SILVER INVESTORS: Why The Next Financial Crisis Will Be Different

There’s a lot of analysis on the MSM and alternative precious metal sites forecasting how the future events will play out.  Unfortunately, 99% of MSM -Mainstream media’s take on the future is absolutely worthless.  However, many precious metal analysts are also making incorrect financial and economic forecasts, based on faulty assumptions of the future.

Now, don’t get me wrong… I still have a great deal of respect for the majority of precious metal analysts as they all believe that gold and silver are the best investments (stores of value) to own when the next financial calamity arrives.  I just happen to differ with some of these analysts due to their incomplete understanding of how energy will impact the precious metals, mining and overall economy going forward.  Basically, we both agree the value of gold and silver will explode in the future, but for different reasons.

The next financial crisis to hit the U.S. and world, will be much different from anything we have experienced before.  This is due to the massive amount of Debt and Leverage versus the remaining available cheap energy reserves to generate the economic activity to pay it off.

Thus, the GREAT FINANCIAL ENEMA is coming whether we like it or not.

While I realize many folks (even many of my readers) don’t believe there is an upcoming energy crisis, I am not going to get into the details in this article.  My stance on this is… Either you believe it now, or just wait a few years until the reality of peak oil and the falling EROI (Energy Returned On Invested) become a forgone conclusion.

I have to say, it’s amazing the amount of emails I receive explaining to me that “ENERGY IS NOT A PROBLEM”, it’s the elite… the Powers that be.  While I realize certain folks are pulling strings from way up above, Peak oil and the Falling EROI will cause a great deal of havoc for those with more money than sense.  Mark my words.

Okay, enough of that rant.  Let’s get to some REAL DATA.

Surging U.S. & India Silver Imports Signalling A Financial Crisis?

It’s truly amazing just how much silver India and the United States are on track to import in 2015.  Even though these figures and this subject matter have been discussed at length on many precious metal sites, until we look at the data as shown below, you can’t really comprehend just how much it is:

U.S.-&-India-Silver-Imports-vs-World-Mine-Supply

As we can see, total U.S. and Indian silver imports of 391 million oz (Moz) comprised 44% of the total 877 Moz of global mine supply in 2014.  However, total silver imports from these two countries are estimated to reach a staggering 533 Moz and consume 63% of total world silver mine supply.  Which means, U.S. and India estimated total silver imports in 2015 will absorb nearly 20% more of total mine supply compared to last year.

You will notice that world mine supply is estimated to be 850 Moz in 2015 versus 877 Moz last year.   This is based on falling production from Mexico, Australia, Chile and Canada.  More on this in future articles.  However, I can tell you that Australia’s silver production is down a whopping 30% in the first six months compared to the same period last year.

So, with falling global silver mine supply on top of declining silver scrap supply, this huge increase of U.S. and Indian silver demand is putting increased stress on the wholesale silver market.  And why is India on track to import a massive 340 Moz in 2015 compared to 230 Moz last year?  Some say it’s due to their ramp up of solar panel manufacturing.  While this may be true to some degree, silver consumption in the world solar industry has only increased marginally over the past few years.

This leads me to believe, Indians are stockpiling silver because they realize a GOOD DEAL when they see it.  And silver at $14-$15 is a good deal as it’s below the break-even cost of the majority of primary silver producers regardless of the lousy “Cash Cost Analysis” that continues to be used by official sources today.

For example, ETF Securities put out their August Precious Metal Monthly and stated the following as it pertained to silver production costs:

ETF-Securities-Silver-Cash-CostSilver is at the lowest level over production costs in 10 years. Silver ended August at its lowest price over average cash costs since 2005 (based on data from the CPM group). Silver cash costs (the basic costs of production per unit of output on site) are likely running just under US$9/oz. in 2015, the price of silver ended August less than $6/oz. over the basic cash costs. The year 2005 marked the last time the price of silver sustained a lower price over cash costs, at about US$4/0z. Such a narrow spread over basic cash costs indicates a majority of miners are likely unprofitable which is thus unsustainable in the long term. Some analysts expect total silver supply to contract in 2015 on the back of slowing mine supply growth and a continued sharp contraction in recycling scrap supply.

Now, ETF Securities puts out some excellent data, but their regurgitation of the worthless cash cost metric continues to confuse investors as to the real cost to mine silver.   What makes matters worse, is that they quote the CPM Group which is run by Jeff Christian.  Jeff tends to talk out of both sides of his mouth when it comes to investing in silver.

