blow up in face bombWhat happens when the Dollar finally collapses (AS ALL FIAT CURRENCIES DO) including the $100 trillion in paper assets?  Where are investors going to store and protect their wealth?
Because the gold and silver market are so small, any move into the precious metals will make their values increase to insane levels.
The world is awash in ENERGY IOU’s masquerading as paper assets.  Gold and silver are not Energy IOU’s, as they are bought and paid for ECONOMIC ENERGY.  While this may be hard to quantify with data as the future is hard to predict, we can be rest assured that what happens going forward will be directly related to Energy values and physical assets and not paper trading based on Financialization.
Business as usual in the world will be over when the impact of peak energy is finally felt.  Well, let me clarify that…. the market is already feeling the pain of peak oil, but due to the Fed and Central Bank monetary printing it is being masked.
What the h*ll happens when interest rates rise?  The whole thing blows up in their face. 
Silver and Gold will become great stores of value and excellent investments in the future due to Peaking of the Driver of the Economy — ENERGY.

Sunshine_Mint_Bars

 
From the SRSRocco Report:

One of the greatest difficulties for the precious metal investor to understand is the true value of gold and silver.  There is a huge range of analysis on the internet on what the real price of gold or silver should be.  While this debate will continue, there still seems to be one factor this is totally overlooked.

Recently, Don Harrold came out with a YouTube video on how silver has been a poor inflation hedge since 1914 as it has underperformed its expected price for most of the time.

Don Harrold silver

In this part of his video he brings back an interview of what he said about silver in 2011, when silver had shot up to $43 on ounce.  Basically, Harrold was saying that he was not a buying of silver at time because the current price had shot way above its expected price based on the inflation rate.

Harrold provides this screen shot in his video to show that silver had way out performed its expected priced (base on inflation) in two periods.

Harrold chart 2013

The numbers at the bottom do not represent actual years, but the number of years since 1914.  The two huge price spikes were in the 1976-1980 & 2009-2012 periods.  The blue line represents what the expected silver price should be based on a normal inflation rate.

Harrold includes a table that shows this rate of chance since 1914.  He explains that for most of the years since 1914, silver has been a lousy inflation hedge.

This is another table showing that the 2013 expected price of silver should be $19.13, and the current actual price at the time was $19.45… which according to these statistics, Harrold believes is right in line with the inflation rate.

Harrold inflation table 2013

I found out about this video from a member on my site.  This is one of the pluses in having great members… they help keep you informed of what is going on in this huge world of the Internet.

The question that was raised to me was…. is Don Harrold’s logic on the silver inflation hedge data accurate?  So, of course I had to watch the video because anytime there is good quality work out there that may offer a different opinion than mine… it’s important to check it out.

I responded by saying, “In an Economic-Energy Vacuum, Harrold’s logic makes perfect sense.  However, what happened for the past 100 years will most certainly not be the same in the next 100.  I can assure you of that.

Harrold remarks, that if silver corrects below its Blue inflation trend line, it may be a good time to accumulate silver.  But, he warns investors that it may be another 10-20 years before we get another spike up to $35 (average a year) or higher.  So, if you want to buy silver, maybe the next generations of you family members could benefit from it.

Harrold 2013 Chart annotations

Again, Harrold’s logic on the silver inflation price trend at face value is correct.  You cannot deny this chart except by one LARGE FACTOR.

Harrod’s Silver Inflation Hedge Video Here

Peak Energy Will Destroy The Dollar & Inflation Metrics

Most of you who have read my work, know that I believe the biggest factor to impact the world going forward is peak energy.  I have written several articles on the Shale Oil & Gas Bubble based on information from some of the best alternative energy analysts.

The reason why this so-called 20 year cycle will not repeat itself is due to the fact that global oil production is in a plateau and will soon decline.  Where we came from and where we are going is nothing like mankind has ever witnessed before.  When the price of gold and silver corrected and remained low after 1980… the world had another 30+ years of increased global oil supply.

The United States has overbuilt its economy to a level that it will soon not be able to sustain.  In the future there will be huge swaths of industrial, commercial and residential real estate sitting vacant with no function or relative value.  Trying to quantify the value of assets in this new world of “Collapse Economics” will be challenging to say the least.

That is why I believe valuing silver as an inflation hedge as Harrold has done will become increasingly worthless as $100 trillion of paper assets implode due to future energy constraints.

