There are two crucial factors why silver will increase more in value than gold during the next financial meltdown. These factors are not well known by many precious metals analysts because they focus on antiquated information and knowledge. While several individuals in the precious metals community forecast a much higher Gold-Silver ratio during the next financial crash, I see quite the opposite taking place.
For example, Lynette Zang, at ITM Trading, has suggested in recent videos, that the gold to silver ratio will increase significantly during the upcoming currency reset. She believes this based on the idea that gold is more the primary monetary metal and has published data showing the surging gold-silver ratio that took place during the end of the Weimar Germany hyperinflation.
Yes, it is true that the gold-silver ratio shot up to 160/1 during the last month of the Weimar hyperinflation, but there was a specific reason why that I will explain shortly. However, the main disagreement that I have with most precious metals analysts on the future value of gold and silver is based on their failure to incorporate “Energy” into their research, work, and forecasts.
While Lynette Zang educates her followers on why it is important to own gold and silver, she does not understand the dire energy predicament we are facing. Thus, she is missing the most critical factor in her analysis. Even the diehard precious metals bull, Peter Schiff, does not understand the negative consequences of the Falling EROI (Energy Returned On Investment) and the thermodynamics of oil depletion. Schiff believes that if the debt was wiped clean and the banks were liquidated, then we could start a new economic boom based on sound money.
However, the collapse of debt and the banking system would destroy our modern economy… for good. There is no way we could survive a cleansing of the debt-based monetary system. Without the debt, most assets have no value.
In Zang’s recent interview CLARIFICATION: Silver/Gold Ratio (Function Vs Fiat), she posted this table of the changing gold-silver ratio during the Weimar Germany hyperinflation:
From 1919 to most of 1923, the gold-silver ratio remained between 14-16/1 as the Reichsmark was printed into oblivion. We can see just how much the value of gold and silver, in Reichsmarks, increased. However, on October 23rd, 1923, the gold-silver ratio shot up to 160/1 and remained there for an entire month. So, why did this occur?
According to the article, Gold and Silver: Lessons From Weimar Germany, the following chronology of events had a big impact on the gold-silver ratio:
October 6, 1923 — Dr. Gustav Stresemann (People’s) forms 2nd cabinet.
October 20, 1923 — General Alfred Mueller marches on Saxony to prevent a communist takeover.
Also, General Otto von Lossow in Bavaria is relieved of command by Berlin; he refuses.
October 23, 1923 — Communist takeover of Hamburg.
October 25, 1923 — Hamburg uprising suppressed.
November 8, 1923 — Beer Hall Putsch.
November 9, 1923 — Beer Hall Putsch quelled.
November 12, 1923 — Dr. Hjalmar Horace Greeley Schacht was named “Reichswaehrungskommissar.”
November 15, 1923 — Rentenmark issued; pegged to the Gold Standard; Rentenmark 4.2 = 1 US dollar.
There is no coincidence that the value of gold to silver surged during the Communist takeover of Hamburg on Oct 23, 1923. Germans who were fearful of the 1917 Bolshevik Revolution taking place all over again, were selling their silver for gold so they could easily transport it out of the major cities. However, after the “Communist threat” was finally resolved, the gold-silver ratio fell back to its normal level.
Thus, those Germans who traded their one ounce of gold for 160 ounces of silver during this tumultuous time enjoyed a tremendous gain when the value of gold and silver normalized.
Regardless, the reason I see the value of silver rising more than gold in the future:
- Has to do with the collapse in the value of most assets as U.S. and global oil production plummets.
- The above-ground investment inventories and supplies of gold and silver are about the same.
As I have mentioned in many articles and videos, Stocks, Bonds, and Real Estate derive their value from the burning of “more” energy in the future. It is essential that you understand the use of “More” in the previous sentence.
When global oil production declines, so will growth and GDP. Without growth, the highly leverage debt-based financial and economic system will disintegrate. Thus, as investors move into precious metals to protect wealth, as Stocks, Bonds, and Real Estate were illusions of wealth, the available amount of silver to gold is nearly an ONE to ONE ratio:
The data in this chart was from last year, but the physical ratios haven’t changed all that much. As we can see, there was 2.25 billion oz of investment gold above-ground versus 2.59 billion ounces of investment silver. When regular investors begin to rotate out of increasingly worthless Stocks, Bonds and Real Estate and into precious metals, there just isn’t that much more silver than gold for investors to acquire.