Regardless, the important takeaway in understanding why CASH COSTS are totally meaningless, is that they deduct by-product credits from the cost of mining silver.  According to my research in my top 12 primary silver miners in 2014, their total by-product credits and primary gold revenue accounted for 44% of their revenue.  If a company is allowed to deduct their by-product credits (revenues) to show a low cash cost, it does nothing to determine the profitability of the company.

Furthermore, my top 12 primary silver miners suffered a total adjusted net loss of $77 million in 2014.  Their by-product credits and gold revenue was $1.5 billion.  If we were to remove say $300 million of estimated gold revenue, it would leave $1.2 billion in by-product credits.  Go ahead and deduct their $1.2 billion of by-product revenue from the total revenue of $3.4 billion in 2014…. and tell me how AWFUL their losses would have been.  LOL

This is the insanity of the analysts community.  They continue to use a useless metric which intentionally misleads investors into believing the cost to produce silver is lower than it actually is.

Peak U.S. Shale Oil Production:  The Canary In the Coal Mine

The U.S. Energy Information Agency (EIA) just released their September Drilling Productivity Report, stating shale oil production peaked in April 2015.  Please hit on the link and check out the data for yourself.  I took their excel spreadsheet and made the chart below:

Top-4-Shale-Oil-Fields-Production

These are the top four shale oil fields in the United States.  While the Permian (olive-green color) has shale wells, half of its oil production comes from conventional (more profitable) wells.  As we can see, production from these four shale oil fields peaked in April at 5.35 million barrels per day (mbd) and are forecasted to fall to 5.0 mbd in October.

NOTE:  The Drilling Productivity Reports are based in estimates.

Now that the price of oil is down in the $40-$45 range, I would imagine we will see a more serious decline of U.S. shale oil production by the end of 2015 and into 2016.   That being said, the EIA just released data showing total U.S. domestic oil production is down 500,000 barrels per day (bd) at 9.1 mbd currently from the peak of 9.6 mbd months ago.

To put the past and future U.S. oil production into perspective, we need to look at the chart below:

U.S.-Oil-Production

This main chart shows U.S. oil production since 1920.  I added the RED LINES to show the rate of increase and decrease.  You will notice that the upside from 1920 to 1970 and downside from 1970 to 2005 were symmetrical.  Of course, it wasn’t exact… but pretty darn close.

Now, look at the recent upside from shale oil production 2007 to present.  It’s nearly exponential.  What would a betting individual guess as to how the DOWNSIDE of the present peak will look like?  Aye?  I included the smaller chart insert above to show that production has indeed peaked.

For all the dreamers who believe the U.S. has all this cheap untapped oil, I know some folks who would like to sell you plenty of U.S. Treasuries and Interest Rate Swap Derivatives.

According to some of the better energy analysts I follow, U.S. oil production will likely decline 33% by 2020 and 60-70% by 2025.  How will the U.S. function on that amount of oil?  Furthermore, include the fact that oil imports will be lower due to the inability in the future for the U.S. to exchange oil for worthless Dollars or Treasuries.

The fall of U.S. shale oil production is the Global Canary in the coal mine.

Better Hold Physical Gold & Silver Before The Next Financial Crisis Hits

The next financial crisis will be nothing like mankind has never experienced before.  Why?  Because the amount of debt and leverage in the financial system on top of falling global energy supply, will totally destroy the valuation of most paper and physical assets.

Investors who assumed Real Estate is a good place to park their wealth, will find out it will be one of the worst physical assets to own going forward.  Only certain types of real estate in certain areas will hold some value compared to most Suburban-City Residential, Industrial and Commercial Real Estate that will continue to plummet for decades.

Again… this next financial collapse will be different from anything we experienced before.  Which is why it is wise to own physical gold and silver.  Thus, gold and silver will be some of the safest assets to own when the Fed finally runs out of Silver Bullets.

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If you haven’t checked out THE SILVER CHART REPORT, there’s a great deal of information on the Silver Industry & Market not found in any single publication on the internet.  There is one chart in this report (Chart #19) that I can guarantee that 99.9% of precious metal investors haven’t seen before.

 CLICK HERE:   For The Silver Chart Report

I use this bird’s-eye approach when I create my easy to understand charts.  The Silver Chart Report is a collection of my top silver charts from articles published over the past six years, and includes in-depth, never-before-seen charts and content that indicate that silver is on the rise. There are 48 charts in the report, broken down in five sections.

