Category: Complacency

“I am altering the deal. Pray I don’t alter it any further.” – The Empire Strikes Back

Am I the only one still trying to forget Game of Thrones?

Today, we’re diving into silver like Scrooge McDuck® into his money vault, mainly because I think it tells a much deeper story about wealth and reality.  Silver prices have doubled since April.  More than that, really.  But who’s counting?

What’s causing this?

First, the dollar is worth less. Not worthless, though I think anyone checking in from the time the Fed® started back in 1913 would disagree.  No, that delightful dumpster fire comes later, probably around the time Tim Walz starts quoting Marx in his next speech.

But worth less?  Absolutely.  Inflation is like a bottle of Everclear® showing up at a high school kegger.  You know it shouldn’t be there, but everyone is enjoying the party so much that no one wants to pour out the booze.  And, no one has poured out the booze.  People just keep showing up with more and more booze.  And by booze, I mean printing money.

Everclear© eventually turns brains into goo, and the Fed® is turning our money into an unsightly goo.  That’s okay, because who needs actual value when you can just ctrl+p your way to prosperity?

Silver’s price jump isn’t because silver suddenly got sexier; it’s because greenbacks are now less than a dime a dozen.  Okay, not a dime a dozen, but a silver dime is from 1960 is worth $7.87 at $110 an ounce silver.

I have a dime in one hand and a nickel in the other.  What am I?  Broke.

I know, I know, there is nothing new here.  Rome.  Weimar Germany.  Zimbabwe.  Venezuela.  History’s a harsh teacher, and not one of the hot ones that just graduated from college that was a hot blonde with long hair that drove a Trans-Am® while I hummed Hot For Teacher in the back row of the classroom in 11^th grade English.

Sorry, that was oddly specific.

Second, a driver of this rise in silver prices is A.I.  A.I. is in everything now, including French’s® Classic Yellow Mustard™, at least according to the label.  But silver is in computer chips, solar panel, and chemical catalysts.  Industry actually consumes the stuff at a rate of 680 million ounces per year.  Yes, that’s a lot, being a bit more than an Ohio-class ballistic missile submarine or the weight of cash exported by Somalians from Minnesota each week.

Everything’s fine, though, right?  We’ve been doing this forever.

Not so fast, Pat Sajak.  The dragon has entered the chat.  No, not George R.R. Martin.  He’s the walrus.  By dragon, I mean:

China.

Dragons don’t explode, but a dino might.

They’re the primary refiner of silver according to some sources, though I’ve been unable to back that up with a source I really trust, so take that as a “trust me, bro” type of number.  Recently, though, China looked around and they do control about 15% of silver production and third of the industrial supply goes through China.

On January 1, China changed its rules.  It will only license exports to specific companies for specific uses.  No more “hey, buddy, can I get a pallet of silver for my Etsy® jewelry shop?”

Nope.

Remember that old Lenin quote where he said that the capitalists would sell the commies the rope to hang the capitalists?

We’re living it.

We outsourced everything except Learing Centers to China because China did it cheaper:  rare earth mining and refining, silver mining, manufacturing, bad fashion choices.  You name it.

“Why get all sweaty and dirty when we can push paper instead?” was the attitude.  So, we traded factories for finance, blue collars for spreadsheets.  Now, the know-how’s gone east, poof, like a magician’s rabbit.

Entire industries vanished from the U.S.

Health is wealth.  Don’t believe me?  Check out the prices of fresh kidneys!  (meme as found)

This is the bill coming due for all that cheap Walmart® crap from China.  We’re paying premium now, and it won’t just be in dollars it will be in our international standing and living standard.

Third:  it’s the paper. Silver’s price used to be all about paper:  silver futures, silver options, the whole Wall Street silver casino.  Sweaty guys in New York could bet on silver in Hong Kong without ever touching it.  It’d never come within 5,000 miles of their Manhattan condo.

It was like playing poker at a casino where people kept trading IOUs.  Nobody cashed out their IOUs for the real chips.  The market was dominated by speculators, hedge funds, a particular big bank, and day traders who treated it like a video game.

This was profits without product.  But oh, how the tables have turned.

Now, the game’s gone real-world, and folks are demanding delivery.  Warehouses are being sacked like a Domino’s Pizza® after Weedfest© in Colorado.  Empty shelves, frantic calls, bummed out hippies, the works.

(as found)

Take Samsung©, for instance.  Reports say they hopped on a plane, jetted to Mexico, and straight-up bought out the silver supply from at least two mines for the next few years.  No matter what it costs, they’ll buy it all, plus front the company the cash to get capacity up to snuff.  That’s not hyperbole; that’s desperation with a corporate jet.

Why?  Because silver’s a tiny part of their widgets:  phones, TVs, fridges.  But it’s an essential part of their widgets.  The recipe calls for it, like flour in a cake.  Skip it, and the chip in the phone won’t work.  Redesigning?  Yeah, maybe.  That takes time, money, and R&D.  The engineers would be pulling all-nighters, and all of a sudden the coffee market is impacted.

It’s far easier to pay $100 or even $200 an ounce.  Even at $200, it’s just a buck or two per gadget.  Compare that to shutting down production lines, which would be a corporate catastrophe.  They’re going to buy the silver.  Sure, there’s a breakeven, and it will vary by use:  I saw one as low as $134.  Less silver jewelry will be made.  Werewolves will go unhunted.

Finally, the biggest risk for most people reading this is that it shines a spotlight on the made-up money system for what it is:  made-up promises, ink on a ledger or magnetic bits on a hard drive.  Silver, gold, copper, lead, corn, PEZ®, that’s real.  It’s tangible, you-can-hold-it-in-your-grubby-paws stuff and eat it our swim in it if you’re Scrooge McDuck©.  Fiat currency?  It’s money conjured out of a belief system, a collective hallucination we’ve all bought into since LBJ printed bucks for Vietnam and Nixon got called on our “gold-backed” bluff by the French.

Hmmm, which one? (as found)

The dollar has been floating on faith ever since, like Wile E. Coyote™ before he looks down. But now, with silver spiking, the fall is in sight.  People want assets, not abstractions.  It’s the ultimate vote of no confidence in the dollar downsizing derby.

Is silver in a bubble?

Beats me.  Maybe.

Maybe not.

Is the dollar in an anti-bubble and collapsing first in slow motion and then all at once?

Beats me.  Maybe.

Maybe not.

Silver could crash tomorrow or double by next month.  But my gut says $20 or even $50 silver is in the rear-view mirror, except for after a deflationary collapse temporarily crushes it.  I think it has vanished like cops without tattoo sleeves or the McDonald’s® Dollar Menu™ where something on the menu actually cost a dollar.

It’s just gone.

I’m sure it’ll be fine.

But, hey, what are you worried about?  Chuck just showed up with more Everclear®!  Party on!

Disclaimer:  I write funny things, and you should know that by now so this isn’t investment advice or fashion advice or love-life advice.  Think for yourself and do your own research and stop copying me!  Teacher, he’s copying me!
Disclosure:  I do have a position in silver that I’ve had forever, and bought (literally) about a hundred and thirty bucks more today in my IRA, which might have been stupid, but, whatever.  If you think this article will move the international silver price, you’re stoned.