Guest Post: Silver - Still The Investment Of A Lifetime

Tyler Durden's picture

By Giordano Bruno Of Neithercorp Press

Silver: Still The Investment Of A Lifetime

Silver is the common man’s currency. It always has been, and it
always will be. While gold holds its place in history as the great
stabilizer of economies and the shield against hyperinflation, its shine
and its safety should not distract us from its brother, silver, whose
uses are numerous and whose value is often more attainable for those
seeking a solid investment outside of precarious paper securities.

Gold’s unprecedented upsurge in price the past year alone is now
becoming the stuff of legend, and it is also something we at Neithercorp
have been predicting for a while now:

The mainstream media attacks on precious metals were so extreme last
year that they began to border on the bizarre. The “cult of fiat” was
relentless in their attempts to slander gold investors and it seemed as
though no matter how well the yellow stuff did, or how dismal the
dollar’s performance was, they would never get tired of the
disinformation game. Fast forward a year later, however, and they have
been utterly silenced. What a difference twelve short months can make…

As I write this, gold is holding after a spectacular drive at around
$1390, which is in line with my prediction of $1350 to $1450 by winter
2010, and on track to meet my prediction of $1500 by the beginning of
next year. We’ll have to wait and see, but what seemed absolutely out
of reach during this summer is now looking rather simple to achieve
today. Of course, silver has been a bit harder to put a finger on, and
there are many unfortunate reasons for this.

The silver market was wholly dominated for at least two decades by
only a few corporate banks, but primarily through the infamous JP Morgan
and the HSBC. Using coordinated naked short selling and massive
amounts of capital, they have been able to knock silver down every time
its value fell below a certain ratio to gold; usually 60:1. Only
recently has that ratio moved slightly closer to the true wealth of
silver. The historical average ranges between 16-33 ounces of silver
for every ounce of gold.

These banks have also been issuing paper silver securities, usually
in the form of ETF’s, which have no REAL silver backing them. These
securities give investors the illusion that there is too much silver on
the market, and not enough buyers. This causes devaluation in the

Gold has suffered from the same manipulation in the past, but the
silver market is even more tightly controlled, at least, until this

In November of 2009, a metals trader in London by the name of Andrew
Maguire contacted the CFTC with inside information that JP Morgan Chase
Bank was deliberately interfering with the silver market on an enormous
scale. He not only told the CFTC how the bankers were doing it, he
PREDICTED when they would do it again! Maguire gave two days advanced
warning that JP Morgan would attack silver on Feb 5, 2010. The market
played out exactly as he said it would:

The bankers were now caught red handed. The market could only go up from there….

Indeed, silver is now holding at around $27 an ounce, up from less
than $10 an ounce two years ago, closing in on a 300% gain. If you
bought silver in 2008 as I did, then you’ve made out incredibly well in a
very minimal time span. But what about people who were afraid to dive
into the market back then, or who just weren’t aware of silver as an
investment at all? Have they missed out? Is the $30 mark as good as it
gets? I believe that silver still has a long way to go before it
peaks, and room yet for millions of new buyers who are in need of a safe
haven against the imploding dollar but don’t have the finances to
purchase gold. Here’s why…

Bank Fraud Exposure Hitting Mainstream

The Andrew Maguire incident was just the beginning and the event
acted as a springboard. Both JP Morgan and HSBC are now under
investigation for silver manipulation pending a lawsuit filed in New
York. The suit accuses the banks of using their 85% commercial net
short position in the silver market to control its value on the COMEX:

CFTC Commissioner Bart Chilton has announced his belief that there
is, in fact, manipulation of the silver market. In his statement he

“I believe that there have been repeated attempts to influence prices
in the silver markets. There have been fraudulent efforts to persuade
and deviously control that price. Based on what I have been told by
members of the public, and reviewed in publicly available documents, I
believe violations to the Commodity Exchange Act (CEA) have taken place
in silver markets and that any such violation of the law in this regard
should be prosecuted.”

This is an extremely rare admission by the CFTC, which has for many
years ignored all complaints and evidence pointing to bank interference
in precious metals.

The Department of Justice has also launched a parallel probe into
criminal wrongdoing on the part of JP Morgan (though I doubt much good
will come out of the DOJ):

The bottom line is that the corruption in silver trade has been
brought into the light of day, which means banks will have to, at the
very least, back away from their activities to a point, which will allow
PM’s to grow according to free market fundamentals, instead of global
banking whims. This explains why silver has jumped to $27 an ounce so
quickly, but it also signals the possibility of even greater gains in
the near future, especially in light of QE2 and the weakening dollar.

Silver Supply Declining

Just as with gold, silver availability, from mining to inventories,
is in decline. This would not be so much of a catalyst if demand
remained at levels similar to a decade ago. That is not the case.
Demand is skyrocketing.