I believe the KEY FACTOR missed by most precious metals analysts is that failure to understand that during the collapse of global oil production, most business and real estate will become increasingly dysfunctional. Thus, it won’t be prudent to take one’s higher valued gold and silver to purchase depressed residential and commercial real estate during the market meltdown, because the Suburban Economy will continue to contract over the next several decades.
Lastly, I don’t include Platinum or Palladium in the group of precious metals to own in the future. While demand for these industrial metals has been quite robust, once the global economy collapses, so will the production of automobiles… and with it, the high demand for platinum and palladium. We need to remember that the future will not resemble anything like it is today. I have a general idea of how the future will unfold, but it’s difficult to forecast the speed and extent of the collapse.
So, to stick with the tried and true guideline… KISS – Keep It Simple Stupid and focus on gold and silver as they have been money and stores of wealth for thousands of years.
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Thank you Steve
Steve,
From my readings on world oil production it looks we are probably until about 2020-2021 when oil really starts to decline. A few well respected people in the oil business do not think this will occur until about 2027. I would be interested in your thoughts about global oil production decline
Doc Rich,
Yes, I have seen some of these forecasts of the ultimate peak of CONVENTIONAL & UNCONVENTIONAL by 2020-2021. This could be true. However, there is a wild card called the HIGHLY LEVERAGED STOCK MARKET. If the stock market decides to crash at the end of this year and moves into high gear next year, we could see a peak a few years sooner.
If Central Banks are able to prop up the markets for a few more years, I still don’t see the U.S. Shale Oil Industry surviving past 2-3 years before it starts to unravel. I believe the market will be quite surprised just how fast U.S. oil production will decline.
As I stated before, I see U.S. oil production down by 50-75% by 2025.
steve
Using self destructing debt instrument ladders, we’ve picked all the high-hanging frac-fruit; a 50-75% drop in US oil production by 2025 seems unavoidable.
Although I hate to admit it, I get a gnawing suspicion about the problems with the portability of silver as you have referenced in the “flight to light (precious metals)” during the Germany upheaval preceding WWII.
My wife and daughter got a back-breaking lesson in the weight of ammunition and guns in a recent move. Same for water, and I suspect silver. They are heavy, and without a gas-powered vehicle to transport, they may even have to be abandoned if a sudden relocation is required.
Although I like Lynette Zang and think she is truly passionate about what she has to “sell,” and makes some valid points, I don’t think she quite “gets it.” Her conversion of her backyard pool in the desert of Arizona (Phoenix?) to a “bog” oasis with fish/vegetable and aquaponics makes good sense in a stable society situation, but it is not realistic for the long term and is a misdirection of resources in a societal upheval scenario (looters). She might be better off just storing freeze-dried food, several NATO 20 Liter military grade containers to store fuel and a huge diesel F-250 to haul it and her trailer, but I don’t want to get into “prepping” because there are so many whackos on this subject, not to mention all the variables that suddenly crop up out of the blue to foil the best laid “plans.”
I am of the opinion that we have up to three more years of “more of the same” whereby the economy steadily grinds down, but if the trucks stop running because of fuel shortages, distribution, or credit to fuel purchases/delivery then all bets are off.
As far as I am concerned, as long as people aren’t starving, they are quite willing to accept being screwed by the government.
And Amazon is living in a fool’s paradise if they think that they will be able to pay for an army of gas-guzzling delivery trucks. Right now, since they only represent 10-12% of retail sales, get some quid pro quo subsidy from the USPS and the cloud services, this is not an immediate problem. They continue to suck up the pension funds’capital, just like the shale oil drillers. I wonder if Amazon actually realizes this eventuality and has made a calculated decision that when enough brick and mortar stores have been wiped out, Amazon will have established enough giant distribution centers whereby their truck delivery system will no longer be needed and the burden will be upon the people to make their way to Amazon’s distribution centers-if they want to eat. Welcome to the new Amazonized FEMA camps! A treacherous double-cross.
Amazon is trying to NOT pay for a fleet of trucks by enlisting fools to pay Amazon for a franchise delivery business where they go into debt to buy a truck for tiny and shrinking commissions. I PITY THE FOOLS!
http://market-ticker.org/akcs-www?post=233711
You know it would have been nice if you had helped your wife and daughter carry the guns and ammo.
Steve,
Not sure what you mean by this “Without the debt, most assets have no value.”
Not arguing with you. Just want to make sure I understand what you mean by that. BTW I hold more silver than gold.