I am not going to get into many energy details here, but there is one I would like to focus on today.  Even though Global oil production has been in a plateau since 2005 (only rising recently due to U.S. Shale oil), Net Oil Exports are declining as domestic consumption from the top oil exporters is increasing.

The chart below is an estimated change in Middle East net oil exports.  The chart was produced using BP 2012 Statical Review and the new 2013 issue has been published in which some of the figures have been revised.

Estimated Change In Middle East Net Oil Exports

According to the 2011 data, the Middle East produced 27.7 mbd in 2011 and consumed 8.0 mbd which left 19.6 mbd (million barrels a day) of net oil exports shown by subtracted the amount in the Red Area (domestic consumption) from the Orange Area (overall production).

BP has since revised its figures for 2011 to show 27.9 mbd with consumption of 7.9 mbd which actually revises the net oil exports for the Middle East to 20.0 mbd.  However, their 2012 figures actually show a decline for the first year.

In 2012, Middle East oil production was 28.3 mbd and consumption increased to 8.4 mbd, which provided the market with a 19.9 mbd of net oil exports in 2012.  While this is only 100,000 barrels less a day compared to 2011, it shows what happens to a country’s oil exports as production peaks and consumption increases.

Even though the Middle East increased its overall production in 2012 by 0.4 mbd, its  0.5 mbd of additional domestic consumption devoured all of the gains.  Who in the energy industry brings up this lil ole TID BIT… aye?

I calculated a simple 1% annual decline rate for the Middle East out to 2025 and the same increased trend of consumption.  As you can see, Middle East estimated net oil exports can fall nearly 6 mbd  by 2025 even though their total production has only declined 2-3 mbd.

This is the double-whammy of the oil EXPORT LAND MODEL designed by Jeffery Brown.  When we add the total impact of the Export Land Model to the entire world, we will see available net oil exports to the remaining 155 oil importing countries decline faster than the fall of global oil production.

There are many other energy factors to consider including the high cost of energy on the global economy as well as the falling EROI – Energy Returned on Invested.

SILVER: Store of Value & Excellent Future Investment

While silver has kept up with the so-called inflation rate, it has done so using the Fiat Dollar as a gauge.  What happens to Harrold’s inflation metric when the Federal Reserve Note goes the same way as the Zimbabwe dollar?  How do you measure inflation when the fiat money supply becomes worthless?

As I have stated several times, ENERGY is the key going forward.  Silver and gold will become great stores of value because they contain “ECONOMIC ENERGY.”  This term coined by Mike Maloney is an excellent description to describe what is locked into each ounce of silver and gold compared to the pennies that it cost to produce a $100 bill.

Another factor Harrold does not consider is the Greatest Check Fraud in History by the Federal Reserve explained by Mike Maloney in Espisode 4: Hidden Secrets of Money:

What is taking place at the Fed is that they can write a check that has no funds to back it up whatsoever to create money out of thin air.  And this isn’t the only problem.

The huge Interest Rate Swap market which is by far the largest amount of derivatives on the planet has destroyed the real rate of interest and the ability to value of goods and services properly.

What happens when the Dollar finally collapses (AS ALL FIAT CURRENCIES DO) including the $100 trillion in paper assets?  Where are investors going to store and protect their wealth?

Because the gold and silver market are so small, any move into the precious metals will make their values increase to insane levels.  This is the factor that Harrold does not consider because he is trader and as he says, “I Can’t quantify data that I don’t see.”

The world is awash in ENERGY IOU’s masquerading as paper assets.  Gold and silver are not Energy IOU’s, as they are bought and paid for ECONOMIC ENERGY.  While this may be hard to quantify with data as the future is hard to predict, we can be rest assured that what happens going forward will be directly related to Energy values and physical assets and not paper trading based on Financialization.

Business as usual in the world will be over when the impact of peak energy is finally felt.  Well, let me clarify that…. the market is already feeling the pain of peak oil, but due to the Fed and Central Bank monetary printing it is being masked.

The Shale energy companies are loaded with debt because they are producing natural gas below its Break-Even cost.  To allow the illusion of growth and sustainability, these energy companies have to borrow money to keep production flowing to offset these huge annual decline rates.   Ultra-low interest rates (due to the huge interest rate swap market) have allowed these companies to hold huge amounts of debt on their balance sheet with very little in the way of interest service charge.

What the hell happens when interest rates rise?  The whole thing blows up in their face.  Again, this is another factor that Harrold does not see.  Harrold is a very smart guy and probably a very good trader, but when it comes to Energy fundamentals and the real driver of the economy… he probably doesn’t have a clue.

