Every physical silver ounce has been sold up to 1000x

Authored by: Egon von Greyerz via Gold Switzerland

 

The silver price is today half of the January 1980 level. That was the peak at $50, which white metal reached again 31 years later in 2011. But alas, the bullion banks, aided by the BIS (Bank for International Settlement) and central banks, have again managed to push it down again, and today, the metal is only $26.10.

The current silver price has nothing to do with supply and demand. In a real market, the Price of Silver would be substantially higher. In a fake market, the manipulators have no problem suppressing the price by selling virtually unlimited fake paper silver.

Every single silver ounce of physical has estimated to have 500-1000 paper claims

Physical silver has sold up to 1,000X over on the LBMA and Comex. If a salesperson has a demand for 1,000 items of a product, he possesses the only available, will first rub his hands and then perform a victory dance. He knows he will achieve an astronomical price.

And that is precisely what would happen in a free silver market. But since the metal paper issuers know that they are dealing with totally clueless buyers who don’t understand that there is no silver, they will continue to stuff the gullible buyers with more fake metal.

That is until the buyers wake up and ask for delivery to find out that the silver vaults are empty.

We know that the silver market is very strained already. Retail silver can fetch margins up to 50%, and they have been at a 100% premium. But at least when people buy retail silver from a reputable dealer and take delivery, they know that they have real silver.

I have warned investors many times not to buy gold or silver ETFs or funds of any kind. The risks are multiple. Here are some of them:

  • It is paper security held within the financial system
  • It has multiple counterparty risks
  • The gold/silver holdings are not segregated from custodians’ assets
  • It owns no gold/silver directly
  • The gold/silver is stored within the banking system
  • The gold/silver held is probably rehypothecated
  • The gold/silver is not fully insured
  • Investors have no access to their gold/silver
  • There have been many reports of problems of getting physical delivery from mints and bullion dealers.

Problems at the Perth mint – again

John Adams of As Good As Gold Australia has reported extensively on the problems at the Perth Mint. Numerous investors hold paper or synthetic silver with the Perth Mint report delays of 4 months when they ask for delivery. Even clients who have demanded and paid for their silver to be transferred from unallocated to allocated have been told that they can’t get delivery.

The government of Western Australia owns the Perth Mint, so you would not expect them to renege on their commitments. Still, I wouldn’t store my gold with any government, whether in Australia, Canada, or the US.

Interestingly, I remember the Perth Mint having similar problems ten years ago when the delay for getting physical delivery of the gold and silver certificates was up to 6 months!

So it is not the first time that the Perth Mint is in trouble. When not even a government-owned organization can be trusted, it is clear evidence of how careful investors must be.

Buyer beware of any paper gold & silver

It is not easy for precious metals investors to navigate the jungle of problems in the precious metals market.

  • You can’t trust the bullion banks and their paper metals.
  • You can’t trust certain mints or bullion dealers.
  • You can’t trust gold or silver ETFs or funds.
  • You can’t trust futures exchanges.
  • You can’t trust banks to hold your metals.

Gold and silver must be owned and held directly in physical form. The precious metals must be stored outside the banking system in the safest vaults and jurisdictions. The investor must also have direct personal access to the vault.

It would be best if you never stored more gold and silver at home than you can afford to lose. It doesn’t help with an excellent safe when burglars come to your house and threaten your family members when you are in.

Hyper-stag-in-deflation

The debate about inflation continuous, with both camps feeling strongly about inflation or deflation. For many, I have been of the firm opinion that this economic cycle will lead to hyperinflation.

But it is not as simple as that. Hyperinflation is a monetary event and arises from a significant increase in the money supply, leading to the total debasement of the currency.

We already have a massive increase in money supply and all major currencies, which have declined by 97-99%. The next phase will be unlimited money printing combined with a substantial increase in the velocity of money.

However, hyperinflation is not the only inflation we will experience. We will also see stagflation and deflation.

Hyperinflation will occur in most commodities, including food, oil, hard assets, and especially gold and silver.

On the other hand, bubble assets like stocks, bonds, and property will see deflation – at least in real terms. Real terms mean measured in constant purchasing power like gold.

There will also be stagflation which means economic stagnation combined with inflation.

The inflation which ordinary people will notice will be hyperinflation. The cost of living and especially food prices will rise dramatically. At the same time, many people will lose their jobs. Pensions and social security payments will not in any way keep up with inflation, and many people will sadly be destitute.

Massive asset destruction for the wealthy

The deflation or collapse of bubble asset prices like stocks, bonds, and property (in real terms) will be noticed mainly by the wealthy. They will experience a devastating decline in their wealth. The current bubble of billionaires’ and millionaires’ fortunes will burst, and $100s of billions of assets will go up in smoke.

The Arnaults, Gates, Musks, Bezos, and Zuckerbergs of this world will not understand how quickly their wealth disappeared. Easy come and easy go.

But don’t get me wrong. None of these guys will be poor. They will still have massive wealth, although it might have gone down by 75-95%. Obviously, with that kind of drop, they will feel extremely poor.

The biggest beneficiaries of the coming wealth transfer will be commodities, like food and hard assets.

Markets

The turn in markets is slowly approaching. No one should hold ordinary stocks now. The risk is massive, and a crash can happen at any time. It is never worth squeezing the last few pennies out of a 40 year (at least) bull market. Even worse to follow it 90%+ down (in real terms) in the coming years.

Gold has turned

When I sent the tweet below out on March 31st, gold was $1,707. Gold had twice touched the $1,670s and told us that the eight-month correction was finished.

The price is up to $80 since the tweet, but that is just the beginning. Sadly, very few investors have taken advantage of this opportunity to acquire gold at a low price. Now is still a great time to get in on what will be the biggest bull market in the history of gold and silver.

Investors must remember that on the other side of the gold and silver coin is a collapsing currency. That is why wealth preservation is so critical. 

Not only will stocks, bonds, and property collapse, but so will the value of money. So going liquid is not the solution. Again, history tells us what the answer is, and if you defy history, you will regret it.

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