Lenard,
The market is based on debt payments. For example, most homes have a 20-30 year mortgage. The market value of the average home is based upon a mortgage or debt. While it is true that a percentage of homes are owned free and clear, a larger percentage is financed through a mortgage. So, by extending payments, and providing low-interest rates, more home is made affordable to the market.
Without this massive mortgage debt, the market price of a home would be substantially lower. Thus, the debt is propping up the asset values.
Then when the oil supply finally peaks and declines significantly, debts will implode… taking down the value of most assets.
We also must remember, the value of most STOCKS & BONDS are based on the economic principle of NET PRESENT VALUE. The market bases their current price on future earnings. When energy supply falls, earnings will fall and with it the value of most STOCKS & BONDS.
Rinse and Repeat.
steve
Steve
Which explains why Robert Kiyosaki is actually selling some of his real estate for 3X what it’s worth. He says that now is a really good time for getting rid of anything he doesn’t want to keep. And the one thing he’s not getting rid of is his silver and his gold. Thank you for taking the time to respond to my question.
I heard same story few years ago about gold and silver during Weimer Germany , it’s must be reason for that unusual ratio.
The Germans who kept their silver and stayed, got to eat.
Steve, what was the industrial demand for silver in the 1920’s compared to the use today? I assume that today’s use is much greater therefore values cannot be compared but used as a reference for hyperinflation. Today’s silver demand is greater with depleting silver concentrations and supplies and increasing energy costs so the value will surpass gold’s value once true free market physical values occur. Just as during the bronze age when copper value was greater than gold value. Also, when alternative energy use is necessary and solar panel usage greatly increases then silver demand will also increase.
Justin Moore,
Silver Industrial demand prior to WW2 wasn’t all that much. It surged after WW2 and especially during the beginning of 1950’s U.S. suburban sprawl.
Justin, I don’t value silver based on industrial consumption. Rather, I forecast much higher silver prices because there won’t be many assets worth owning during the coming Oil Supply Collapse Depression.
steve
Thanks, Steve!
Watch out for Autumn this year. Dramatic changes are on the way!!!
That’s pretty cryptic. Presumably,you have something of substance to say. So, I’ll bite: what specifically do you have in mind?
The start of public anger like you have never seen before. They first killed my horse, then my wife. But this is nothing in comparison what the average man on the street will suffer!!!
Looks like the gold/silver ratio stayed about the same for roughly 4 years then spiked up for 2 months.
I’d call that a statistical outlier and throw the data out when developing an average or mean value.
SkeptiSchism,
I agree. Again, the reason the Gold-Silver ratio shot up to 160/1 for the final month of the Weimar Republic hyperinflation was due to the Communist threat and fear by Germans to leave cities and sell silver for gold… which was easier to transport. But, this only lasted for one month.
steve
I appreciate these articles and I’ll continue to be a supporter. What I would also like to know more of is just what you believe the future will likely look like. So, while you say, ” I have a general idea of how the future will unfold, but …” please share that with us. It would add a distinct value to all your articles were we to have a glimpse at just what all these changes and market swings will lead to. Will markets fail? Will society limp along or collapse? Is city living viable or will there be a mass migration to rural areas? Could such a migration be sustainable?
MikeK,
While it is impossible to forecast the details on how the future will unfold, it seems to me that the SPEED at which the financial system and economy unravel will come as a big surprise. Now, the speed of the future collapse could be quite similar to how the Financial system nearly disintegrated in 2008 when Bear Stearns and Lehman Brothers went under.
However, this time, the leverage is in the Volatility and Implied Volatility financial instruments and ETFs. There is over $2 trillion invested in Volatility and Implied Volatility instruments and another $5 trillion in Global ETF’s. When the markets finally crack, there will be no BID for most ETFs.
Furthermore, the biggest increase in debt since 2008 has been in the Corporate Sector.
I believe we are going to see a replay of 2007-2008 meltdown, but much worse. As years go by, it will turn into a depression that doesn’t end. This will be due to a low oil price that will destroy a lot of supply.
I doubt we will experience a MAD MAX scenario, but it won’t be like anything Americans have experienced before.
steve
This is where the law of Supply & Demand comes into the fore.
The “Supply” of food by farmers to satisfy the “Demand” by a hungry populace.
Without an adequate supply of oil, the farmer will fail to grow enough food.
Those extra mouths that abundant oil fed will disappear by starvation.
