companies are showing profits but simmering under the surface is 10 to 20% plus food inflation, 20% real unemployment, a continual lag in the housing market if not a continually collapse, unsustainable national, state and local debts that can only be salvaged by the Federal Reserve. This is to name only a few, do not forget rising oil and gas prices. Their whether they are spinning US Dollars or real gold it still creates something from nothing and debases the currency and fuels the fires of inflation and destruction of the US Dollar and other currencies worldwide. The other side of the storm is a currency collapse that will be global in nature, which will lead to variables that will spin out of control very quickly and if you are not prepared to weather the storm to get to the other side you will be running to the first government savior to literally sign yours and your family’s life away.

My preparations began by converting about two years ago every dollar denominated asset such as Roth IRAs and 401(k)s to first food, then guns and ammunition and finally silver and gold. With only one small bump in the road I have been able to grow my physical holdings and continue to do so even with current silver and gold prices. Many ask me why when the rainbows and butterflies are out, I my reply is that someday the financial storm we weathered in 2007 will require not only the preservation of my savings but may be required for mine and my family’s survival. To those who are still slumbering they roll their eyes but to those that are awake or are just waking up this will ring true to your spirit. I urge you to continue to speak the truth of what we will be facing in very short order, hope upon all hope to reach as many as possible.

My dilemma has been that to purchase goods and services with silver or gold you must first sell it to convert it back to US Dollars, the process is cumbersome to say the least. Because of the cumbersome process I starting searching for a better way. Currently I am purchasing fewer one ounce rounds and more pre-1964 silver halves, quarters and dimes, and the following will explain why.

I follow Franklin Sanders of MoneyChanger.com, who has been dealing with silver and gold for years and his commentaries are usually spot on. He has developed a Silver and Gold calculator and is encouraging people to start asking when making a purchase “I can pay you with silver, gold or US Dollars, which would you like?” There may be a sense of fear in light of the recent Liberty Coin Federal case, but his issue dealt with the appearance of the coin and it representation of US Coinage, not that a private exchange between two individuals can be regulated (yet). Franklin Sanders reports that in some cases they will take the silver and gold and give you a discount on the purchase. Now I don’t suggest you try this with the local corporately owned Gas Mart or Wal-Mart, but maybe a local privately own Gas station convenience store, farmer, Co-op, etc. would be more receptive to the idea. So many of us that have awakened to realize that part of returning to some normalcy or even a return to the Founder’s principles we must start by eliminating the Federal Reserve. This task will probably never be achieved but at least it allows you the modicum of stealing back some degree of freedom from the fiat system by using real money. If our legislatures do not have the fortitude to fix it, the people will have to take the mantle upon themselves.

Franklin Sanders has a calculator to convert US Dollars to silver and gold. All that is necessary is to plug in the amount in US dollars the purchase requires and it calculates the amount of face value of US pre-1964 coins you need. I recently purchase three chickens at our local poultry auction using this formula for $27.61 in US Dollars or .98 cents in silver coinage. I exchanged three US pre-1964 silver quarters, two silver dimes and three copper pre-1982 pennies. A small victory!

Chickens purchased with silver, Price $27.61 USD with silver:

$0.98 face value of US Silver Coins worth USD $27.61 **
But it also works with large purchases such as a $1800 purchase which would convert as follows:

Pay $1,800.00 with gold & silver…

American Eagle gold coins:
1 $50 (1 oz) coin worth USD $1,539.68
1 $5 (1/10 oz) coin worth USD $153.97
and $3.58 face value of US silver coins worth USD $106.35 **
This site calculates and provides the amounts you need it also allows you to calculate a premium if you are a retailer interested in offering your product or service in silver and gold, I am hoping he turns into an App for I-phones or Blackberry in the near future.

