The New Cold War is Being Fought Over Gold & Silver

By SD Contributor AGXIIK:

The tale of the silver boom ended badly for the Hunts when the Federal  Reserve, Justice Department, Saudi kings and others with a real desire to smash the Hunt Brothers took after them with a vengeance.  Jim Sinclair was part of the team that helped Volker dismantle the silver barons, restoring  the US Dollar hegemony from the frightening specter of even worse currency debasement.  Silver and gold went to sleep for another 30 years. The Petro Dollar system was preserved.  That cost was in the billions.Today things are different.  Or are they?  The same economic tides are making precious metals a safe haven from the real perception of inflation and its harmful effects. The difference today is that silver is in a shortage with most of the silver production immediately absorbed into commercial and investment uses, leaving many asking for their precious metals and not getting delivery in short order, or if at all.  Most of us can acquire silver and gold in small amounts.  Gold has no ready stocks available for sale.  Every ounce, pound or ton is spoken for, sometimes several times over given the theft occurring from allocated accounts and vaults emptied by smart money investors like China and Russia taking delivery from bullion banks and their badly placed paper bets.

Unlike the 1970s when  gold and silver price spikes were stimulated by fear of inflation erosion despite massive above ground supplies,  all precious metals today are in short supply, even to the point where small hot wars are being fought for its possession.  This is not the era of the Hunt Brothers chasing an enormous bet on silver in hopes of making a few billion in profits, riding the public’s desire to save themselves from currency devaluation.
Our present era is a Cold War being fought over these most important commodities.

 

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I’m going to approach the silver price spike in a little different manner than my prior attempts.
Having been through last silver and gold price explosion, first  as a somewhat broke student and later a somewhat broke employee working for wages, who incidentally worked in an office next to a commodities trader with a focus on trading gold and silver futures, I did spend some time talking with the broker and studying precious metals.

Having no money to invest, I was still anxious to understand why these precious metals were going up so quickly.  This was taking place while silver was moving from $20 to nearly $50 an ounce. Gold was completely unaffordable but silver caught eye.

Imagine how anxious I was to place a paper bet on some options.  A mere $800 could get me into the market.  Just as well it was not to be and that was good for me.   Knowing my tendencies I would have exited too late and lost everything, just like the Hunts.  The only thing I was able to do was stand in line and sell my box full of Junk Bullion when it was $30 an ounce as silver bounced to $40. The broker’s office quickly closed after the silver collapse, just like the local coin stores,  so my conversations and studies ended at that point.  But the broker did offer some advice. He said these prices were due to speculation and money chasing yields.   He also said this phenomenon would not last, warning me to stay away from this market. Those words fell on deaf ears.

The effects of inflation began in earnest in about 1970 when  ‘Guns and Butter’ President Johnson’s fiscal policies showed up through deficit financing and currency printing. Inflation was running at a quiet mid single digit level from 1966 to 1970.  I felt the first bite of inflation in  my first job out of high school, involving a promotion that should have resulted in a raise. Then President Nixon implemented wage and price controls in a failed attempt to curtail the price increases. No raise for me.

No hourly wage increases were permitted.   No product price  increases were permitted either but manufacturers and retailers managed to pass through price increases before this Executive Order was laid down. Shortly into the law’s implementation these same firms were repricing products, with price gouging.  They called them end product something else or repackaging the same item and jacking the prices up substantially so as to avoid these labels. Wages were still static.

Gas price shocks started in earnest, hitting the American pocketbook twice; once when pump prices doubled  to 50 cents a gallon and a second time when prices went to $1.00 a gallon.  Severe shortages took place with gas lines a mile long and rationing of gas to Odd Even sales days based on your  car license number.

These prices shocked and rattled people and did so in a way not seen since WWII.  My parents and I spoke about this frequently, comparing prices to fill a shopping bag at the grocery store.  The commonplace complaint was that a loaf of bread hit $1.00 a loaf, an obscene cost that got real national attention.  A grocery bag could be easily filled for $10 with silver coin change left over. I did my own shopping so I felt that pinch while making no additional wages.  The same grocery bag later cost $20 and that also got national news attention as well.

Inflation’s effect could not be denied and unlike today, with SNAP and EBT  food subsidies, $1 trillion in government largesse buffering the worst  inflation we’ve seen over the last 10 years, and people buying cheaper and cheaper goods just to get by, those more halcyon days where real silver was still used in everyday commerce,  we had no buffer against inflation then running 10% or moreWages never increased to meet price inflation.  People started looking for alternatives.  Home prices began rising and did so substantially.  Interest rates began to rachet up from mid single digits to low double digits.  Savings account rates never kept pace with inflation.  These rates started taking place before Reagan was elected and brought Paul Volker in as Chairman of the Fed.  Rates rocketed upwards and the prime rate hit 21%.

The government worked overtime  to crush inflation, throwing everything they had towards this beast.  The cure was very painful.
Before the regime change, everyone was trying to find a way to get out of the way of the inflation juggernaught.  No one had any experience in how to deal with this phenomenon.  People were struggling and desperate to get ahead and yet continued to fall behind.  We think our present era is troublesome and it is but if you lived through era of malaise with inflation at 13-15% and unemployment at 10%, it  was one of the worst time periods in anyone’s recollection.