This will take a relatively short time, say six months at the outside for the majority of deaths to occur. After that it will be a long drawn out affair of population shrinkage, back to a level that the earths bio-mass can sustain. With the remainder of humanity fighting over who has ultimate control.
The future that most envision for mankind, is NOT what they think it will be.
I tend to agree. I’ve been around long enough to know what my fellow man is capable of…and that’s in the good times, wait till there’s no food. They will crush your skull for a loaf of bread…
OutLookingIn, enjoy your comments. And agree that Demand does not control Supply. I think we’re going to see that the much maligned Say’s Law drives a stake through the Keynesian heart.
Steve,
why do you keep saying that you DOUBT that we will experience a mad max scenario? Your reasoning on falling EROI is correct and we will experience a seneca cliff moment. Nowadays people are soooooo reliant on cheap oil and economies are so interconnected that everyone will be involved in this. A big chunk of people in urban-metro areas are going to leave the place in a hungry/desperate move and will do anything to feed themselves and family. These hundreds of millions of people don’t have any resource or know how on how to seek for food and grow it, also consider the chain reaction of consequences. U cannot compare this next crisis to the 1929 crisis cuz people back then were basically a lot more connected with the rural reality … imo it is gonna be a mad max scenario…
Regarding the MadMax scenario, maybe most of us try to distance ourselves from the thought to increase our own credibility, not-to-mention reduce the anguish that particular vision inflicts. But to some degree, we may as well embrace it – not because it’s possible, and not because it’s probable – but because it exists in some dark corners already. So, I tend to agree, it’s not if but how much and where.
Since WW2 living in rural sustainability and the knowledge has mostly died and been forgotten. I remember some family saying they didn’t know exactly when the depression hit because they were already poor, scraping out a living on the land, but surviving.
Brant Lee exactly. Most of our ancestors were poor or certainly well connected with nature. But now if u calculate how many people live in urban areas the numbers are staggering…The danger is not much the % in urban areas(I reckon around 30% worldwide) but what these people are going to do to people growing crops and living off of land. Pandemonium!
Steve, your analysis that silver will increase much higher relative to gold parrots the chorus of almost all alt media figures (save lynette).
You’re ignorning government manipulationintervention. If it comes down to it, mines would be nationalized and production subsidized. Do you really think that people would pay $10,000 for an iPhone or other gadget? The public would riot in the streets if they can’t get affordable iPhones (shows the sad state of affairs were in today).
Since gold is not used as much as silver in industry, it could be allowed by government to go much higher than silver and o I’m preparing for a higher g/s ratio, in my opinion.
James,
We have to think about the coming collapse similar to what took place during the collapse of Ancient Rome. When things fall apart, people will not be concerned with I-phones. Rather, it will be acquiring essentials. The next market meltdown will be much worse than 2008.
You must also understand that the Falling EROI destroys the largest institutions the most. Thus, Central Banks and large governments will become increasingly powerless and will not function as oil production collapses. The United States will disintegrate into smaller regions over the next several decades.
A currency Reset suggested by Zang and even Jim Willie does not take into account our dire energy predicament. Basically, backing debt or the U.S. Dollar with gold won’t matter when oil production collapses. It will be a much different future than most realize.
steve
And this won’t be just a US problem but a global one. As the saying goes, “and this time will be different” because as you citied the collapse of Rome, sure civilizations have all collapsed in the past. The difference this time is that we are all interconnected. Just look at the effects a small nation such as Greece had on the markets when it threatened to default on it’s EU loans. Back then a civilization could collapse and the rest would continue. Today the entire planet is on the Titanic because of energy, technology and globalization of markets and finance.
Rodster,
Agreed. It will be global. However, some countries and regions will likely survive a bit longer before collapse takes place. For example, Russia still exports a great deal more oil than it uses domestically. I see Russia lasting longer than many Western and Eastern Countries who depend on oil imports.
steve
That’s quite possible that some could hold longer than others. HOWEVER, my favorite quote is from none other than Hank Paulson who told G.W. Bush during the let’s call it for what it really was “a global collapse” if the TBTF banks were not bailed out the contagion would have gone global, the world’s economy would have come to a halt and the US would be under Martial Law with military tanks roaming the streets.
If the global economy collapses I can’t see a whole lot of trade and selling going on between nations. Hopefully i’m wrong.
Thanks Steve, for another important essay.