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65 Comments on "SILVER INVESTORS: Why The Next Financial Crisis Will Be Different"

  1. I really thank you for the wonderful analysis and data. I am grateful to benefit from your excellent work from here in Korea. Thanks again

  2. Really good report on what’s truly happening with silver. Thanks, I needed that. Sometimes it can be hard to stay the course so reports like this re-affirm what is going to take place, and it seems sooner than later.Shale oil always was bullshit to me, and that also seems to have been proven. Stack it and stack it high !

  3. Thanks Steve, very interesting indeed.

    I tend to think that continously supressed prices of energy and many metals in the face of real fundamentals are an enigma and that insanity, corruption and delusion of analysts, media and investors are not enough to explain this phenomenon.
    I don”t have a better explanation though. Not without resorting to really wild theories And those would not pass as “better explanations”, or would they ?.

    • Andreas van de Kamp,

      This is a tough one. However, expensive $100 Dollar oil allowed the PONZI to continue for several more years. The Elite wanted the QE Liquidity to go into Stocks and Bonds. They are making a killing. However, the public really can’t afford $70+ oil and oil companies can’t afford to produce oil below $70. So, there lies the rub.

      I don’t really know how things play out going forward, but I do think Paul Craig Roberts notion of a Inflationary Depression is by far the most likely outcome.

      That is INFLATION for things we consume (energy-food-goods-services), and DEFLATION for things we own (real estate, vehicles, boats etc).
      steve

  4. What if TPTB have been manipulating the price of oil via OPEC since the mid 70’s? Artificially inflating the price way above what it would normally be under free market conditions and ensuring the strength of the petrodollar to recycle US debt achieved many other things as well. They’re able to drag down the oil price at will in order to crush their enemies, like what happened to the USSR and the more recent attempt with Russia. All this, while behind the scenes, the US has more oil than Saudi Arabia, kept secret under Prudhoe Bay, Alaska, which will only be untapped when the rest of the world has hit that peak oil you speak of in the article.

    • Considering that they made the U.S. dollar the petro dollar followed by the world currency , your analogy is most likely true.

  5. Steve I found this eye opening graphics on peakoilbarrel. I am sure you know it also as i see you commenting there often. This graphics is incredible it shows how unsustainable this tight oil really is unless you find enough stupid money to invest in. Investors in tight oil will never ever make break even not to mention earning some money with this.

    http://peakoilbarrel.com/wp-content/uploads/2015/09/5382351.gif

    • Juergen Heil,

      Yes, that was a great chart by Rune Likvern. He runs the blog, Fractional Flow out of the Netherlands. He has been doing analysis on the estimated FREE CASH FLOW for the U.S. Shale Oil Industry for several years now. Anyone following his work, knew that Shale Oil Industry was a BIG TURD from day one.

      If investors who dumped WADS OF CASH into Stansberry & Associates garbage pumped shale energy companies and instead read Rune Likvern’s work (and some of mine)… they would have saved a lot of money.

      steve

  6. Steve,
    Another great analysis and timely article. With you, the “hits” just keep on coming. At the near end of this article, you wrote that you feel real estate is one of the worst physical assets to own going forward and that only certain types of real estate, in certain areas, will hold value. Wow…what a teaser!
    I really would appreciate it if you’d expound on that and share you thoughts in more detail on that subject as real estate (mostly commercial) is one of my major holdings (along with PM’s) and I’m struggling with wether or not I should acquire more real estate or divest.

    I’d liked to hear from fellow SRSrocco Report readers also!

    • One piece of “insider information” in the attorney world that I picked up was to only buy land without any structures on them. Not sure about perc tests and the like but it wouldn’t hurt I guess.

      • I agree to a point. Granted, “bare” land, has relatively low taxes. Timber growing is comparable to savings growing in a bank account (Oh!…wait.). Desert/arid land, not so much. It’s when you place a dwelling upon any bare the tax man wakes up. The problem is, otherwise, bare produces no income. Its a place to park some cash but like negative interest rates, it has a holding cost. Somewhere there must be “niche” land to invest in a sea of potential anchors. Any thoughts?

        • The attorneys mentioned were from the Mass. area , inland maybe.

          About the sweetest deal that this reader ever heard of was from a guy owned an excavating co. He bought a lot -land only , which sloped down to a huge pit like contour and he found another vacant property which had a hill so big that it was unable to be built on. After transferring earth from the hill laden one and back filling the huge cavern on the other he ended up with two level salable lots. He capitalized on both.