If you notice all the conversions use US denominate coinage. Since American Eagles, both Silver and Gold, are legal US tender and pre-1964 coinage is still US approved tender. You will not be trying to “destroy the US Currency” with privately minted coins as the US District Attorney in her infinite wisdom announced about the Liberty Dollar. There can be no legal ramifications in restricting bartering especially if you are using US sanctioned coinage. And that goes to my last point in purchasing silver and that is to start procuring pre-1964 silver halves, quarters, dimes, pre-1982 pennies, and current and early nickels for use in a bartering system either now or in a post-collapse society. They will become your initial life in a post-fiat collapse society.

Categories: 180 Mind Set Training, Barter, Economic Collapse, Gold, SHTF, Silver, TEOTWAWKI | Tags: , , , , , , , | 1 Comment

A Beginner’s Guide to Buying Silver on eBay

Here’s a post from SurvivalBlog.com  titled “A Beginner’s Guide to Buying Silver on eBay, by Gil G.” to get you started buying junk silver.

When I put some serious thought into purchasing silver as a hedge against the rapid inflation of the US dollar, I was overwhelmed by the complexity of the task. Go to eBay’s web site and type in the search criterion “junk silver” and you will be slammed with about 2,000+ different auctions on an average day advertising everything from “face value” (FV), to Troy weight and standard weight, to vials of silver flakes and silver jewelry from someone’s estate sale.  A little bit of knowledge goes a long way when it comes to buying precious metals, especially if you’re shopping on a budget.

Troy Weight
When you go to kitco.com and they list the current price of silver or gold (commonly referred to as the “spot price”), the value that you see listed is the current trade value of one “troy ounce”.  Troy weight is entirely different from the typical weight scale we use in the US today, more specifically called the avoirdupois system.  Troy weight is only really used for precious metals, gems and gunpowder, so unless you have experience trading in those markets, you may need a little education on this scale.

First of all, a troy ounce is not the same as a standard ounce.  I’m not going to bore you with numbers and values and conversion tables.  If you’re truly interested in the specifics, there are abundant resources available.  Suffice it to say, a troy ounce has about 10% more mass than a standard ounce — that is to say, it’s heavier.  However, a troy pound is smaller than a standard pound.  There are only 12 troy ounces to a troy pound, while there are 16 ounces to a standard pound.
Why is this important? you may be wondering.  A large percentage of the auctions on eBay will have the amount of silver being sold listed by weight.  If you plan on getting value for your purchase, it is critical that you understand what scale the seller is using.  If they don’t specifically state that the amount is troy weight, you should assume its standard — which means there is less silver up for auction. When you see a weight listed in pounds, you can safely assume they are referring to standard pounds, as the troy pound isn’t commonly used.   As there is a significant difference between these systems, you should read the auction carefully to try and determine which scale the seller is using.  Most reputable coin brokers will only use troy weight, as it is the recognized industry standard.

Which Silver?
When you start looking for junk silver or silver bullion on eBay, you will see a wide variety of items listed for sale.  Knowing which to invest your hard-earned money in will mean the difference between throwing good money away or having a valuable trade commodity on hand when it’s crunch time.
I believe strongly in limiting my purchases to pre-1965 US silver coinage.  Primarily, its because these coins are already standardized.  Their silver contents are established, as are their weights.  In addition, they are already denominated and widely distributed, so they are likely to be used regularly in common transactions.  Lastly, they are also the most readily available bullion on the market today.  Most of the silver auctions you find on eBay will be for these types of coins, so there will be no shortage for you to bid on.

You will also see silver bars available for sale and may be tempted to invest in these.  You should avoid buying the 1-gram bars, or bars weighted in grains.  These tiny bars are pure silver, but they rarely offer any kind of value.  You would need to accumulate 31 one-gram bars or 480 grains to get a single troy ounce.  As these bars usually sell for a couple of dollars a piece, plus the cost of shipping, there is virtually no benefit in buying these.