I’d say JW does accept the dire energy situation; he sources your work regularly and for quite some time. It’s just that the “reset” is so hard to envisage. The production of digital dollars and other debt instruments hit ludicrous speed a decade ago. Surreal as it is, we’re in the Twilight (in the Desert) Zone. It’s like the FRNs that lubricate the global engine are rapidly losing viscosity – at some point it has to cease.
Interesting observation by Lynette Zang. I wasn’t aware of that Weimar spike in the Au/Ag ratio. Gold was superior for transmitting wealth across space and silver was superior for transmitting wealth across time. I’ve read that relationship before, maybe Dr. Fekete. Worth keeping in mind as yet another wild card for volatility. Like you I’m expecting ratios near historical means with excursions toward 1:1 entirely probable. I think it was also Fekete suggesting that it wasn’t gold and silver that pulled us out of the Dark Ages; it was markets.
James, your missing the ‘price inelasticity’ of the necessary but minuscule amounts of silver in an iPhone or other product. If the amount of silver in an iPhone cost 7 cents, it doesn’t matter if silver rises by 10 or 100 times; because adding 70 cents or $7 doesn’t change the retail price enough to deter the purchase. Lynette is doing good work, a public service, but I will disagree with her noted outlier as anything more than just that, an outlier.
Wonder if a similar phenomenon has occurred in Venezuela and what the US dollar cost equivalent for the local price consumables would be? Did people trying to escape also convert assets to gold?
Thanks for another great analysis.
Steve W
https://www.energycentral.com/c/gr/perils-cryptocurrency-mining-utilities?utm_medium=eNL&utm_campaign=grid_net&utm_content=493855&utm_source=2018_07_03
The Perils Of Cryptocurrency Mining For Utilities
Last year Canada’s Quebec province announced it was open for business for the crypto mining community. The thinking for Hydro Quebec, the region’s utility, was that it could use surplus capacity as a nice little side business for cryptominers. By May, it had stopped approving new crypto mining projects.
What went wrong?
. . .the demand for crypto mining proved too much for Hydro Quebec. According to the utility, demand for crypto-licenses has exceeded its utility’s “short- and medium-term capacity”. “A ministerial order temporarily halts Hydro Quebec’s processing of requests from this category of consumers so that the company can continue to fulfill its obligations to supply electricity to all of Quebec,” the company stated in a blog post. Currently Hydro Quebec supplies about 20 MW to crypto-mining customers. Based on the volume of applications received by the utility, it estimated additional power requirements of 10,000 MW.
Growth of crypto mining within Quebec has also been hampered by the state’s Premier Philippe Couillard’s comments. “If you want to come settle here, plug in your servers and do bitcoin mining, we’re not really interested. There needs to be added value for our society; just having servers to do transaction mining and acquire new bitcoins, I don’t see the added value,” he said.
I’m with Steve on thinking Silver will become much more valuable during the next crises. I also follow Lynette Zang. She puts out some very good information. She rightly points out that during the final several years of the Weimar Republic days which were during the Great Depression Silver was priced around $4 in todays Dollars. Not worth much reallly. However, there were other circumstances to consider.
1. Silver wasn’t used in electronics nor was it used in other areas of industry such as bombs, water filters, iPhones, cars, solar panels, batteries etc… So, most of the historically mined silver was available above ground.
2.The largest silver mine ever was the Commstock lode and it was in full production during the Weimar years.
3. A lot of silver was stolen from China during the preceding 50 years during the 2nd opium war.
My point is that history often rhymes but rarely repeats. 2018 is very different then post WW1 and the economics of the time. As an example during WW1 nations used horses to deploy artillery and men into combat. Now we use smart bombs and drones. At that time much of the world didn’t even have electricity or plumbing. It’s just not the same world, and our dependencies have also shifted just as dramatically. The modern world is dependent on silver and silver has an EROI cost. It’s a depleting asset and above ground stocks of silver will one day reflect their true value. I don’t think that day is too far away.
It seeems like much of the world already lives relatively low energy lifestyles. I saw a show about rural Thailand and the ordinary people still live on farms. A bus comes around and there is a train every day. They won’t care when people in the USA have to give up their 5,000 square foot McMansions and three ton SUV’s. We in the USA are spoiled rotten and are energy gluttons.
“We need to remember that the future will not resemble anything like it is today. I have a general idea of how the future will unfold, but it’s difficult to forecast the speed and extent of the collapse.”