In June, the U.S. Mint announced it had run out of silver bullion blanks for the production of coins like the American Eagle:

While COMEX silver inventories continue to decline because of constant customer withdrawals of physical bullion:

Mining in many areas is also beginning to fall, including in Peru, a
major source of metals like copper, gold, and, of course, silver:

On top of all this, silver is used in the making of many industrial
and consumer products, including electronics, photography, batteries,
and engine components. This puts an extra strain on silver supplies
that is not felt as prominently with gold. Meaning, the ability of
silver to outperform gold in terms of demand and investment potential is
very high.

Dollar On Its Last Leg

The private Federal Reserve has been injecting fiat into our
financial system for quite some time. The acceleration in 2008 heralded
a new stage, however, in the devaluation of the dollar. Contrary to
popular belief, the bailouts and quantitative easing implemented that
year never actually ended. The bailouts of Fannie Mae and Freddie Mac,
for instance, have continued non-stop every quarter since the mortgage
crisis unfolded. Without a full audit of the Fed’s accounts, there is
no way of telling how much money has been created out of thin air. We
do know that it is enough to drive foreign investors and central banks
out of the dollar and into gold and silver en masse:

The announcement of QE2 has compounded the precious metals issue (not
because the Fed is creating more fiat, they were already doing that
unhindered). No, it is because the Fed signaled to the world OPENLY
that they were about to deliberately devalue the Greenback, instead of
just doing it under the radar. They erased any delusions left in the
investment world had that they would try to protect the stability of our
currency. As a result, the dollar index has dropped like a rock into
the recesses of some distant Grand Canyon, while PM’s have spiked.

As gold climbs into the $1500 range, the effect on silver will be
evident. Gold will be less and less attainable by average people with
lower incomes, but these same people will still be exposed to dollar
devaluation, and the need for a hedge against inflation; enter silver.

I believe silver will become the single most important investment of
our age, filling the void in the wage gap gold leaves behind. As gold
shoots into the stratosphere, it will be silver that people turn to most
for smaller investment needs, which means much higher demand and much
greater returns for those who are smart enough to buy now. $27 an ounce
is incredibly affordable, especially when considering that the metal
has the potential to reach $75-$100 an ounce in the next two years (and
that is a conservative estimate).

There is little doubt that the dollar plunge will continue to drive
people towards PM’s. While Ben Bernanke and Timothy Geithner have both
made claims pre-G20 that QE2 is not a move to devalue, the rest of the
world is unconvinced. Reuters recently called the meeting in Seoul,
Korea “G19 plus 1”, as foreign nations become infuriated with the
Federal Reserve’s actions:

Even Alan Greenspan has come out in opposition to QE2, saying it is a dangerous act of devaluation:

Now, why is Greenspan of all people suddenly coming out against
blasting the financial system with fiat? It’s hard to say. We have
written here often at Neithercorp about the deliberate destabilization
of the American economy in order to remove the dollar as the world
reserve currency and replace it with the IMF’s Special Drawing Rights
(the SDR). We have also written about the possibility that the IMF
will attempt to insinuate itself into the U.S. system as a “savior”,
implementing supranational control over our fiscal infrastructure, just
as it is trying to do in Ireland today:

It is perhaps possible that the Fed itself (the institution, not the
people who run it) may one day be offered up to Americans as a
sacrificial proxy to be torn down as the lone culprit of global
collapse, only to then be replaced with the IMF (which is worse, because
they don’t even live in this country). In any case, the dollar is
going for a ride into the backwaters of historical infamy, and it will
take us all with it if we do not protect ourselves from its demise.
Gold, and most especially silver, give us the power to do this.

The Return Of Real Money

While many people in the Liberty Movement are preparing diligently
for the inevitable dollar plunge, some have still not delved into the
world of PM’s, either because they are afraid it will be too
complicated, or because they feel it is unnecessary. Obviously,
survival goods are absolutely imperative, along with a solid plan for
keeping one’s self and his family safe. However, the need for an
alternative economic outlet to take the place of the failing dollar
should not be overlooked, even by the average prepper. A system of
barter is a tremendous starting point for such an alternative, but
eventually, expanded trade also requires some form of currency.
Preferably, one based on a tangible commodity that can’t be recreated to
infinity. Precious metals have fulfilled this role for thousands of
years, outliving every fiat currency ever printed. Of these metals,
silver was always the one most commonly used.

Beans and bullets aside, Americans need a way to protect their
savings from what is coming, as well as a way to support a replacement
market outside of elitist control. There is a reason why central banks
across the globe are stocking up on PM’s; because they know full well
that the dollar’s days are numbered, and they plan to capitalize on its
death. If the banks are allowed to dominate the supply of PM’s, simply
because only a few people had the good sense to stock them while they
were readily available, then our options for a free economy grow that
much slimmer.

There will always be dips, corrections, and fluctuations in metals,
and this should not deter us psychologically from their ultimate
benefits. Every citizen of this country can and should purchase at least
some insurance against hyperinflation and monetary catastrophe, and the
most affordable insurance with the greatest potential today is physical
silver, bar none.