Value Of Silver
Let’s start this by looking at the historic value of silver. How will silver actually be valued if the whole world returns to using gold and silver as I expect it to eventually? Sure, it may go up a lot in terms of dollars, but won’t everything else just cost that much more, too? No. No! I expect silver’s rise in value to far outpace every other asset, and every other commodity you can buy.
As proof, And given the ongoing supply/demand deficit and shortage, as reported by the two industry reports, I expect silver’s value to far exceed the historic value. There are several ways to evaluate silver’s historic value. The first is to look at what silver could buy, and to look at what wages were in terms of silver. I have written that a day’s wage, in silver, for skilled labor, about 100 years ago, ranged from being a silver dime as one man reported, a silver quarter during the great depression in the 1930′s, or as much as a silver dollar. Henry Ford paid his workers, what was considered a very excessive $5.00 a day. In silver, at .72 oz. per silver dollar, that was 3.6 oz. of silver per day. But remember, that was an extremely high and very unusual wage. It was made possible by the very high productivity of the assembly line, and little government regulations or taxes. If silver returns to historic norms, it will be an ounce of silver, or less, for a day’s wage. Due to scarcity of silver, it may well be more like less than a 1/10th of an ounce of silver per day. Or perhaps, a silver dime for two weeks of labor!
The reason is that the U.S. has well over 100 million workers, yet the world has about 250 million oz. of silver in known inventories! If 1/10th of an ounce of silver is a day’s wage of $100, then an ounce of silver would be $1000/oz. The other historic value was the gold to silver ratio. One ounce of gold was the same value as about 10 to 15 ounces of silver. Again, due to silver’s scarcity today, that ratio will certainly deserve to be exceeded, to at least 5 ounces of silver to one ounce of gold. Thus, silver will be valued at about 1/5th of $1000, or $200, assuming that gold is fairly valued at $1000. But, if gold should really be valued at about $5,000 per ounce, then silver will be about $1000/oz.
In both of these examples, this does not mean the price of a gallon of milk would shoot up to $400 per gallon. I would expect that milk prices would remain the same, at $4.00 per gallon. If milk rises to $40/gallon, and if consumer prices rise by a factor of ten, then increase the “future value” price for silver also by a factor of ten, so that silver would be $10,000/oz, and 1/10th of an ounce of silver would be $1000, so that a 1/10 of an ounce of silver would be able to buy the things you’d buy today with a day’s wage. And if you truly believe that an economy would be run more efficiently, as I do, without all the fraud of the dollar negatively affecting things, then you should assume, as I do, that a day’s wage of silver (however small of an amount that would be) should help the average consumer to be able to buy more than a day’s wage of fiat money can buy today.
Further proof: Monetary demand during inflation will go into all tangible things, yes. However, nobody can buy and store a billion dollars worth of “milk”. Milk spoils. It’s simply too inconvenient to use as money. And so are nearly all other goods. Silver does not spoil, and people will realize that no other commodity has the peculiarly unique properties that the precious metals have, that make them the only tangible things that qualify as money. This combination of factors then, forms my view of silver as an investment. I expect the future value of silver to be at least $1000 per ounce, in terms of today’s money and today’s value and today’s purchasing power. Let me rephrase so everyone is clear. I believe that an ounce of silver will buy what $1000 of today’s money will buy. Today, with $1000, I can buy a month’s rent. Yes, a month’s rent may cost an ounce of silver in the future. Today, with $10,000, I can buy a nice used car a few years old. Yes, I expect to be able to buy a similar car, or better, with about 10 ounces of silver, in the future.
I expect that most readers will either not understand, or not believe, my point of view. That’s fine. But ask yourself: Could it really be any other way? There is going to come a time when the silver price moves up so sharply, so violently, it will be something which the world has never, ever seen. There is no experience that any human has experienced that can prepare anyone for what is coming. This will happen because the world has never totally abandoned using silver as money, until this generation. The world has never seen such a low price for silver as today, and the world has never seen such low inventory levels for silver as today, and the world has never seen such a high industrial demand for silver as today. The world has never seen such a deficit and scarcity of real money. And the world has never seen such a huge build up of false wealth, as represented by the enormous amounts of paper money that exist in the form of bonds and M3.
Today’s price movements in silver are but tiny wiggles, and are insignificant in the long run, in the grand scheme of things. Silver will remain a screaming good buy even at $50 to $100 per ounce. And at that price, there will be billionaires lining up and begging to get it, because there will be little else for them to buy to protect their bonds and money from going up in smoke as inflation wipes out the paper fraud and dollar debts accumulated by generations. Today is not a “once-in-a-lifetime” opportunity in silver. It’s not a “once-in-100 years” event. It is an event that has never before occurred in all of human history. In just the past year the increase in money being printed and put into the U.S. banking system has more than DOUBLED! Money is being printed with NO accountability, and NO restraint! Relative to the world supply of silver it is absoulutely beyond reason that this worthless IOU can retain it’s value.
Gold is overvalued relative to silver, because at current prices, it takes 65 ounces of silver to buy 1 ounce of gold. Historically, this ratio was 15 or 16. Given the silver shortage, this ratio will hit 10:1 or 5:1, or even 1:1. Thus, gold is perhaps 65 times more overvalued than silver. Thus, if you factor everything, You will see that bonds and currency are overvalued relative to select silver stocks by a factor of 139,000 to one. In other words, if silver stocks reach their true value, and paper currency disappears as it always does, then you might expect certain silver stocks to go up in relative value by a factor of 139,000 times more than they are worth today.
Can silver stocks really appreciate so much? Is there historical evidence for such a crazy thing? Yes. “CDE rose from penny stock status (.02 in 1967) to an NYSE-listed, $60 per share stock in 1980. In fact, the average share on the Spokane Stock Exchange rose in value nearly 16000% (yes, sixteen THOUSAND percent), as America could not get enough of silver and silver stocks.” CDE rose by a factor of 3000, or 300,000%, and by 1980, the metals boom was stopped short, and paper money’s death was postponed. If paper money dies a death that lasts a generation world-wide, then even greater gains should have been expected. For this reason, a wise silver stock investor should NEVER sell silver stocks for paper cash. A wise silver stock investor who looks for value would never sell a fairly valued silver stock for an overvalued silver stock that traded for hundreds of thousands of times more value than it should be. Likewise, there is no excuse for a silver stock investor to have any cash or money market or bonds in his portfolio for any reasonable length of time, except for when selling one silver stock to raise the cash for another silver stock, or for when you need to raise the cash to buy silver, or a private placement in another silver stock.
The sheer stupidity of big money not recognizing the value of the world’s remaining silver is utterly shocking to the rational mind. Clearly, bond holders are utterly deceived, and totally unaware of the situation. All my readers should understand and know that bonds were originally invented to suck the capital and money (gold and silver) away from the people. Bonds today are a paper promise to repay paper. What a con game! Are bond holders conservative and safe? No, they are fools! There is nothing safe about holding a paper promise to receive more paper printed by the con-men who have brought the world economy to ruin!
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