Without nailing you down to a timeline or other specifics I would be interested in hearing your opinions on how the futre will unwind. You have a different take on the economy as it relates to eroi and I think a lot of your readers would be interedting in hearing your opinion on this. You an heavily preface it by saying that this is your best guess and you were asked for your opinion. The trolls will still troll as the music continues to play on the titanic.
Mexico’s New President Has The Energy Sector On Edge
https://www.zerohedge.com/news/2018-07-03/mexicos-new-president-has-energy-sector-edge
Mexico is very much part of the silver conversation. They provide 25% of the global silver mine supply. PEMEX oil production is declining while gasoline thefts and related violent crime are surging across Mexico. Its going to be interesting to see how silver production reacts to ever increasing energy related problems and a socialist regime with a growing appetite for funding. The just in time global supply chain is only as strong as its weakest link.
Great article Steve. I always love to hear about silver. Mike Maloney goes into a lot of detail in his book, but has never made a video about it. I’ve asked him to but no luck so far.
Silver is attractive to those that aren’t super rich because you can get a whole lot more for the same amount. After 2 years of amassing silver, I’ve decided to put a little into gold. What it takes to buy two ounces can get 150 ounces of silver. The ratio is insane, but I’m afraid of a scenario where silver is ignored in favor of the one everyone has on its mind. Which is why I like hearing about the numbers of available silver bullion, the higher amounts of paper silver manipulation going on… it just makes sense that silver will gian much more than gold proportionally.
Thanks for the hard work Steve.
Steve,
Further to your comment…
“Thus, it won’t be prudent to take one’s higher valued gold and silver to purchase depressed residential and commercial real estate during the market meltdown, because the Suburban Economy will continue to contract over the next several decades.”
What do you suggest then, is a good use for Gold and Silver in the next crisis if not to buy real estate?
Cheers, Mark
Real estate is too general. Steve specifically notes suburban and commercial real estate, which echos Kunstler. Many of these properties are unproductive (or, soon to be unproductive) yet viable in a cheap energy environment. Sign says bumps ahead. Productive rural real estate and strategic small city property may be worth owning. Use gold and silver as insurance.
Things will get much worst than you think. When you mix the decreasing EROEI with a similar decrease of every other species on this planet and the ever increasing (for a little longer) global human population the Mexican drug cartels will look like a bunch of cream puffs. Some groups have estimated that the ocean sea life has been reduced by 90%. A similar reduction in the human population will soon follow. On the positive side, the transplant list for those who survive will be really short.
Steve: The Keystone Pipeline starts late this year or 2019. The pipeline carries 590,000 barrels a day which is 29,000,000 gallons. They have a contract for 20 years to deliver 510,000 barrels a day. Are they fooling themselves? Will they spend $8 billion for nothing. I own EPD which only one pipeline distributor for the Permian basis. There are several. Are they building these pipelines because they are running out of oil. EPD makes a good profit. They do NGLs and export. I own quite a few of these MLPs. They pay 6 to 15% dividends. Are they all putting more money into a failed crude oil industry? And these are only a small percentage of the corporations involved in crude oil supply.
Joe Lindell,
You have no idea of what is taking place on the ground in the Shale Industry. I know several high-level people in the industry who know that it is a complete DISASTER. You can continue to believe the propaganda put out by Main Stream Media and the Investor Relations at the shale oil companies… but if you do… YOU ARE A COMPLETE FOOL.
Do me a favor. When the Shale Oil Industry collapses, please come back to the blog and let us know what you think.
steve
I will do that Steve but first tell me why they are building the Keystone pipeline? It will cost 9 billion. And you are saying it is all for naught?
Joe Lindell,
Yes, it will be for naught. While part of the oil supply will come from Canada, the Keystone XL pipeline will also acquire oil from the Bakken. Unfortunately, right when Phase IV of the Keystone pipeline is completed (2-3 years), Bakken oil production will already be in steep decline.
So, to answer your question I will answer it with another question. Why are the Chinese building massive cities to nowhere with virtually no one living in them?
For naught?
steve
Steve
It also provides jobs.
False hope can be a valuable tool, in order to help quell the masses.
And let’s not forget that China tears down it’s ghost cities when it can’t find any buyers. So it’s basically an expensive way of putting people to work digging a ditch and filling it.
Petedevine
Regarding your comments-8:39 am about Silver responding differently to collapse because
humans are so dependent on it now. One of the main thrusts of Steve’s message is that because of peak oil this Silver dependency will rapidly end as we are forced back into a greatly deindustrialized reality.