Silver and Gold will become great stores of value and excellent investments in the future due to Peaking of the Driver of the Economy — ENERGY.

This isn’t something we can quantify as we have to idea how to live in a world that has a falling energy supply.  We will soon find out.

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& Peace on Earth medallions are available now at SDBullion!

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    • Hi Charlie  Welcome back  How did the wedding go? Any videos of you giving away the bride.  You must have gotten and bit of silver pronouncements into that.  Cheers.

    • @AGXIIK Wedding was great and I had a good time but what really made me proud was that my daughter showed me her Physical PM Stack, now that made me proud. Lol As for the video, sorry that’s private.  Keep Stacking
      P.S. She also has a AR 15, 22 and 38 hand guns, 22 breakdown rifle and a pump action shotgun. What a girl. Lol

    • @Marchas45
       
      Welcome back, Charlie!  Sounds like your daughter is a real keeper and quite the young lady.  
       
      Funny how times change, though.  When I was a strapping lad, saying that a gal was stacked had an entirely different meaning!  :-D

    • @Marchas45
       
      No offense meant, Charlie, truly.  I am a great admirer of the female form and all its fine attributes… like fine wine or art, it is truly a wonder to behold.  :-)
       

  1. It’s a shame the videos don’t work.   
    “Harrold’s logic on the silver inflation price trend at face value is correct.  You cannot deny the chart”
    So with that being said, silver trading at $20 today makes perfect sense, and the theory that manipulation is suppressing the price is not correct.

    • Wrong again ztraitor government-paid troller, from the Cass Sunstein based discussion forum intervention program. That chart from Harold is surely based on fraudulent government-based data to determine the inflation rate. The existing CPI for many years now is not reflective of the true inflation rate. It’s a known fraud for many years now. Of course you’re paid by the government you work for to deny this fact, whereas shadowstats.com shows what the real inflation rate has been, using the original, legitimate CPI formula, unmodified through all the years. When you look at true consumer price inflation rates using the original formula for CPI, and compare to the modified CPI fraud that the government that you work for and admire puts out, the difference is quite substantial.

      That’s just looking at price inflation. If we look at monetary inflation (M1, M2, M3) over the same time period of the price inflation, we see even much higher percentage change increases in the monetary levels. That’s because some of the monetary increases have not made their way into the metals and commodity complex as a whole, and instead have found their way into overpriced stocks, bonds and other over-priced assets.

      Anybody who uses analysis based on known-fraudulent data, such as Harold above, is either a MORON or a SHILL, or in your case, a government paid troller trying to make a DISHONEST LIVING. Don’t ever forget zman, you will rot in hell for making a dishonest living, working for a government that believes in intentionally deceiving people from making decisions that benefit them and their family in their quest for a happy living, or even survival.
      Shame on you for accepting your job working for them!

      Thus silver trading at $20 makes no sense at all, given that real true inflation levels (price and monetary) are far higher than Harold’s moronic/shill study detail. Silver is at 20 strictly due to government price control/manipulation. Using shadowstats data, and looking at percent changes via utilizing the original CPI formula, or percentage changes in money supply (either of the 3 measures) would clearly show, in a properly-done chart (using the metrics that Harold used above, aside from CPI fraud utilization), that silver would be at least twice the current price, or at least $40/oz. The only reason that silver is at 20, is because the traitorous government that you (ztraitor) work for, wants it at 20 as part of their plans. Free markets don’t exist in silver.
      ——————————————————————————————————-
      ZMAN is a Cass Sunstein/Obombass administration paid troll.
      ——————————————————————————————————————————————–
      “Cass Sunstein, the Regulatory Czar, had suggested, in a 2008 paper, that government agents, or allied groups, infiltrate and undermine groups that spread “conspiracy theories.”

      In a 2008 academic paper, President Barack Obama’s appointee to head the Office of Information and Regulatory Affairs advocated “cognitive infiltration” of groups that advocate “conspiracy theories” …….

