Short & Long Term Silver Price Moves, Gold Conspiracies & The Falling EROI

The U.S. economy has gotten considerably weaker since the investment banking collapse in 2008.  Nothing has improved, except the fundamentals for owning gold and silver.  However, there are many conspiracies that confuse people if you don’t look at the numbers.

One such conspiracy is the one claiming the world has a great deal more gold hidden in huge vaults.  We continue to read and hear about the infamous Yamashita’s gold hoard or Karen Hudes statement that there are 170,000 tonnes of gold stored in Hawaii.  I have even seen estimates of 1,000,000 tonnes of gold in the world.

I sat down with Will Lehr at Perpetual Assets and discussed why I don’t believe there is a great deal more gold in the world than official estimates.  Sure, there might be more than claimed, but not the 100’000’s tonnes stated by several in the industry.

This is Will’s write up about the interview:

Steve dissects his opinion as to why PM prices will likely go down in the short term. The commercial traders activity can be studied historically to show patterns. Regardless of short term gyrations the long term picture is very bullish for gold and silver.

We are being lulled to sleep with what has been 2 years now of $20 silver or below. Precious metals investors have been disillusioned by shock and awe. The real truth lies in the fundamentals. Currency collapse and Comex default are mere byproducts of a bigger picture scenario. Falling productivity and availability of energy will ultimately collapse the system.

Physical silver sales have surged relative to fund flows into silver ETFs. Investors are buying the physical. EROI is energy returned on invested which reflects the amount of energy it takes to yield a unit of energy- essentially energy extraction productivity. It takes energy to produce energy.

The collapse of EROI in the US in the last 100 years is unprecedented. We used to produce 100 units of oil per unit spent, now it is down to 10/1 or less. The Roman Empire collapsed and never recovered due to these same factors. The fall of the US Empire will not ultimately be due to a currency collapse, it will be from collapsed EROI.

The central banking facade and toxic debt system cannot survive without an increasing energy supply. When it declines the whole fiat monetary system that is based on leverage and debt starts to implode. A fiat monetary system needs a growing energy supply to sustain. It’s not a coincidence that we went off the gold standard soon after our energy productivity peaked.

In the 1960’s, for every dollar that gold exploration companies spent, they returned $105 in gold. In the 1970’s it fell to $83, in the 80’s it fell to $57, in 90’s it fell to $23, and in 2000 it was a whopping $11. Here we have a double edged sword effect: falling EROI and falling gold availability, yield, and ore grade.

Stocks, bonds, and paper assets are based upon net present value, NPV- it’s one thing they teach you in finance school. Energy must be spent to deliver the asset. When you hold gold or silver in your hand, no energy must be spent to deliver.

We cover gold conspiracies from Karen Hudes to Yamashita’s gold. Steve breaks down global silver production and ore grades in the earth’s geological makeup. More than half the gold produced in the history of the world was produced after 1940. Steve shares the math on why he believes this is not logically possible.

“EROI is the most important fundamental principle for life… it determines if one is going to starve to death or if a company is going to continue” ~ Steve St. Angelo

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12 Comments on "Short & Long Term Silver Price Moves, Gold Conspiracies & The Falling EROI"

  1. Hey Steve,

    good, solid thinking as usual. But the conundrum remains…what is going on and why?

    One might wonder is the world terminal? The actions of our leaders would tend to have you believe they know the patient(s?) are doomed and might as well make the most of the little time left. Consistently creating excess credit (debt) to create excess capacity that can only remain utilized if even more excess credit (debt) is created…but that in turn creates more excess capacity…etc. etc. We are running a doomed Ponzi system of government central banks buying nations own debt to fund more debt and unfunded liabilities. Stock markets at record highs while the basis of all their business, commodities (the basis of which everything the companies rely), has collapsed to 2008 depression lows and makes clear organic demand has collapsed. This sort of system is what a perhaps a kind and loving parent would do for a child they knew only had a short time…so why not make the most of it.

    But I didn’t get the memo and must not be part of the club who knows we’re doomed. I’m still identifying the problems and thinking of solutions that give my kids and my kids kids and so on the best opportunity to live life to the fullest. But the nation’s leadership (D’s and R’s) plus the financial leaders, and media empty heads are cheering to get the system to the highest point on the cliff before giving it the final push. If a meteor or asteroid or solar flare or contagion or whatever is imminent…then everything makes sense. Otherwise…nothing makes sense.