Think you have thrown this idea out before, and of course it is a common bulwark of most silver enthusiasts elsewhere, but i doubt Steve agrees with you. he supports silver for diff reasons. You are implying strongly you don’t agree with peak oil or that it is not the immediate future we must prepare for. If you don’t agree think you should say so and why so please do.
Hello Frank,
I believe there are varying degrees of energy collapses. For example Gail Trverberg claims the Great Depression was a collapse based on the depleting EROI of coal. In the case of our current EROI collapse I don’t think we will fall off a cliff, but rather follow the Hubbert curve down which is similar to the Hills Group’s analysis. Also various nations will collapse faster or slower depending on their access to hydro-carbons. Even though we will eventually get to a low energy world, I believe we will fail in stages. There will be lots of little failures like walking down a long flight of stairs.
https://en.wikipedia.org/wiki/Hubbert_peak_theory#Hubbert_curve
In my view the engines of civilization will slow and may even stop, but we will coast on momentum for a while. Tech manufacturers like Apple and others will attempt to manufacture their widgets. There won’t be a moment of realization, but rather a continued decline of quality and availability. Until one day Apple closes their doors. A slow drawn out death. However, like a patient in the E.R. they will labor to live. They will pay a lot for above ground stocks of whatever materials they need to survive. Just as we will need fiat currencies until they too fade. I don’t pretend to know the future. There are lots of variables on this very slippery road. However, I’ve shared my view on how I think this will most likely play out. It will be death by a thousand cuts and not by a single thrust.
I was on vacation enjoying my crypto wealth and missed the crypto is dead post…so….
FACT:
Last year BTC was $ 2500 NOW it’s $ 6,600
Last year Gold was $ 1,250 NOW it’s $ 1,250
Last year Silver was $ 16.00 NOW it’s $ 16.00
Last year the Dow was $ 14,500 NOW it’s $ 14,500
hmmmmmm
OBYW, I didn’t trade in one ounce of PM for crypto. ( still got em )
I sold my bow wow PM stocks for that…..
dale– from 1:56 pm. you’re cherry pickin. Many items use a lot more then Iphone, to the extent that 200 buck silver will really deepen crash. Then we won’t need it at all. Solar panels for example. Moderate size 300 watt uses almost 2 ounces so lets add $400 to price each panel. No sweat, right?
You’re right, I was cherry picking. But James’ example was an iPhone, so the target was deliberate on my part, it seemed appropriate. Still, you make a good point with solar panels. And you’re also saying, inadvertently perhaps, that solar panels, with silver property valued, may not be as cost effective as they currently appear. Liebig’s Barrel comes to mind.
As far as EROI effects on the future price of silver, Steve has this nailed; he has for years. It takes energy to mine silver. Once cheap energy is gone, and we’re on that precipice now, you have to revalue, like anything else, by replacement cost.
Very good. like the Leibigs barrel. Xcept the cheap energy is probably already gone, sure is for shale. it’s just being kept alive by ever increasing debt. My main problem with silver besides not having any money is just can’t see logistics of how to turn it into food in a semi rural area where people know you without getting shot. You’d really have to have a lot of metal to make a difference and aren’t going to be any coinshops or even fiat money to change it into so as to get more anonymity. I get the temptation though. Collapse is insurmountable for any modern human. stop spending on everything else, buy silver and crawl under a blanket. The vision of the other metal pumpers is easier to digest but i think Steve roughly right in saying they are missing the worm. so a gold standard won’t work. Too bad. Speculating about this future world we are supposed to spend pm in is off the table tho, because too much honesty there would discourage customers. All good tho. Better get back to celebrating holiday and beer. Thanks
Ooops meant Dow 24500 point is all those assets are equal from were where they were last year except BTC which is up 260 % but crypto is failing?
GLP you sound like a financial advisor I know. He pulls out a chart from March 2009 and says you could have made such and such if you invested in the market. But he won’t go back to 2000.
Measure tops, not bottoms.
I’m not “pulling a chart from 2009” but comparing recent data against last year. Surely relevant information. You don’t have to be a financial adviser to notice how many simply pile on a winning asset trying to find a fault when all other assets are struggling. Now why is that? So many metal only enthusiasts don’t want to see the superiority of crypto over fiat as an ally in the fight against centralized government, but instead see crypto as competition to the metals space. How short sighted. Imagine if gold had moved 260% in one year. The champagne corks would be popping, but if it’s bitcoin the only argument is, “so…it was up 1000% and now look at it, only up 260%” Actually quite humorous.