      Cass Sunstein, a Harvard law professor, co-wrote an academic article entitled “Conspiracy Theories: Causes and Cures,” in which he argued that the government should stealthily infiltrate groups that pose alternative theories on historical events via “chat rooms, online social networks, or even real-space groups and attempt to undermine” those groups. ” 1

      1 http://conservativehideout.com/2010/01/17/czar-wars-trolls-cass-sunstein-advocates-“cognitive-infiltration”-of-groups/
      ——————————————————————————————————————————————————————–

      Another article describing what job ZMAN is paid to do: Obama Information Czar Outlined Plan For Government To Infiltrate Conspiracy Groups: “Put into English, what Sunstein is proposing is government infiltration of groups opposing prevailing policy,” 2

      2 http://www.prisonplanet.com/obama-information-czar-outlined-plan-for-government-to-infiltrate-conspiracy-groups.html

    • “Anybody who uses analysis based on a know-fraudulent data, such as Harold above, is either a MORON or a SHILL.”
      Yet, SRS said, “In a Economic-Energy Vaccum, Harrold’s LOGIC makes PERFECT SENSE. However, what happened for the past 100 years will most certainly not be the same in the next 100.”
      Seems like you are more upset with SRS’s acknowledgement of the studies that Harrold presents as being true.  The only thing that changes the silver market down the road is the energy situaction (according to SRS), because the past enviornment was not very bullish for the silver price.

    • ztroll.gov, I’ve already blasted the SRocco article in my post below. He’s not god, you know. He wrote a bad article, as I’ve already noted in detail. Hopefully he addresses my valid points in a future article, or he’ll lose credibility in my mind as a good analyst.

      As I’ve already noted, and as you already know, it’s not energy that will be the big mover in silver down the road, but MINING EXTINCTION projected by ’29. Again, mr. ztroll.gov, I strongly suggest that you do not acknowledge the USGS ’09 silver extinction report in any way, shape or form, because those CIA agents that handle you have a whole army of MKULTRAs to suicide you for straying away from government talking points that they’ve presented you with. Just make sure you do your job and keep on making believe that inflation doesn’t exist; that shadowstats doesn’t exist; that government price controls don’t exist; that supply and demand determine the price of silver; and that the USGS silver report of ’09 about silver extinction from mining doesn’t exist. As long as you do this, your government-created pay will keep on flowing in, and you won’t be given the MKULTRA treatment.

    • @hromano1030
       
      “Wouldn’t just make more sense to ignore @zman and his posts?”
       
      Indeed it would.  This used to be known as the “Don’t feed the trolls” approach.  They are hardy little pests and, like roaches, are hard to kill.  The most effective way seems to be starvation.  ;-)
       

  2. Oh, wonderful…  so, there is no inflation, no shortage and no manipulation now, eh?  and don’t kid yourselves, the rates are NOT going to go up.  Too much crap depends on interest rates.  Japan lived with low interest rates for a very LONG time, so what?
    We all have been massively lied to.  I lost a lot of money in PM, sure, I should blame myself for it, but I would like to watch all talking heads like a hawk and call their bullshit if I please so.  I will call them shysters until the all prove themselves correct and accurate.  Right now they are all full of shit and don’t know their elbow from their collective ass….

  3. This is probably the absolute worst article that SRocco has ever written here. I’ve been a very big fan of much of his work, but not this piece.

    First of all, he makes no mention whatsoever as to Don Harrold’s method of determining inflation. I’m guessing that Harrold is using the standard CPI, which we all know is a fraud, after reviewing the amazing results of the research from shadowstats’ John Williams. If SRocco doesn’t know what method is being used by Harrold, then he should’ve contacted him to ask him.

    Any time one makes an analysis reviewing inflation, one must state the method used, and if that method used is the CPI fraud, one has a journalistic obligation to rip apart the analysis of the person who used a method that’s a well-known fraud. SRocco failed to do so, which is very irresponsible of him. In essence, he’s giving a bit of credibility to Harrold’s work, where none is deserved, given the use of known-fraudulent methodology utilized for his chart. Using shadowstats data, real true CPI data is much higher than what the traitorous government reports in their modified (from the original formula)CPI.

    A second huge problem with SRocco’s analysis here, is that he focuses solely on peak oil, and refers to oil supply issues by the year 2025, which can thus lead to higher prices in gold and silver. Silver is expected to be almost extinct from mining by that year (read the ’09 USGS silver report), and yet he fails to even make any mention of that. Staring in the face of a mining extinction dilemma will play a far bigger role in the price of silver, compared to merely looking at higher fuel/mining costs. If there’s nothing to mine, then the price of oil/mining costs is essentially irrelevant! How in the world does SRocco overlook this?

