Part I: The 3 Legs of The Precious Metals Bull Market
Jeff Nielson: Normally, at this time of year writers tend to turn their thoughts toward making predictions for the upcoming year. My own belief is that this practice has turned into a Fool’s Game; as the saturation-level corruption in our markets and endemic propaganda from the Corporate Media mean that rationality is out the window.
Without accurate information and legitimate, vigilant regulation; our markets have become nothing but rigged casinos – where “the House” doesn’t even honour its losing bets when inconvenient. Prices are no longer the product of supply/demand fundamentals, but merely the outcomes of crime.
In such an environment, investors are forced to purely “play defense.” The object is not simply to seek out promising investment opportunities, but rather to survive the rapacious plundering of the banking cabal. It is not enough to identify assets which “should” or “probably” will turn a profit.
Instead, investors need to identify asset classes which must appreciate in value (over the long term) at a greater rate than the spiraling inflation generated from the exponential money-printing of the banksters. At the top of the list are gold and silver, humanity’s ultimate shieldagainst financial crime in general and (predatory) inflation in particular.
For those craving certainty/security in the most uncertain of times, the precious metals bull market (which began over a decade ago) offers “three legs” of support; or (alternately) three reasons why we know that gold and silver must outperform most/all other asset classes in our current circumstances.
Currency dilution is neither a theory, nor is it some obscure concept which can only be grasped by those with training in economics. Rather, it is the obvious and inevitable result of a simple relationship of arithmetic.
Incredibly, while nearly all but the most novice of investors understand the concept of “dilution” when it applies to the printing of shares by our corporations, virtually none of those same investors comprehend the dilution of our (fiat) currencies – despite the fact that currency-dilution is precisely analagous to share-dilution in virtually every respect.
If a corporation prints excessive quantities of its own shares, the share price will plummet. If the corrupt (private) bankers holding monopolies to all of our sovereign(?) printing presses print these fiat currencies in excessive quantities, they must plummet in value (i.e. purchasing power). This is “inflation.”
As we saw with the hyperinflation of Weimar Germany, it is possible to delay the effects of even the most extreme/insane excesses of money-printing. However, it is never possible to prevent such monetary depravity from totally destroying the value of one’s own paper.
How much is “too much” when it comes to money-printing? Under ordinary (i.e. sane) circumstances that can be a difficult answer to determine. Unfortunately current parameters are “extraordinary” in every respect – and not for the better.
Current Western money-printing grossly exceeds any other time in any modern, major Western economy, with the exception of Weimar Germany. Worse still, it continues to ramp-up at an exponential rate. And even worse, we have these rapacious banksters now openly using words like “unlimited” (Europe) and “open-ended” (the U.S.) to describe their suicidal money-printing.
If a company prints a lot of shares you should probably sell it. If a company prints up more shares than it (or any other company) has ever printed, in all of History; then you should dump all that soon-to-be-worthless paper as quickly as is practical.
As our purest (and untaintable) monetary assets, gold and silver don’t merely provide probable protection from this predatory inflation; as hard monetary assets they offer complete immunity to this paper debauchery. We don’t “think” that precious metals will rise in value as the banksters destroy their own fiat currencies (yet again). We know they must.
One of the many reasons to avoid any/all purely “paper” bets in the banksters’ rigged casinos (i.e. our markets) is that with such nebulous assets the potential for manipulation (of prices) is potentially infinite. Not so with commodity markets, and other bona fide “hard assets.”
Here manipulation can only be a temporary phenomenon, or to put it more simply: low priceslead to high prices. There is much to say on this subject, fortunately I have gone into great detail in this area in many previous commentaries.
From a theoretical standpoint, it can be established through elementary arithmetic that any significant/serious suppression of the price of any hard asset must ultimately result in the price of that asset not merely returning to the equilibrium price which would have occurred without manipulation, but even higher price-levels. This is the inevitable consequence of the inherently destructive market practice known as “shorting”.
While the consequences of manipulation can be demonstrated/explained with absolute certainty; so too can the existence of such manipulation in our gold and silver markets. There are many means of demonstrating this in unequivocal fashion; however for the sake of brevity I’ll stick with the simplest and most-obvious.
For over 4,000 years; most of the world’s silver was produced via “primary mining” – i.e. “silver mines” which produce silver just like gold mines produce gold and copper mines produce copper. Then, in the 1980’s and 1990’s relentless price suppression in the silver market drove the price of silver down to (in real dollars) a 600-year low.
This bankrupted more than 90% of the world’s silver mines (naturally), and most of those mines remain shuttered to this day. Since that time, most of the world’s silver (as much as 80%) has come from the byproducts of other mining. And despite the (current) eight-fold increase in price off of the absolute low, most of the world’s silver continues to come from this secondary mining.
Has anyone (even in the Corporate Media) claimed that we are “running out” of silver? Has the phrase “peak silver” been cropping up, the way that “peak oil” is inevitably discussed in the oil market? Of course not. There is plenty of silver still to be mined. All that is required are the fair (i.e. non-manipulated) silver prices necessary to allow all the (viable) old mines to re-open, and for new silver deposits to be developed.
In the meantime, serial price-suppression means that the world’s silver deficit remains very large, and totally unsustainable. Investment icon, Eric Sprott of Sprott Asset Management quantified just one aspect of this unsustainable silver deficit in a recent interview.
He noted that while the incremental supply of silver (mine supply) was coming onto the market at only eleven times the rate of gold, that (primary) incremental demand for “physical” silver – investment demand – was fifty times as great as that for gold (by quantity). This comes in the context of a 90% collapse in global, silver inventories from 1990 – 2005; with any reliable inventory numbers since that time completely hidden by the banksters (to support their price-suppression).
As with any/all markets for hard goods, there is only one remedy for a supply deficit: higher prices. In the case of the longest and most-extreme episode of price suppression in History (which continues to this day); the only possible outcome is a price-spike of commensurate severity.
The “third leg” of the precious metals bull is multi-faceted, and given that some of those aspects have not been covered in previous commentaries; deserves an installment of its own. Readers will see this for themselves in Part II.
Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada www.bullionbullscanada.com. He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among the most complex (and misunderstood) in the world.
Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.