Silver Market Fundamentals: The Numbers Don’t Lie by Jeff Nielson, Sprott Money
“Statistics can be used to say anything.”
Many readers are familiar with this cliché, but few understand its real significance . Numbers don’t lie, meaning the raw data which we collect on a nearly infinite number of subjects. Statistics, on the other hand, are rarely just raw data. Instead, they are numbers that have been massaged (i.e. manipulated) with various adjustments.
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Deception and deceit enters into the picture when our governments (and charlatan economists ) create their statistics, and do so by making adjustments which are completely indefensible from an analytical standpoint. These adjustments don’t improve upon the raw data in terms of adding clarity, but rather they pervert the data into numbers which cease to have any resemblance to the real world.
Thus, with their adjusted statistics, these frauds-with-numbers can make the U.S. Great Depression look like a recovery. An even more obvious example is found in all the imaginary “jobs” the U.S. government claims to have created during its imagined recovery .
Fewer and fewer people are working in the U.S. every year, and virtually every month. Since the start of the “recovery,” the U.S. economy has lost an additional 3+ million jobs. The “11 million new jobs” boasted of by the political puppets, and manufactured by charlatan economists, never existed. They were completely created with mammoth – and bogus – adjustments.
“Numbers don’t lie – people do.”
This brings us to the silver market, and some numbers that illustrate some unequivocal truths. There are few better sources for numbers on silver than precious metals icon, Eric Sprott. In a recent interview with The Daily Coin , Sprott provided a few interesting numbers.
Silver is mined at an 11:1 ratio to gold. This is raw data. This becomes significant when we look more raw data numbers: the natural occurrence of these two metals in the Earth’s crust. Silver is approximately 17 times as plentiful as gold. Therefore, all things being equal, we should expect silver to be mined at a near-identical ratio of 17:1.
Instead, silver is under-produced by roughly 50%. How? Why?
We know it could not possibly be due to lack of interest or demand. Historically, over a span of thousands of years, the price ratio between silver and gold was a very steady 15:1. This means that (over thousands of years) humanity has exhibited a slight price preference for silver. It occurs at a 17:1 ratio, but people have been willing to pay for it at a slightly higher 15:1 ratio.
In more modern times, we have proof that humanity’s desire for silver hasn’t waned at all. As was explained in a previous commentary , the silver market has been in a state of supply deficit for thirty consecutive years – something totally unprecedented with any other commodity market in history.
Indeed, it is impossible for any other commodity on the planet to ever experience a supply deficit of this magnitude, with one exception: gold. What makes gold and silver totally unique in this respect? Being “precious,” we have conserved these metals over thousands of years, and as a result humanity has accumulated gigantic stockpiles of them. In fact, nearly all the gold ever mined has been conserved.
However, this is no longer true with silver. In addition to being a more brilliant metal than gold, silver is incredibly useful. Over the past quarter century, more silver-based patents have been created than with any other metal on the planet. But not only does silver have unparalleled versatility, it is an extremely potent metal, meaning that in many of its commercial applications it is used in only trace amounts.
Why is this of significance? Because in such tiny quantities it is economically impractical to ever recycle any of this silver, at prices anywhere near the (absurd) levels of recent decades. Thus this silver is being consumed in tiny amounts, but in billions and billions of consumer products, over a span of decades.
Unlike gold, our stockpiles of silver are disappearing. As previously mentioned, for at least the last thirty years, the only way that our strong demand for silver could be satisfied has been through consuming portions of these stockpiles. Perhaps no one has studied this dynamic longer and more closely than noted silver researcher Ted Butler.
Butler argues that consumption of the world’s silver (on a net basis) dates back more than 70 years , to World War II. This begs the obvious question of how much (above-ground) silver is left in the world, but no one can supply a precise answer. Estimates have ranged from a high of 6:1 (versus gold), all the way down to where some commentators argue that the stockpile of gold is now larger than the dwindling stockpile of silver.
Give these numbers, there could never possibly be any legitimate explanation as to why silver is under-produced by 50%. In fact, there is only one illegitimate explanation: price suppression . Let’s toss out some more numbers. In the 1990s the price of silver was manipulated to a 600-year low.
Silver Market Fundamentals
We’re not talking about minor, subtle price suppression here, but rather a massive, systemic attack on this market, which began (originally) a hundred years ago. Another silver historian, Charles Savoie, provides the background here, in his noted chronology The Silver Stealers.
Savoie points out that during World War I, the British Empire conscripted vast numbers of soldiers into its army from India’s immense population. But these soldiers would not accept banker-paper for wages. They would only fight if paid in hard silver – the “Peoples’ Money.”