    Indeed his peak oil analysis is spot on with regard to gold (no mining extinction event on the horizon for gold) prices going up, along with many other commodities. However, silver mining extinction will play a far bigger role in determining the price of silver than peak oil will. That’s like comparing a ‘royal flush’ (guaranteed victory) to a ‘full house’ (good chance of winning) in the game of poker. I’m all excited that the USGS is telling me that they plan on dealing me all the cards I need to get a ‘royal flush’ in silver, thus guaranteeing me an investment victory in the long term, whereas SRocco is all excited about getting dealt a ‘full house’ that’s realistically applicable to gold increasing in price. He can have his ‘full house’, and I’ll take my ‘royal flush’, while silver increases in price at a far higher percentage than gold does.

    • Recently, the government began to spend a lot of effort and attention to discredit gold and silver. In the all forums about gold and silver, we have now our the  government trolls.
      Such dense psychological impact from the government, has never happened before.
      This is a very good sign. They run out of ammo. They do not know what to do and they panic. This is a very powerful signal to buy!

      My motto is: Listen carefully, that says the government and do all the opposite. And you’ll always be right.
      Because the Government always lies against your interests. Amen !

  4. Eric Sprott is a nice guy, but it looks like his career is over.    http://www.traderdannorcini.blogspot.com/2013/12/gold-and-silver-decline-yields-victim.html
    Trader Dan reports from the Dow Jone wire feed, “Sprott had under management some $3 billion in 2008. That has fallen to about $350 million.     The investment company Sprott Inc. is phasing him out of the investment decisions. By the end of next year he will no longer make the firms investment decisions.”
     

    • @Zman Well, all this Sprott revelation proves is that PM market manipulation is having its desired scalping effects. Anyone who talks down USD denominated paper ‘assets’ will be Julius Caesar’d by their own investors, and Miners will go broke and be gobbled up by a multinational cartel with cheap fiat printed at a whim and handed to a cartel behind the interest rate firewall/apartheid.
       
      As Maloney has said correctly, it is Stored ECONOMIC Energy … so SRocco has missed the real point once again. ECONOMIC energy refers to;
      1- PetroChemical Energy
      2- Human Wages = Time and Expertise
      3- A stable political environment in a country not in chaos able provide access to that raw mining resource.
       
      And all 3 of these required aspects are becoming harder and harder to attain … so he focused on actual PetroChemical Energy why? … because it was simply a bad article.
       
      When the USD’s stored in overseas financial hoards (US Treasuries and other equivalents) have completely been washed back to US shores, and when the large multinationals finally have their own slaughter day on the stock market, the only USD’s swimming around for real assets that already contain a store of Economic Energy will be in severe surplus, and those real assets will be in very short supply. This will be what makes the REALIZED INFLATION sky rocket so far past Harolds analysis to have made his point irrelevant.
       
      The ironic thing about Sprott’s investors and their hissy fit is that they will be Scalped TWICE;
      1- When they exit their phyzz
      2- When whatever Paper they are directed to invest in other than PM’s goes the way of Icarus.
      …and if they’d just had stronger hands and weathered the Central Bank created storm, they would never have been scalped even once. Maybe there is a day coming when Sprott will be able to recover his reputation and deliver the good old line “I told you so”.
       
      So as I always am trying to point out to you Zman, the manipulation is being done for this very reason … to take advantage of as many suckers as are available, and the Fed and the Media are making sure that there are a very great surplus of those in the USA.

    • Whoa!  Flickering low-res B&W video coupled with mega-scratchy mono audio.  My eyes AND ears are bleeding now.  :-O
       
      OK, so here we have living proof that not everything about the “good old days” was all that good.  lol
       
       

  5. “How do you measure inflation when the fiat money supply becomes worthless?”
     
    I guess that would depend upon how one views inflation.  In my view, monetary inflation becomes a moot point at that stage because my definition for inflation is the rate at which the buying power of a currency is destroyed… essentially the speed of the death of that currency.  If the currency’s buying power is completely destroyed, then there is no rate of destruction.  It is not dying at that point.  It is dead and ceases to exist as a currency.
     

  6. Now the world is an undeclared war between all governments and all peoples. People do not want the government continued rob the people. But the government wants to continue to rob the people.
    I’m not in a hurry. I just buy gold and silver at each price reduction. I act like the Chinese.

    But I and others like me, of course will bring these whores to the clean water in the end.

  7. Hromano 1030
    your daughter’s commitment to her country, family  and the Marines tells me daddy has a wonderful daughter, accepting the torch and carrying it onward.   Ladies like her give us all hope for the future.

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