        • MillenniumWright | September 19, 2015 at 11:55 am |

          Imagine a world where the rich have gotten richer and the poor have gotten poorer. In order to make money in this brave new world, you need either high quality, high price, low volume goods that the rich pay for, or you need low quality, low price, high volume goods that the poor can pay for. So as far as land goes, examples would be: farmland; low cost per acre, low financial yield per acre, therefore you need lots of it. Or you need San Francisco ocean front property, very high quality, very high price, but you don’t need so much volume. Or you need a giant shitty appartment building that you can pack hundreds of people into that pay small rent. Or you need property in a unique gated community where the rich pay to keep the poor out. Anything associated with the middle class will devalue as the middle class is either squeezed into the poor class, or some smart lucky individuals find ways into the upper class.

    • “I’d liked to hear from fellow SRSrocco Report readers also!”

      Since you asked…

      A modest home in an area with one or more of the following: employment, abundant natural resources like water, lower taxes [currently], lower population density [which means less craziness], would seem to be a good investment. One has to live somewhere. Likewise modest homes for rental may be good; having no mortgage is of course best. Larger more luxurious homes or commercial property in population density areas are not a good investment IMO [for example does anyone think inner city Baltimore is a great place to invest in real estate?].

      • Also land one can grow crops or trees or raise livestock on can be good. Land with a modest dwelling in another country may prove valuable, particular if one can get citizenship in [a passport from] that country

      • I agree. However, not everywhere in the US is Detroit or Baltimore. When the SHTF, I wonder if some markets will remain at least viable due to their unique locals? Thoughts?

    • Xploregon,

      I am an ardent follower of Steve’s theories regarding Silver supplies and EROI. While it is true for 95% of the population that any real estate is not where you want you investment dollars, for those of us, the remaining 5%, that have made our living and fortunes from real estate nothing could be farther from the truth.

      I own prime mixed commercial/residential property in the heart of a town that is home to a large international university with an endowment in excess of 4 billion dollars. A classic “College town”. They are insulated from the normal market and they don’t have ghettos. The students come from the wealthiest families in the world. When times get tough, many go back to school and rich universities don’t layoff people EVER. They just keep pumping money into the local economy.

      The other property I own is 40 acres, 25% tillable with it’s own water supply, in the middle of 25,000 acres in a state forest – nearest neighbor is 1 mile away as the crow flies. It is 3-4 hours drive by expressway and 6 hours by back roads that don’t go through any big cities and over rivers on bridges that are in the middle of nowhere.

      Since selling my business eight years ago, my only investments have been in precious metals (last 5 years silver only) and goods/equipment for my family’s survival.

      Buy for cash and stash.

      SteveW

      • Steve- Wow! Your life amazingly mirrors my life! I have a doppleganer!!!

        • Xploregon,

          There are a bunch of us out there. The uber rich do it too but their bug out locations are in other countries and they can afford private jets, but the same principle.

          Real estate is particularly good for one thing – Only the government can steal it.

      • SteveW,

        Your land sounds great! Too bad some of us can’t meet at least in direct email.

  7. Regarding “Real Estate.” Most assuredly it will be a costly ownership. Property is always owned by someone and property tax increases will come as deficits grow. I lived in Florida 20 years ago. Since
    they do not have a “personal income tax” they began raising property taxes. I was $2,200 a year when I lived there and $12,000 a year when I left there. Governments will tax the real estate when the bubble
    on debt bursts.

    • I totally agree. Will we get to a time when even a dump will be taxed so high it isn’t affordable unless its owned by Wall Street or under water banks? or, will market forces take over and force .gov to reduce property taxes down just to survive?

      • Most big politicians and big banksters and their masters have their wealth in land. That’s what half the European Union is about. The biggest holders of land (Duquesa de Alba in Spain, as an example) get the biggest public subsidies. Farming land and forests… These will be the last ones they tax because they themselves are the biggest owners of land.

  8. “Investors who assumed Real Estate is a good place to investor wealth, will find out it will be one of the worst physical assets to own going forward”

    For those who plan to stay in their current home for many years will benefit from lower taxes if their home values drop sharply. That’s why I decided to focus on home improvement vs. upscale to a new house.