“So many metal only enthusiasts don’t want to see the superiority of crypto over fiat as an ally in the fight against centralized government”
I’ll bet well over 90% of crypto interested parties view it as a [hopeful] investment, unless they got in say a year ago, and bought things or cashed out by now, i.e. most don’t view it as a currency. Sovereign nations and central banks don’t like competing currencies to their fiat, and they CAN do something about it.
“but if it’s bitcoin the only argument is, “so…it was up 1000% and now look at it, only up 260%” Actually quite humorous.”
I think it is instructive to think about why it went up such a ridiculous amount, and why it came down so much, and what EXACTLY does one own with a cryptocurrency.
In Lynette Zang’s table it is shown that gold to silver ratio jumped to 159 on 23 October 1923. It does not mean that the cause of the jump was happened on that day (communist uprising in Hamburg). It might be caused by something happened two weeks, or two months before that day. If the jump of gold to silver ratio was caused by the communist uprising, then why the ratio did not go down after the uprising was succesfully suppressed two days later (25 October 1923) ????
This was the straw that broke the camel’s back, so to speak. The Weimar Republic was in crisis for years. Hyperinflation has been culminating in the fall of 1923 going into January 1924. Both militant communist groups and the Nazi party led by Hitler have been wreaking havoc all over the place.
So, yes, in a sense we can’t pinpoint the exact reason why the gold silver ratio went parabolic. But I believe that we can safely assume that there was enough crazy crap going on in Germany at the time that people could have anticipated that the heavens will fall any minute. And in a situation such as that it made sense to convert EVERYTHING not just silver into ounces of gold because of the portability issue.
Please, take a look at this older post published here that describes the hyperinflationary period after the collapse of the Austro-Hungarian Empire in great detail. It might give you a better idea of the craziness of the 1920s in Europe.
I just browsed your article. Nothing about Prussia (Deutsch/Weimar) there, but I saved it to be read later. Thank you.
The period of 1920s is a craziness that has to be revisited and scrutinized, if we want to understand the craziness in today’s world. The rottenness we see today is the continuation of the rottenness saw by the people in 1920s (not only in Europe, but also in Asia, America, and some parts of Africa). Perhaps that is why today some say that the 1920s is not yet over. We are still living in that period.
Some very telling facts concerning Germany and the Weimar period should probably be considered. Along with Steve’s point regarding the communistic influence, think about this, Germany is equivalent to two New York states in size. Weimar was a very small and contained set of circumstances than today’s challenges. Today’s economic challenges are worldwide- not just 1 small country. That fact combined with the influence of so many more dynamics that will have a direct impact on monies, commodities and world debt in today’s terms, is like fitting a circular peg into a square hole.
I reread that P; it was a good article. I liked your “Final Thoughts”
Final Thoughts
As you can see, there is not much difference between ideologies and governments. They all tend to follow the same practices and, in the end, they all destroy or at least significantly debase their currencies.
The average 100 year old person living in Central Europe has experienced a currency conversion once a decade. Now we are using the Euro, which, I am fairly certain, will undergo a currency conversion within the next 5-7 years.
So how would you go about preserving your wealth in Central Europe? Clearly, we can throw currencies out the window. Real estate gets obliterated in war times. Anything not hidden gets stolen several times over by the many invading troops and common thieves. Private businesses get nationalized, then destroyed by bureaucratic idiots. Travel can be completely banned for decades, so having a safe box abroad doesn’t help much either.
From a Central European’s perspective the only good choice for preserving wealth during the past 100 years were well-hidden precious metals.
I, GrahamB have added…..
What is that old saying? “We never learn from history because things are different this time”.
GrahamB
Thanks Steve.
My point is, while the amount of investment grade silver is more or less equal to that of gold, we should remember that silver is available above ground in other forms as well: coins, numismatic items, silverware, potentially recyclable industrial materials, etc. collectively form a lot of silver. During or after the next severe crisis, a sharp surge in silver prices could well drive these to PM investment markets.
To GrahamB: agree on your last thought. Can add: „The history teaches us that we never learn from it”
If the middle classes are being decimated in this economic downturn, it occurred to me that there will be a larger than usual demand for silver rather than gold. Why? Because as peoples’ wealth declines, they will be less able to afford the more expensive price of gold.