Stir It Up

[webmaster]

Subject:Stir It Up
By: Ted Butler

Overview: A few comments before I print a discussion I had with my friend Israel Friedman some weeks back. Once again, the bullish COT set up was accurate in predicting the impressive recent $70 gold rally. Less impressive has been the rally in silver, which appears to being dragged upward by gold. If one were to analyze strictly on short-term price behavior, the price action in silver could not be considered constructive. Then again, short-term price behavior is not the way to properly analyze a market.

Link: http://news.silverseek.com/TedButler/1189558274.php

[peri1224]

That silver should have a price several multiples of today is clear. The question is multiples of what? $50 was due to the Hunt speculation and had nothing to do with the regular supply and demand plateau at the time. So lets put that level at $5/oz., or ten times less that Izzy assumes.
When looking at rarity, we can't really say that silver is rarer than gold, since 650 M ozs. come out of the ground per year, while gold only 80 M.
When silver becomes very expensive, substitution will be automatic and demand reduced, making the bigger part of the yearly mining output available for investment, say 450 M ozs, leaving a reduced/substituted 200 M ozs. for consumption.
Whatever that final ratio will be, mined silver will always be several times that of gold, so it's reasonable to assume that silver's price should still be a few times less than gold. Maybe a ratio in the area of 8 would be reasonable.

If world trade were to revert to 100% gold/silver standard because people don't trust fiat paper anymore, the entire world GDP of US$50T at today's prices, could be conducted with a gold price of $15,000/oz., assuming most of the 3.2 B ozs. above ground could be mobilized for the purpose.
Assuming 1 B ozs. of silver were available for the same purpose, silver would initially have a value close to gold and then slowly and naturally sink to the ratio of yearly mining between the two metals. With gold at $15,000/oz., that would put silver in the $2,000 range.
Assuming further that today's ridiculous, inflated prices of everything were to be adjusted (for easy comparison's sake, say 10% of today) that would leave a world GDP of $5 T, gold at 1500/oz., and silver at $200.
Just a few wild thoughts that may seem outlandish, but actually doable if there was a true will to establish honest money, which is doubtful. Where would that leave our money cartel gangsters, their cheating, their wars and their world shaping? They would actually have to look for honest work and compete on a level playing field with others, like nature intended. That would be something new.
Regards, Peter
peri1224@yahoo.com