Larger bars can some times be a good value, but it’s unusual.  These are sometimes called “art bars” because some of the value associated with the bar is for the quality of the engravings. These should be avoided because you will be competing with collectors and art enthusiasts and they often value these much higher than their weight in silver.  What you will want to look for are larger metal bars called “ingots” manufactured by a metalworking company.  These should be stamped with the quality of the silver, preferably .999 fine silver, as well as the troy weight.  Occasionally, you may find a large ingot being sold at a good value.  I tend to avoid silver bars altogether however. If the weight is smaller than an ounce, I’d rather have it in coins.  If it’s greater than an ounce, I’d rather convert it to gold.
You will also find other assorted silver items for sale.  These may be valuable purchases in terms of “melt value”, that is to say the item’s value if it’s melted down and the silver is extracted. Most often, you’ll find vials of silver flakes, junk jewelry and sometimes flatware.  The vials of silver are garbage for tourists and idiots, frequently suspended in liquid to increase the weight.  Under no circumstances should you purchase these as an investment.  Other items like jewelry might be a good value, but the lack of standardization diminishes any benefit.  When used for trade, these will need to be tested for purity, weighed and their value negotiated.  You may even need to consult with an expert, who will undoubtedly require compensation for their services.  So any advantage you may have gained in the purchase, you have lost in time, effort and cost when trading.

Other coins can also be an excellent value, but there are some disadvantages.  By these, I mean, foreign silver and modern US silver coins.  The problem with foreign silver is they are less widely disseminated in the US and therefore harder to commonly identify. Outside of a smaller circle of coin collectors (numismatists) and brokers, most people won’t know the content or purity of the foreign coins, so the same hurdles you face trading silver jewelry, you encounter here.

As for modern US silver coins, I avoid these as well for the same reasons I avoid art bars – they are collected and I will be competing with individuals who place a higher value on them than their silver content.  The US currently only mints silver coins in limited runs, usually for commemoratives or collectors.  The one exception to this policy is the American Eagle silver coin, which is the US Mint’s silver bullion coin.  All of these coins are highly sought after by coin collectors and usually valued well over the spot price of silver.  Even the American Eagle bullion coins are collected for their numismatic value, so their cost will often be much higher than you should be willing to pay.

So What Should I Look For?
In general, when looking for coins to buy for their trade value, you should avoid anything that is “slabbed”.  Professional numismatic services will grade coins and place them in hard plastic cases to protect the grade and to catalog the coin in their systems.  These hard cases are often referred to as slabs.  You should avoid these coins because they are being traded to collectors for their uniqueness, value and rarity.  They can be fantastic investments, but not for their content in precious metal, which is after all your primary interest.

Since graded coins are of little to no interest to you, you can ignore any reference to grading, the numismatic community’s 1-to-70 [Sheldon] scale of coin quality.  Terms like “BU” (brilliant uncirculated), “MS” (mint state), and “proof” (a different type of mint process with a highly-polished die) shouldn’t mean anything to you.  In addition, lots that are advertised as “unsearched” should have little meaning to you as well.  This only means that these large lots of coins haven’t been thoroughly sorted for key dates, rare coins or “toned” coins.  (Toning refers to unique colors older silver coins can acquire, which are often desirable by some collectors.)

Your focus should be on lots of silver coins sold either by their weight or their face value.  In general, these coins are called junk or trash silver because they have no value to collectors.  Most of the coins will be worn, scratched, dented, gouged and possibly almost unrecognizable – basically all of the qualities of coins that have lived long lives as pocket change.  You can rest assured that any coins of outstanding numismatic value have been weeded out of these lots already, but this isn’t to say that you won’t come across a modestly rare or key date coin from time to time.  However, it would take a great deal of time to sort through and research large quantities of coins to find these modest value rarities and any benefit would be lost in the time and effort spent searching.

For the most part, US silver coins minted prior to 1965 contain 90% silver, often listed as .900 silver.  Please note, I said for the most part.  There are a few coins typically lumped with junk silver that contain proportionately less, specifically 1942-1945 Jefferson Nickels (called war nickels, having 35% silver),  1965-1970 Kennedy Half Dollars (40%) and on rare occasions 1971-1976 Eisenhower Dollars.  There are two versions of the 1971-1976 Eisenhower Dollars, one that contains 40% silver and the other that is clad.  (Cladding is a metallurgical process of putting an outer layer of a different kind of metal on an item.  Turn a modern coin on its edge and you will notice that there appear to be layers of metal.  Silver coins do not have this layered appearance; the edges will appear to be of one uniform metal.)  The silver Eisenhower Dollar was only issued as a collectible though, so its not typically in circulation and isn’t likely to be in any of these auctions.

