From a fellow Cafe member:
Here are some additional thoughts, by J. Kent Willis, strengthening my earlier comments, that eventually the government will seize Silver.
".... Playing devil's advocate, if we were truly going to run out of it in less than 30 years, and it was truly indispensable, you can imagine the outcry from the silver users and price managers about the rising price. They exist to guarantee a steady, cheap supply for the military-industry complex that produces finished products sold at high, whatever-the-market-will-bear prices. Can you imagine the behind the scenes arm-twisting and public propaganda spewed forth that "evil hoarders" are responsible for the shortage and they don't want to surrender what little is left for the "good" of the larger population?
Silver hoarders are a vanishingly small minority; as such, it is easy to vilify them in the eyes of the masses and blame them, however unfairly, for any even tangentially associated economic problems. This is the oldest trick in the book used by governments to effectively confiscate private property when it suits their objectives. They won't blowtorch Grandma's forks and spoons, but those nice little rounds and bars with no "sentimental" or "artistic" value will be the first into the crucible.
Silver is still listed as a strategic material in every US Government database. It is therefore critical, by simple extension, to national security. This was an inevitable conclusion long before Patriot Act I or II was even conceived. This is likely the trump card if (when) price capping through unlimited short selling proves ineffective. Since silver is so very useful in security, aerospace, defense and industrial applications to the United States, it is therefore, by the same analysis, strategically important to any nation whose interests are inimical to those of the United States. With such a premise firmly established, the US government can effectively argue, at the urging of the silver managers, that it is important to prevent our enemies from acquiring it in order to limit its use in enemy or "terrorist" applications. The US can't control the world "free market" in silver outside her territories, but she can surely at least attempt to control the purchase, sale, distribution, trading and "hoarding" of it by very, very few of her voting citizens. As they might say for all things that threaten the power or privilege of governments: "outlaw silver, and only outlaws will have silver".
Of course many of the same arguments can be made for gold confiscation, but the national security issue in a paper based fiat economy is more dubious. Not impossible, just a more ridiculous stretch of logic. Everyone knows that most of the gold ever discovered is still above ground, looking as fresh as the day it was refined, while silver is largely "consumed" through use. However, the main reason that silver speculators trumpet her virtues as a superior investment is a double-edged sword; her absolute criticality and impending "disappearance" almost guarantee adverse government action. Personally, I tend to view silver and gold bullion both as insurance and not an investment.
They may turn out to be superior vehicles for growing wealth. If they hold their value in a world awash in worthless fiat paper, that is enough for me. If I die, having never needed to convert precious metal back into fiat paper, I can pass it on to my children for the same "just in case" purpose. They will have it if they need it. Any net capital appreciation that multiplies effective purchasing power when the item is sold and "converted" back into the currency of the realm to purchase either necessities or luxuries of this world is icing on the cake.
It is without debate that silver can go from $7 dollars an ounce more easily or quickly than gold can catapult from $450 to $900 dollars per ounce, hence the reason for the investor leverage in terms of percentage price rise. This necessarily implies much greater volatility in silver which will make it more difficult to trade. I consider silver much more risky and therefore more speculative than gold. I do like it. I have traded it also since the late 70's. It scares me much more than gold. My approach is to take profit more regularly with price advances and sell on strength. I don't care if the price rise is fundamental or speculative frenzy driven; an exit point is an exit point, even if the cycle for capital deployment is repeated again and again.
I do very much like the prospects for silver because of all the uncertainty about continued cartel success at price suppression, coupled with her unknown but likely rapidly dwindling reserves. All of these things together guarantee a more volatile ride with silver and it will NOT be easy to play with it. So, like gold, just purchase coins or bullion and hold on for the ride. Get out from time to time and take money off the table. Keep the demons of greed fully leashed and heeled. Silver and gold have disappointed investors seeking quick home runs for millennia. They crucified legions in 1979-1981. However, over those same millennia, those seeking insurance and capital preservation have never been disappointed. Regardless of myriad adverse government actions over the course of history, the fact that precious metals are superior to every other item known to man as a store of value is mute testimony to their supremacy. Government action against them is PROOF of their superiority. Governments never try to stamp out or confiscate that which is worthless. Gold was, is, and shall be "King". Silver will be esteemed when all is said and done as "Queen" or "Prince".
With all of the manipulation past and present, silver even seems sometimes like "Court Jester". Good heavens, where in the world does that put paper currency? Trust God For Everything. Trust Governments For Nothing. Trust Gold Somewhere In Between."
J. Kent Willis
email: jkentw2@aol.com
January 19, 2005
AGAPI Financial