    I know many articles back you provided a small list of essentials to weather the economic maelstrom coming soon. Based on your research what would be the recommended minimum amount of oz. someone should own in silver & gold to hedge against the collapse of fiat currencies?

    • The weight of your body in silver?

    • Don’t think of it as a hedge, think of it as a form of savings. How much savings [in a form governments can’t devalue] is enough for you? How much is too much?

    • My quest is to head to the sea if and when the SHTF. I’m toying with a 38- 42 foot catamaran or perhaps a yawl.( Love those mizzen sheets ! They help keep the bow into the wind better.)

      The way that I look at it is if things do go upside down for awhile , having a place to live which can get around on wind as fuel is a win. If you don’t like what’s going on around you , pull line and relocate.

      What about the hurricanes you may ask ? With the advancement of today’s technology , pinpointing storm systems are reported a week or two in advance with a close eye on their direction.
      Having a jr. ham operators license and equipment also has it’s advantages .

  9. Come on, people. Seriously, how can you take this site seriously? Peak oil? Really? Is that why oil is at 45 a barrel and supply is more than demand.

    Seriously.

    Here’s the deal. The Gulf of Mexico has Proven 10 trillion in reserves per day just sitting there…..and since PEMEX has 100% of their revenues taken for Mexico’s government……there is a reason why the first time in history Mexico has opened their doors to foreign oil for putting in the infrastructure needed to tap in into Black Mother Lode.

    People this doomer stuff about peak oil is plain nonsense. Have Steve explain to you how just in the Gulf of Mexico alone there isn’t enough oil to feed our greedy little financial system for literally 100 + years alone.

    Nonsense. Almost ever single thing here about PEAK OIL is non-sense!

    • Dear Jack, you wrote:
      “…Nonsense. Almost ever single thing here about PEAK OIL is non-sense!…”

      …of course, to a first rate MORON like you, this is “non-sense”.
      I really, really do/did not mean to insult you (and akin)!
      I made every effort, trust me!!!

      Judging by your comment, “MORON” is the most accurate and direct way to describe you.
      “Brainwashed” – although accurate, is way too politically correct.

      -Again, no insult intended – just an observation!

      …and no, I’m no troll!
      I have worked with the best energy/investing people the world had/has to offer and know energy and financial matters like few, very few others!

      -Instead of bad-mouthing this respected site/blog, you should be happy, VERY HAPPY Steve is enabling your bird-brain (and I say that as an insult to birds!) with such a detailed and intricate information for FREE!

      With all do respect:
      Fuck Off!
      (Steve, I hope you forgive me!)

      Be well,

      Petro

      P.S.: Steve, you should seriously consider editing the comments/commentators!
      Just a thought…just a thought…

      • Petro,

        Fuck off right back. Do some due diligence and then go fuck yourself. Bird brain? Sure, you Peak Oil guys nailed it. That is why oil has gone from over a hundred a barrel to under 50. If there was ANY hint of Peak Oil even remotely transpiring….

        OIL WOULD BE AT 200 a BARREL RIGHT NOW.

        Go fuck yourself moron. You’re good at it. Anyone following your nipshit analysis would have lost fortunes.

        And this Steve idiot with Gold and Silver, Gold and Silver, Gold and Silver wrongheaded analysis also losing folks millions.

        Why would anyone listen to non-sense that NEVER materialzes You think Warren Buffett sold Exxon becasue he believes Peak Oil is upon us.

        Serious, go fuck yourselves. Because you have fucked enough people.

    • Jack,

      LOL… if you believe there are 10 trillion barrels of proven reserves in the GOM, then you disagree with 99.5% of the professional oil geologists.

      Thanks for the comedic relief.

      steve

    • Jack is nonsense. Pulls out wild statements with no documentation behind them. Maybe he believes this drivel, maybe he doesn’t. In addition to nothing backing the nonsense he spouts he probably has no other qualifications from which to have a valid opinion. Steve knows more than I do about this and I have a degree in geology.

  10. Steve,
    on the “U.S. field production of crude oil” graph (last chart) you wrote:

    “…Of course, it wasn’t exact… but pretty darn close….”.

    -The “…darn close…” part was the discovery of Prudhoe Bay in Alaska (the “distortion” from ~’78-’80 to ’88-’89 in the graph).
    Without it would have been “…exactly close…”!

    -Keep up the good ORIGINAL work and do NOT cave in to (tend to) the idiot “gold bug” crowd!!!
    You are a first rate intellectual and energy analyst …!
    Stick with that….and not with the “climate change is a hoax…”, or “…plenty of oil in the ground…” and “..energy independence…” herd (You know who you are!!!).