And then along came the price rise in precious metals.  People piled on. The Hunts piled on.  Everyone dreamed of being silver millionaires in the hopes that prices would rise to the moon.  This was a reasonable assumption since pocket change went to $40 an ounce and a silver dollar could pay for a week’s groceries, just like the good old days.

In all likelihood the Hunt Brothers did not create the silver price spike, much less the gold price spike.  The GTSR was still 16 to 1, a historical norm, but $50 and $800 silver and gold were delirious prices and people starting going a little crazy over this. Lines formed outside the coin shops and pop-up precious metal buyers.  Anything with phyzz attached showed up at the doorsteps of these outlets.  One story noted that 90% of all the junk bullion in circulation ended up passing through these businesses, later melted down as scrap.

The tale of the silver boom ended badly for the Hunts when the Federal  Reserve, Justice Department, Saudi kings and others with a real desire to smash the Hunt Brothers took after them with a vengeance.  Jim Sinclair was part of the team that helped Volker dismantle the silver barons, restoring  the US Dollar hegemony from the frightening specter of even worse currency debasement.  Silver and gold went to sleep for another 30 years. The Petro Dollar system was preserved.  That cost was in the billions.

Today things are different.  Or are they?  The same economic tides are making precious metals a safe haven from the real perception of inflation and its harmful effects. The difference today is that silver is in a shortage with most of the silver production immediately absorbed into commercial and investment uses, leaving many asking for their precious metals and not getting delivery in short order, or if at all.  Most of us can acquire silver and gold in small amounts.  Gold has no ready stocks available for sale.  Every ounce, pound or ton is spoken for, sometimes several times over given the theft occurring from allocated accounts and vaults emptied by smart money investors like China and Russia taking delivery from bullion banks and their badly placed paper bets.

Silver has not an ounce of surplus.  Every ounce produced finds an immediate home.  Vaults are similarly being looted by those who call for delivery.  The US is shipping hundreds of tons of silver to the LBMA. The Swiss are backstopping gold demand from the LBMA.  The LBMA is forced to ship their bullion to the traders who call for delivery at every price smack-down, whether it’s $32 silver or $1,700 ounce gold, both low prices in this world of precious metal wars waged to acquire these immensely valuable and strategically important currency backing metals.

Unlike the 1970s when  gold and silver price spikes were stimulated by fear of inflation erosion despite massive above ground supplies,  all precious metals today are in short supply, even to the point where small hot wars are being fought for its possession. Violent trikes, nationalization at gun point and harsh regulatory attacks create even greater supply chain injuries.  The following effects are critical in evaluating the future price of gold and silver.  This is not the era of the Hunt Brothers chasing an enormous bet on silver in hopes of making a few billion in profits, riding the public’s desire to save themselves from currency devaluation.  The following effects and events affect the prices at every quarter:
Lower Exploration
Lower Discovery
Lower Ore Grades
Lower Prices
Higher Energy Costs
Higher Labor Costs
Higher Taxes
Higher Regulations

Our present era is a Cold War being fought over these most important commodities. Wars beget shortages. Nothing is safe during wars.   Every country with a central bank and an eye to acquiring precious metals sees how important it is to be ahead of the purchase/price curve. Many are calling for repatriation of gold stored overseas. That gold is gone.

All major countries are devaluing their FIAT currency to keep pace with the economic slowdown seen in every hemisphere.  They are responding to both the perceived shortages in precious metal.  The actual shortages that are so commonplace that the US Government and its crony bankers are spending billions to supress the price.  If the price remains suppressed, the FIAT and currence debasement con game can continue.  This con game hides the real price of silver and gold. It hides the real price of money. It hides inflation and it hides the real economic price of hyperinflationary  FIAT printing.  It’s fellow traveller, ZIRP, provides cover for precious metal theft by driving the getaway car.
The countries that are fighting for their economic lives, including the US, China, Russia, the  Euro-zone, the UK and many others with GDPs in 13 digits know that the jig is up. They can lie cheat and steal but Gold backed currencies are coming.

Those who have gold make the rules.
Silver is mission critical to the industrial base of any country that builds things.  Silver is real money and every person knows that.   These countries are now acting like the individuals who raced to the coin store to buy precious metals in hopes of grabbing a small profit, and maybe protecting themselves from FIAT erosion.  Those countries who fail to realize the value of precious metals, preferring to hold true to FIAT,  are racing to the global coin store to sell their stores of precious metals in the faint hope they can continue the con game, continue printing, pushing off the day of reckoning.
Those countries that represent the Global Coin Store will end up prospering because of their common sense and foreward thinking.
Every country fights a constant and ongoing economic and monetary cold war with every other country, trying to exact a small advantage over their adversaries.  Today, evey country tried to fight this cold war with FIAT currency, completely unbacked by any hard asset. This beggars all participants as paper currency eventually wears out in spite on the quantities produced. The country and it’s people eventually drown in paper.  The only winners are those who trade paper for hard assets. These countries and people eventually win the battle. Much blood is shed in the interim.

When that day reckoning  comes, and it will be very soon in the overall scheme of things, the con game will end, FIAT based countries will be destroyed and the countries with the foresight to buy precious metals cheaply, like now, will prosper.  People who follow this real money paradigm will save themselves.  There are always winners and losers in this global battle of currencies.  The only winner will be the one backed by something other than the central government’s promise to pay.  Those promises ALWAYS go unfulfilled.