By the end of World War I, a large percentage of the world’s silver had flowed into India. Enter the Old World Order , the oligarch crime syndicate which readers know today as “the One Bank.” Both contemporary sources like Bill Still (The Money Masters) and historical sources like Charles Lindbergh Sr. ( The Economic Pinch) document how this crime syndicate was already pulling the strings of our puppet governments a hundred years ago.
These Western oligarchs ordered the British government to loot all the silver from India after World War I. Once that had been done, the Old World Order then commanded that much of that silver be dumped into the global market, virtually all at once. It was these massive twin crimes which distorted (and destroyed) the historic 15:1 price ratio which had existed for roughly 5,000 years.
Silver has been under-priced, both versus gold and in absolute terms, ever since. However, it was only in the 1990s that the One Bank took this price suppression to a criminal extreme. The 600-year low they produced by that systemic price manipulation literally destroyed the global silver mining industry .
Well over 90% of all silver mining companies were bankrupted. Since this era of extreme silver price-suppression began, roughly 80% of the world’s silver is now produced as a by-product of other mining (primarily lead, zinc, and copper) – further proof of extreme price manipulation.
There is no other explanation as to why (for thousands of years) we got most of our silver from primary silver mines, but no longer do so today. Because of this extreme, systemic price suppression, only the world’s richest deposits of silver can still be mined at a (small) profit.
This brings us back to another number provided by Eric Sprott in his recent interview. Silver is currently being purchased (in investment demand) at a 50:1 ratio to gold. For the significance of this shocking number, we need merely refer back to two other numbers already presented.
Silver is currently mined at an 11:1 ratio to gold (including all by-product production). It exists in the Earth’s crust at a 17:1 ratio. How can it be purchased and consumed at a 50:1 ratio? It can’t – not without leading to an inevitable inventory default once the last ounce of the world’s stockpiles is consumed.
Anything that is under-priced will be over-consumed.
This economic tautology has been presented in several previous commentaries . The hypothetical example used most often is chocolate bars. Imagine if chocolate bars only cost a dime. This was the actual price of chocolate bars, before Paul Volcker assassinated the gold standard and unleashed the One Bank’s “inflation” upon us.
If chocolate bars were priced at 10 cents apiece today, in our ultra-diluted dollars, all chocolate bars would disappear from store shelves in a few days. Worse still, no chocolate bar manufacturer could remain in business selling its chocolate bars that cheaply.
All the world’s chocolate bars would disappear. No more would be produced. The only bars remaining would be the tiny number hoarded and stockpiled by chocolate lovers. This brings us back to silver.
As previously documented, over a span of thousands of years humanity has exhibited a slight preference for silver over gold, in relative terms. This is not surprising, given that silver is the more brilliant of the two metals, and today, the more useful of the two metals. Yet the price ratio today has not shrunk from the historic 15:1 ratio, to reflect the decimation of global silver stockpiles. Instead, it has soared to a totally absurd level of today more than 80:1.
Again, there is no legitimate explanation for the current (ultra-suppressed) price for silver. Conservatively, silver should be priced at a minimum of a 6:1 ratio to gold, reflecting the maximum ratio of silver-to-gold stockpiles – i.e. priced over $200/oz. Arguably, silver should be priced at least as high as gold (if not higher), reflecting that the world might now have more gold than silver. This translates into a current price for silver at or above $1,200/oz (USD).
Perhaps by coincidence, a previous commentary pegged a “starting point” for the price of silver at $1,000/oz. This number came via a totally separate line of reasoning. It began with an observation by analyst Rob Kirby that, historically, the average wage for workers was 1 ounce of silver per week. With the average (paper) wages of the workers of today being approximately $50,000/year, this would require that the workers’ 1 ounce of silver (per week) be priced at roughly $1,000.
Numbers don’t lie – people do. And the “numbers” on silver tell an unequivocal story.
1) Silver price suppression has been more extreme and more continuous than any other form of price manipulation by the One Bank crime syndicate.
2) The near-total destruction of the global silver mining industry is a direct result of this systemic crime.
3) If silver was ever priced anywhere close to a fair and rational level, we would see the resurrection of the global silver mining industry. Once again, most of the world’s silver would come from silver mines, as had been the case for thousands of years.
4) An absolute minimum price for silver today would be $200/oz. However, a very strong case can be made that the current price of silver should be at least $1,000/oz (USD).
The world will eventually run out of silver, and it will happen soon. Roughly one billion ounces of stockpiled silver has been consumed over just the last decade alone. The numbers don’t tell us that this silver default might happen, they tell us that it will happen.