    Be well,

    Petro

    • Petro,

      Always happy to receive comments from you. Yes, everyone has an opinion… LOL. While it’s frustrated that some people who should KNOW BETTER, regurgitate some pretty STOOPID things, this is the way of the world. So, all we can do is continue with the work and analysis and let the future results prove the true outcome.

      While there are some IDIOT GOLD BUGS out there, there are indeed many some smart ones. Unfortunately, a good percentage of the precious metal community have blinders on about energy. They think after the big crash and reset, then its on to INFINITE GROWTH on a finite planet forever… LOL.

      This is where I disagree. I still believe the best assets to own going forward are gold and silver. However, I can’t give a data for the revaluation of these metals. But… it’s coming.

      steve

      • Steve,

        I do not disagree with you on gold and silver, but…I think we are past them!
        We are way over the “hump”, way over the “point of no return”…!
        Food, water, safe shelter and physical well being (literally) are our gold and silver “investments” in the next few decades…

        -You know as well as I do (if not better!) that without its “dirty”, “foul smelling” liquid black brother – the “shiny”, “sparkly” yellow one means nothing!!!

        -Energy is THE resource….the ULTIMATE resource and Oil is Energy!
        Who does not understand that (or writes something moronic akin to Jack above: 10 trillion barrels…Ha, Ha, Ha – the entire World has not consumed 10 trillion barrels since Rockefeller had the idea of Standard Oil in 1870s…
        Jack probably does NOT know how many zeros one trillion has…and yet he feels expertly enough to assertively and confidently comment here!) – does understand NOTHING!
        -Try telling that to Nick G on Paterson’s site….LOL (and he is one of the smart ones…..we are indeed doomed…)!

        Be well,

        Petro

        • Petro,

          Well, you know, I can’t disagree with your assessment of the real assets to own in the future. However….. food, water, and safe shelter will come a lot easier by way of physical precious metals than trying to pawn off worthless monopoly money. That’s how I look at it.

          I have all those things you mentioned. Of course there are no guarantees, but with the surplus… I think precious metals are the way to go. I get a kick out of the MAD MAX FOLKS who only believe in GUNS, BULLETS and BEANS. What happens when someone runs out of BEANS or BULLETS?? LOL. Gonna buy them with old Fed notes?

          I don’t spend too much time on the climate as that would really cause MASSIVE ERUPTIONS from the precious metal carrying folks with blinders on. I tried that a few times and its like pulling a 10 foot nostril hair out of someones nose… starting from the ass first.

          I do plan on chatting more about that in the future as climate events will wake up even the worst Die-hard Deniers.

          steve

          • Fair enough!

            Be well Steve and thanks for the info and detailed charts!

            Petro

          • Petro,

            Always a pleasure reading your work and I really appreciate the comments you leave on the site.

            steve

          • MillenniumWright | September 20, 2015 at 12:29 am |

            Hi Steve,
            I’m enjoying your rational analysis of market factors so far. My intuition says silver is the way to go for some traumatic economic future hypothesis. However, I have studied history, as well as philosophy and macro patterns, and I think you’re relying a little too heavy on the past to dictate the future. One thing I would like to hear your take on: examine sentinel individuals in history, and you find that there are people who in essence predict the future. Davinci with his primitive helicopters, Ayne Rand with her economic zombies, Asimov with his Ai, and a host of others.

            So my question is this: how are we going to explore the stars with gold and silver as our currency? At some point we absolutely must transition to a digital or information based currency. Any theory that says otherwise is a theory that demands the human race end its expansion, and fail in its historical pattern of expanding into new territory. This is the end of all things good.d

            Because it is the same as proposing that Freedom, and Liberty will die. Because in every historical example, the greatest freedom is to be found in frontiers, and when there are no more frontiers, there will be no more freedom.

            So how do we employ gold and silver as currency when space is our next frontier?

            Michael

          • MillenniumWright,

            That’s an excellent question. Let me start off by saying, I don’t believe we are going to see widespread digital currencies or electronic money. This is due to peaking of liquid (and cheap coal) energy production on top of a falling EROI – Energy Returned On Invested. From your answer, I gather you have not been following my work for long. Maybe you have, but missed a lot of the energy analysis.