The auctions you are looking for will advertise that they only have 90% silver coins in them.  They may list what kinds of coins they will include, so check for reference to those coins that have less silver, as it may be very important in getting a good bargain.  The following list is of all the types of coins you should find acceptable:

  • Barber Dime (1892-1916)
  • Mercury Dime (1916-1945)
  • Roosevelt Dime (1946-1964)
  • Barber Quarter (1892-1916)
  • Standing Liberty Quarter (1916-1930)
  • Washington Quarter (1932-1964)
  • Barber Half Dollar (1892-1915)
  • Walking Liberty Half Dollar (1916-1947)
  • Franklin Half Dollar (1948-1963)
  • Kennedy Half Dollar (1964 only) [The later halves are either 40% silver, or are clad.]
  • Morgan Dollar (1878-1921)
  • Peace Dollar (1921-1935)

Weight Versus Face Value
You will see auctions for lots in both weight and in face value.  We’ve already gone over the importance of clearly knowing what weight scale the seller is using, so I won’t go back over that. You may be tempted to skip over auctions for face values, because sellers won’t guarantee specific weights.  Silver being valued for its weight, the face value of the coin may seem to be irrelevant.  However, face value is just as accurate a means of evaluating these lots of silver, as long as the lots don’t contain 40% silver Kennedy Half Dollars.

Since silver was used to determine the values of these coins when they were in wide distribution and common use, it was alloyed into them in proportionate weights.  So 10 silver dimes has the same silver content as 4 silver quarters and 2 silver half dollars.  This means that regardless of how a seller distributes the coins to you, $1 in face value has the same amount of silver.  There are a couple of exceptions to this rule however.  Morgan and Peace dollars are actually slightly heavier than $1 in lesser coinage.  Also, despite having a lower percentage of silver, there is actually more silver per dollar [of face value] in the Jefferson War Nickels than in other coins.  Much more.

The spot price of silver today is $31.23 and always in fluctuation, so these valuations are only good as an example.  However they should give you a fair idea of the relative values.  So today, the melt value of $1 in 90% silver coins is $22.59.  The melt value of a Morgan or Peace dollar is $24.15.  And the melt value of $1 in Jefferson War Nickels is $35.14.  However, the melt value of $1 in 40% Kennedy Half Dollars is only $9.24.  Do you see how knowing which coins are being included makes a big difference?

As far as buying by weight goes, you should only look at auctions that have 90% coins in them.  The lesser content coins are large and heavy and have less silver in them relative to their weight.  As a result, less valuable metals like copper and manganese take up more of the mass of the lot.  Avoiding these auctions is also a matter of principle in my opinion.  Dealers who are including these coins in their lot are preying on the ignorance of new and uninformed buyers, swindling them by giving them less value for their purchase.  This is no different than a butcher putting their thumb on the scale.  Ethical and conscientious people should vote with their wallets and put these guys out of business.

Navigating eBay
Don’t be intimidated by the fast-pace and the abundance of hyperlinks and advertisements.  There will be a timer counting down the auction and, psychologically, the closer the auction gets to ending, the more eager you will become – anxious to win your item.   Ignore it.  If you miss this one, there will be others.
As for the security of making a purchase on eBay and the likelihood of getting cheated, suffice it to say that unscrupulous people can be found in all corners of the planet and in all walks of life.  eBay and coins brokers are no different.  There are some steps you can take to protect yourself though.

First, as with any purchase, get to know the seller.  The seller will have an eBay nickname or handle, and right beside that handle in parentheses there will be a number and possibly a colored star.  The number is the number of positive “feedback” comments the person has acquired.  Feedback are short comments buyers and sellers will leave for each other after a successful transaction, and they can be positive, negative or neutral.  If you click on the number, you will be taken to a page which lists these feedback comments for the seller.  Take the time to look them over, especially any negative or neutral ones.  Often these are from disputes, miscommunications and misunderstandings, so you can get an idea of what the seller’s history in dealing with customers is like. If you click on the person’s handle, you will be taken to a profile for the seller.  These aren’t always filled out or detailed, but there will be links to other auctions the seller has up and their eBay storefront, if they have one.  I’ll often take the time to look at other items they have up for sale to get an idea of what type of merchandise they sell.

