Silver theory

[rexmerdinus]

Ok guys, a random thought occurred to me the other day and it has been festering. I wanted to bounce it off y'all since I'm still new to this, and I'm just an end-user who is not really familiar with most of the forces and players in the PM market. WARNING--if you have a tin-foil hat, you may want to don it now!

It's no secret that there is manipulation in the silver market, and it has historically been downward manipulation in price. Now that that manipulation is unravelling and prices are climbing, does anyone think this may also be due to intentional upward manipulation beyond the traditional forces of supply and demand retaking control? The reason I say this is that I've seen an increase in articles advocating a return to some sort of specie-backed currency, and not just from the fringes. A number of mainstream political and economic leaders around the world are beginning to espouse this, with some even saying that such a currency should be international in nature. Now, if I saw this as a definite inevitability, and if I were someone well-positioned in the silver market and able to influence policy on a national or international level, I might seek to have people (sheep) mentally condioned to accept a single monetary unit, like a dollar, being worth a much smaller amount of silver than it has traditionally been. The reason this occurred to me is that silver's jump (due, I know, to unwinding manipulation) is far out of proportion to the increase of the price of real goods--whereas an ounce of silver at $5 might have bought ten loaves of bread a few years ago, the same ounce at $35 might buy 50 or more loaves today (yes, I'm just picking numbers and arbitrarily assigning the inflation rate, but you get the idea). When a currency change occurs, it makes sense in terms of maintaining civil order to assign the "New Silver Dollar" a value close to that of our current dollar in terms of real goods, like loaves of bread--you can't eat silver, after all. Thus, someone holding a lot of silver (or other PM) would have their liquid wealth instantly multiplied--in which scenario upward manipulation, or rather allowing downward manipulation to unravel, would make sense in anticipation of such a currency conversion.

As I said, I'm relatively uneducated and uninformed in this field, but does this scenario make sense?

Comments?

[whatsnext]

Nixon stated we were only temporarily suspending the gold standard.

So the stronge dollar was manipulated up to? To complicated to really go in to.

[VWBEAMER]

If you look back through history, the Gold Silver Ratio has been 20-1.

A silver dollar was a dollar, a the large gold double eagle was 20 dollars. So, Silver is still under valued in terms of the price of gold.
Silver should be twice the price it is now.

The reason silver has gone up so fast because it was held down. Like a beach ball held underwater, when released it will fly up out of the water and the come back down to it's natural level. It will over correct, but we are not there yet.

Look at the gold-Silver ratio. When it gets below 20-1 , then you unload your silver and buy gold. or if fits one of your other goals sell it and buy a house, whatever your goal is.

We still have a long way to go, there will be ups and downs, hang on.

[exbingoaddict]

A number of mainstream political and economic leaders around the world are beginning to espouse this, with some even saying that such a currency should be international in nature.

That line puts me tine way back machine to 2001. I was in college and had a course on monetary economic policy. The professor proposed one day that the the major U.S. Presidental candidates could have secured victory in a very tight election back in 2000 by catering to a gold bug voters. Which he figured could be between somewhere of .05 to 1% of the vote at the time. At the time I brushed it off as somewhat of stoner logic. Unholding history may be giving him the last laugh though.

[rexmerdinus]

If you look back through history, the Gold Silver Ratio has been 20-1.

A silver dollar was a dollar, a the large gold double eagle was 20 dollars. So, Silver is still under valued in terms of the price of gold.
Silver should be twice the price it is now.

The reason silver has gone up so fast because it was held down. Like a beach ball held underwater, when released it will fly up out of the water and the come back down to it's natural level. It will over correct, but we are not there yet.

Look at the gold-Silver ratio. When it gets below 20-1 , then you unload your silver and buy gold. or if fits one of your other goals sell it and buy a house, whatever your goal is.

We still have a long way to go, there will be ups and downs, hang on.

Yeah, I understand all that, and I am hanging on and still buying. I know silver still has a long way to go, but I don't fully trust the traditional gold-silver ratio as an indicator of where prices should be. This is in part because I think it is too low on the silver end due to industry "using up" the silver supply, but I can't quote any numbers to back this up.

I guess the point of my original post is that there's ALWAYS more to the story. I'm not a conspiracy nut or anything, but I always wonder who is nudging what where, and why.

[Know Common Cents]

Don't assume that the price/value of gold and silver march in lockstep to the rate of inflation or deflation. Your bread argument holds true now, but will be less significant when all aspects of the bread ingredients, bread baking and transporting them to market gains traction with inflation.

My silver quarter bought one gallon of gasoline in the 1960s. Today, even at $36 silver, it buys about 1.75 gallons. Certainly a net gain in purchasing power, but how long is even that ratio going to remain intact? Summer driving season is ahead and with growing worldwide mayhem, most expect fuel prices to keep on chugging upward.

At best, it's a seesaw effect of back and forth. The smart seller must keep abreast of all market conditions to let loose just the right time. Just the opposite for buying. Timing is everything as they say.

[psi]

When a currency change occurs, it makes sense in terms of maintaining civil order to assign the "New Silver Dollar" a value close to that of our current dollar in terms of real goods, like loaves of bread--you can't eat silver, after all. Thus, someone holding a lot of silver (or other PM) would have their liquid wealth instantly multiplied--in which scenario upward manipulation, or rather allowing downward manipulation to unravel, would make sense in anticipation of such a currency conversion.

While that would obviously be good for the holder of silver if it were to occur, I tend to think that a more stable system might result from including more metals than just silver (or gold). I've heard it argued that commodity money is impractical today because there just isn't enough gold or silver to represent all other things of value in the world. While obviously almost everyone on a forum like this would disagree with that conclusion, I think there may be an element of truth to the premise.

If you re-designate one or two rare metals as money, their trade value has to rise far beyond what the market price might otherwise have been as you suggested, putting a lot of influence into the hands of people who happen to hold those metals already. My thought is that if a wider range of economically significant and (ideally) coinable metals were treated as independent currencies (e.g. gold, silver, PGM's, copper, nickel, aluminum, magnesium, titanium, tungsten, ???) then there would be less of a discrepancy between 'intrinsic' and 'monetary' value. A 'dollar' or other currency unit could be defined (mass/weight) for each element (and by different countries) based roughly on current prices, but the 'exchange rates' could be free to fluctuate afterwards based on market conditions.

[argent_pur]

I've heard it argued that commodity money is impractical today because there just isn't enough gold or silver to represent all other things of value in the world. While obviously almost everyone on a forum like this would disagree with that conclusion, I think there may be an element of truth to the premise.

Murray Rothbard argued against that premise with what, I think, is very sound logic. How many cows is a gold ounce worth? How many Lamborghinis could you buy with a gold ounce? The answer is that a gold ounce could buy one or one thousand of each. Gold's "value" is not fixed in ANY way, shape, or form. There is no dollar-price of gold that is "correct" in an absolute sense that every other price deviates from. At least theoretically, a single gold ounce could back every dollar in circulation right now by a simple re-valuation of gold's dollar "price" per unit of weight (micrograms, maybe ). This authority is given to congress in the US Constitution "to regulate the value thereof".

So, Rothbard concludes that any amount of gold (or silver) is just as good as any other amount.