            I see the United States disintegrating into regions as domestic oil production goes into the crapper over the next 3-10 years. Again, I see U.S. oil production down 60-70% by 2025. Arch Coal, one of the largest coal companies in the world, was trading at $360 back in 2011, its now down to $3.50….LOL.

            People have no idea of what’s coming. I am not saying we head into a MAD MAX scenario, but falling energy production will destroy the valuation of most paper and physical assets. Repeat, not only is energy production peaking, the EROI of Oil is down significantly in the past 80 years.

            1930 EROI U.S. Oil = 100/1
            1970 EROI U.S. Oil = 30/1
            2015 EROI U.S. Oil = 7-9/1
            2015 U.S. Shale Oil = 5/1

            The reason Shale Oil is not really profitable has to due with its low EROI of 5/1. In the 1930’s, the U.S. oil industry was producing oil for the market at 100 barrels for 1 barrel of energy consumed in the process. The Great U.S. infrastructure was built in the 1960-1970’s on 30/1 EROI oil.

            Unfortunately, our modern society needs at least a 12/1 EROI to be sustainable. Shale oil at 5/1 doesn’t pay the minimum EROI requirement. Either does Solar & Wind which have even lower EROI’s when we factor in all costs.

            So, to me… the best assets to own during the coming collapse of U.S. and World energy production are the precious metals. The U.S. will likely become a third-world country status within the next 10 years.

            steve

          • “So how do we employ gold and silver as currency when space is our next frontier?”

            So….how do you propose to get up/out there if the world runs out of petrol based Texas tea ?

          • Oil production may decline in the US but it doesn’t mean we have peaked. There are plenty of reserves throughout the world that will keep numbers up. The one thing that the US needs to look at more and utilize more is natural gas. The GOM is the largest untapped source of natural gas in the world. Estimates by geologists say could power the world for 200 years. Boone Pikens is huge on natural gas. Only time will tell. For now, I hold silver and just smile at the people who laugh at me for doing so. Take care and wish everyone the best in whatever the future holds.

          • Henry,

            I don’t know where you are getting your figures, but there “AREN’T” plenty of “CHEAP RESERVES” in the world. The U.S. supposedly holds 1 trillion barrels of oil shale in the west. However, the EROI of oil shale is like an 1.5-2/1 EROI. If the companies drilling Shale oil (EROI 5/1) in the Bakken and Eagle Ford can’t make money, why would anyone attempt to go after CRAPPY OIL SHALE in Wyoming and Utah?

            This is the mistake most people make when the regurgitate those figures put out by MSM. They are totally worthless.

            steve

  11. MillenniumWright | September 20, 2015 at 1:17 pm |

    Steve,
    Thank you for taking the time to respond. That is a dire scenario indeed. You are correct, I have only been following for a couple weeks. I did not realize the severity of the perspective you outline.

    Assuming that your numbers are all correct, and that we are therefore running out of easily acquired and employed energy, then we are on track for a massive die off. Modern farming absolutely cannot produce without easy energy, unless we make some massive investment in new tech.

    Historically, I think we have as a species many times been able to come up with a new technology that proved to be our salvation just in the nick of time. But there have also been die offs of human populations.

    I will have to go back through your older posts and review more of you data. If you are correct, then Liberty is indeed going to take a serious hit, or else our entire social structure will unravel and it may very well look like Mad Max.

    Again, thanks for the response.

    Michael

    • “I will have to go back through your older posts and review more of you data. If you are correct, then Liberty is indeed going to take a serious hit, or else our entire social structure will unravel and it may very well look like Mad Max.”

      I don’t think it will be bad in all places at the same time. But I think inner city riots of late give a glimpse of what population density areas could devolve to, AND THOSE PEOPLE WERE NOT HUNGRY, THE ATM’s WORKED, HOSPITALS PROVIDED FREE MEDICAL CARE TO THOSE WITH NO ABILITY OR WILLINGNESS TO PAY, ETC., ETC. And yes declining availability of cheap energy will not support economic growth, and it won’t support population growth, and it won’t support the current population. It won’t be supportive of energy-intensive industries like mining or modern agribusiness.

      “Historically, I think we have as a species many times been able to come up with a new technology that proved to be our salvation just in the nick of time”.

      Maybe it was a technology savior in the past but abundant inexpensive energy in the form of coal, oil, or natural gas was there. Technology, no matter how fantastic, doesn’t replace cheap abundant oil because of the low EROI.