Second, ensure the auction is covered under eBay’s buyer protection policy.  Only a handful of auctions aren’t, but take the time to make sure.  There should be a banner underneath the terms of the auction with a shield beside it.  If you open your package and its not what was described in the auction or if you never get your coins at all, this is how you will go about getting your money back.  eBay will act as a mediator between you and the seller to get the issue resolved and usually the results are quite positive.

Third, you can utilize PayPal as an additional method of security for your purchase.  PayPal also offers buyer protection and it does make online transactions easier.  I’ve had an account with them for years and have never had an issue with security or fraud.

Fourth, check the shipping terms of the auction.  For larger value purchases, the seller will usually ship with some kind of delivery confirmation and insurance.  If they don’t, you can contact the seller and request it.  They will usually comply, but might ask that you cover the additional costs.  I typically seek out sellers that offer free shipping.  After all, when you’re purchasing $1,000 or more online, they don’t have to maintain a storefront, pay rent, hire staff, pay for healthcare, taxes and insurance, etc.  So who’s getting the better end of the deal?  In other words, their overhead is minimal, so its not unreasonable to expect them to pick up the $5-$20 shipping costs.  Many sellers pass this expense on to you however, so be prepared for that.

And lastly, set limits for yourself.  The psychology of an auction appeals to our competitive nature, so don’t be surprised to find yourself in a bidding war.  Set a hard limit on how high you will go and if the auction passes it, walk away.  Like I said earlier, there are about 2,000 junk silver auctions on eBay on any given day, so winning this particular auction isn’t life-or-death… yet.

How Much Is Too Much?
It’s important to remember that the spot price of silver is a guideline only.  It’s a baseline from which trades are made.  If you were running a business trading silver and you bought and sold at the spot price, you would lose money.  So you can rationally expect to pay a higher price than spot for your silver.  After all, most sellers aren’t looking to give away their merchandise.  This is why buying online can offer such a good value.

Most traditional stores and businesses operate on a 40% profit margin.  Anything less than that and most businesses are losing money.  This keeps the lights on, the bills paid, the employees on salary and covered by health insurance, guarantees next week’s deliveries, etc.  With silver trading at about $30/oz (Troy) a traditional store owner would have to sell silver at $42 an ounce to keep the doors open! As I previously stated, an online business owner has substantially less overhead.  For all you know, it could just be a guy in his den with a barrel full of silver and a computer.

For my part, I look for buys at about 10-15% over spot and consider myself fortunate to find them.  Just this week, I picked up $32 FV for $800.  Doing the math on that, that’s a melt value of $723, and a profit of $77 for the seller.  Have I done better?  Sure.  I’ve also done much worse.  But the auction is guaranteed 90% silver, with at least $2 in Morgan and/or Peace Dollars, the seller has an excellent reputation and a 14 day return policy, and the auction has eBay buyer protection.  Plus, I didn’t have to drive all over the county at $4 a gallon, hunting down pawn shops, coin shops, flea markets and swap meets, crossing my fingers and hoping to find a handful of coins at a good value.  For those things alone, it’s worth the extra $77 dollars to me… and the price of silver is still rising.
I hope this sheds a little more light on the subject of buying silver online.  It can seem very daunting and confusing, especially when you start trying to make conversions and calculate values and keep pace with an ever-changing commodities market.  The harsh reality is that it’s not for everyone.  If you don’t have the patience and depth to do the research and put in the time, you will get cheated.  If you take nothing else away, remember this:  If it sounds too good to be true, that’s because it is.  No one is giving silver away these days.  No one.

 

Categories: Barter, Economic Collapse, Silver | Tags: , , , | Leave a comment

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