    I’m really proud of the book I’ve written and posted (link below)…it details the systems collapsing nature…but what I can’t detail is why we’re being led to the highest cliff?

    http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-1-advanced.html

    Keep up the good work
    Chris

    • btw – I think your readers might be particularly interested in chapters 5, 6, 7, 8, 10…this details how almost all US Treasury debt purchased since ’09 has been via the Fed and “foreigners”…how four tiny nations of Belgium, Cayman Islands, Ireland, and Luxembourg purchased almost the same amount of US Treasury debt as the Federal Reserve since July 2011..despite the fact these tiny nations have no excess dollar surplus’ in need of recycling.

      Since the “Taper” the BRICS have sold over $100 billion while our four tiny creditors have purchased over $200 billion.

      Now with the Fed’s QE complete…all Treasury buying and the US solvency via low interest rates is in the hands of our four tiny friends. And the role of gold seems prominent in this entire farce.

  2. It all makes sense if the plan is starting a war so the elites can blame the economic collapse on external factors beyond their control and therefore retain power after the collapse.

  3. The use of words like collapse; eminent collapse means to be doomed and this is not the
    case. The FIAT dollar will be devalued. It is ridiculous to use words like a collapse. Look at
    Greece. How about Russia? Their FIAT money is down 66% + meaning they must use
    3 times as much currency to purchase anything. If our FIAT dollar is devalued, the printing
    press will run 24/7 but the USA Citizen will need 3 or 4 times as much money to live. Good grief!
    We need perspective. The Greeks are in the same boat. So is Spain, Portugal, Argentina etc.

    • Mike Nagle | March 6, 2015 at 5:38 pm |

      I am no financial wizard by any means and have little enough to speak of to keep from living paycheck to paycheck but, “collapse” of the dollar is certainly not too strong a phrase. To devalue the amount of dollars, physical and electronic, in the system, they would not need to be devalued by 66% like Russia’s currency, they would need to be devalued to about 9999.9%. Remember the ‘German Mark’, to ‘Rentenmark’ (each worth 1 Trillion German Marks), to ‘Reichsmark’, to ‘Deutschmarks’, to the EURO? I would say each of those previous currencies would have been considered to have collapsed. No?

  4. The correlation of the EROI to currency collapse seems logical enough, but I urge caution when referencing the Roman Empire as declining for monetary reasons. After three centuries of persecuting Christians, they declined and fell in the marketplace of ideas when Constantine issued his “Edict of Toleration” in 313 CE and then twelve years later made Christianity the state religion.
    Although the Romans seem to be primarily referenced by those in the present age, there have been many empires that have risen and fallen since then, eg the Merovingians (Franks), the Abbasids (Muslims), the Mongolians (Asians), the Ottomans (Muslims). A common denominator for their individual failures has always been precipitated by moral decay which seems to have accompanied their financial weakness.
    This historical perspective is intended to benefit those who read your consistently erudite research.

    • Thanks Saxon for the dates on Christianity. I am shocked to learn that I was raised in the Roman Empire’s state religion.
      I agree that moral decay seems to be the critical element. But the timing is uncertain. I have read that the Romans were already complaining of moral decay in the 1st century when they lost their republic. It seems that a closer indicator might be when they were no longer able to finance their military/conquest mechanism.

  5. Steve, you mentioned that gardening produces about five times more calories than we burn in the effort. As someone who is attempting to eat healthy and do a little gardening I find that intereesting. Whee did you get the data?

    Thanks.

    • lastmanstanding | March 1, 2015 at 8:37 am |

      Mike, the cost of the energy required to farm, seed, grow, harvest, process, transport your food to the gross-cery store is…well you get it if you take a moment to think about it.

      At home, there is no where near the energy expended…and whatever human energy is expended is beneficial to you and your mindset.

  6. I listen to people always talk about the ratio of gold to silver in the earth before its mined and then just assume that is the same ratio available after its mined. Silver is an industrial metal that is mostly mined as a by product of copper and lead. It is used up in alot of applications and cost more to recycle than it is worth. Gold is mostly used as a store of value and therefore most of the gold that has been mined is still in existence in someone’s vault or around someone’s neck. As we find more uses for silver in industry I believe the ratio will move closer to one to one.

    • lastmanstanding | March 1, 2015 at 9:00 am |

      One to One is a given. Money is money and based on history, I have really never researched if long ago on the Silk Road, if it made a difference as to which metal was more valuable. Hell, spices were very valuable…and highly accepted/traded.

      Regardless, you could purchase goods and services…anywhere, any time, without questions.

      One is valuable for destruction one is coveted. Go figure.

      All I know is that without silver, we wouldn’t be having this discussion.

      • “Hell, spices were very valuable…and highly accepted/traded.”

        At one time paper was a rare and valuable tangible item. But not for a long time.

        In time spices may be worth a lot of fiat currency. It it is tangible and useful it has value. When fiat currency confidence wanes it will have less value.

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