  12. Steve,

    “Unfortunately, our modern society needs at least a 12/1 EROI to be sustainable. Shale oil at 5/1 doesn’t pay the minimum EROI requirement. Either does Solar & Wind which have even lower EROI’s when we factor in all costs.”

    How did you calculate the 12/1 EROI and does the market price have any time effects on its impact?

    Thanks for all your good work!

    SteveW

  13. MillenniumWright | September 21, 2015 at 12:13 am |

    Integrity Steve. Integrity. I just went back through my email notifications and compared them to what is now published on this thread. Very disappointing. Very, very disappointing.

    Some people call it God. Whatever it is, the Spirit is watching.

    May You be blessed.

    Michael

  14. So Steve- Are you going to expound on your thoughts about real estate?

    • Xploregon,

      Yes, however… I plan on doing that in more detail in a report. Let’s just say, 90% of Real Estate will experience a devaluation of 75-90% over the next 10 years. It may take a few more years than 10 for a total washout, but it’s coming. Again, cheap abundant oil gave Real Estate its inflated values, and falling and expensive oil will destroy it.

      steve

      • HO LEI CRAP! That’s pretty much in line with what I was thinking (but not QUITE that much!) and it’s what I’m absolutely terrified of! Maybe only 3-4% of the US population is investing in PM’s but, 67% +/- are home owners and obviously that doesn’t include commercial, industrial, recreational properties! NOW ALL THAT…devalued 75-90% is REALLY going to get peoples attention!
        I really, really look forward to your report Steve. It’s not a subject covered much and when the SHTF, it’s going to rock our world big time. Katy-bar the doors!

      • Steve,

        On this one I think you are way off base. The value of real estate to “ordinary people” is in its utility. Everyone needs a place to live, everyone needs a place to work and everyone needs to eat. Everyone needs lumber to build their houses and furniture. If we reach the point of no gasoline (or it becomes unaffordable) we will need lumber to build our wagons.

        My bug out location is in the area of a very large Amish community. They use no electricity, no gasoline and no diesel. They farm 1,000s of acres. They live simple lives but do very well for them selves and no one goes to bed hungry.

        If you are saying that the world is going to go through a major deflationary cycle, then depending how bad it is, real estate and EVERYTHING ELSE (except maybe PMs) will lose 75-90% of their value. But if the choice is a place to live vs a new TV or washer/dryer or car, the real estate wins every time.

        In fact, the one asset that has outperformed each and every other asset is prime farm land. If anyone is in the financial position to do so, they should buy unimproved prime farm land now. You don’t have to work it but can lease it and make a decent return. And it is one asset that only the government can steal.

        I look forward to your real estate report.

        Thanks,

        SteveW

        • Absent from this brief discussion, opinion, or conjecture on real estate, is how the availability of credit affects real estate sales prices. After 2008 credit dried up and if potential buyers couldn’t get loans then of course sales prices were lower.

      • Cheap abundant loans give real estate it’s value now.

        • David,

          Cheap and abundant money is giving everything hyperinflated values. The S&P is selling at 34 times earnings. Stocks in a similar neighborhood. Bonds are yielding in the 2% range. The huge difference is that when the paper market blows up the paper holders just have paper. Real estate owners still have property and while its value may have diminished greatly its utility hasn’t changed a bit.

          The real trick to successful real estate in precarious times is to remove the banker – payoff your mortgages.

          What has fundamentally restrained the commercial real estate business since the crash is the fact that the FED pays interest on the excess reserves held by the banks so they have absolutely no motivation to loan that money out to businesses. This result is compounded by the burdensome loan regulations and paperwork required when they do concede to make you a loan.

          Even when the banks were not loaning money and values took a dive, many in Michigan were still able to sell their real estate and buyers to buy by using Land Contracts. Similar devices are available in most states.

          Real estate is like all other hard assets, even if the market goes to hell in a hand basket it has physical utility whereas paper assets leave you with only worthless paper.
          \
          Buy for cash and stash.

          Steve

          • Well said SteveW. Well said. Couldn’t agree more. Get out of debt. Pay off the mortgages. Dump the banksters.

          • “The huge difference is that when the paper market blows up the paper holders just have paper. Real estate owners still have property and while its value may have diminished greatly its utility hasn’t changed a bit.”

            Yes but the ability to collect rent from impoverished public may be diminished.

  15. I believe that the prices if PMs can rise, but there is no energy shortage. What is more, id the next great depression hits energy consumption will decrease.

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