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Mix-Ansicht- Immer mal wieder Silber - drooy, 11.07.2002, 10:21
Immer mal wieder Silber
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WEEKLY COMMENTARY
July 9, 2002
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Butler’s Bombshells
By James R. Cook
Over 18 months ago, before it was widely known that the U.S. was out of silver, Ted Butler wrote about this government shortage. He said,"Please remember that 50 years ago the U.S. Government held over 3 billion ounces of silver, the largest stockpile of silver in the world. In less than a year, it will own zero silver."
On November 27 of 2000 the U.S. Defense National Stockpile Center announced its remaining stockpile of 15 million ounces of silver was being shipped to the U.S. mint to manufacture silver Eagles and other silver coins. Ted Butler wrote,"Never in the history of the United States has the need for holding a stockpile of silver been more important. This is a sad and dramatic turn of events. That’s because not only is the U.S. Government almost officially out of silver, but so is the rest of the world. World inventories of silver, just like the U.S. Governments, are at the lowest levels in hundreds of years."
As an explanation of why the U.S. ran out of silver, Ted Butler wrote," Let me tell you why the U.S. Government, and the rest of the world, has the lowest level of silver inventory since the 1700s or 1800s. Two words - the deficit. Since the introduction of modern technologies, computers, communications, electricity and photography, the quality of human life, as we know it, has been transformed. This transformation required, and does require, massive amounts of silver. We don’t produce enough silver on a current basis (mining and recycling) to provide the massive amounts needed. We have consumed huge amounts of silver mined and produced in past centuries. We are using up silver from the time of the Incas, Aztecs and the Conquistadors; from the time of the Comstock Lode and the Sherman Silver Act. That’s what a deficit is - consuming more than can be produced.
"How we consumed so much previously produced silver, depleting the US Government’s and the world’s inventories, with no dramatic rise in price, is a separate issue that I’ve written tens of thousands of words on. I’m not doing that here, except to say leasing of silver, along with the huge short position and the dubious activities of the Silver Users Association, a US lobbying organization, have artificially held down the price of silver. The main point is this - the deficit, which requires continued massive amounts of existing inventory to continue, has just officially lost its prime provider - Uncle Sam. For the past 50 years the US Government has donated 60 million ounces of silver per year to feed the deficit. But now the jig is up. Never again, will the US Government, formerly the largest holder, provide silver to the market.
"Instead, the US Government will become a user, courtesy of the popular coinage programs it has created. It’s a double whammy - from net seller to net buyer. (And to those who would say the US can just stop minting silver coins - think of the mega-bullish event that would be created by the US announcing it is stopping the minting of silver coins because silver isn’t available.) And once Uncle Sam turns buyer, all will be aware of it. There will be no more belief in the silly bearish stories that are constantly written about no demand for silver. If the US Government is demanding it, after being a supplier for 50 years, that is all you need to know about real silver demand.
This article was recently on the Internet."Congress has sent to President George W. Bush legislation that would allow the U.S. Treasury Department to buy up to 9 million ounces of silver annually on the open market to make a special silver eagle coin." Ted Butler pointed out,"People like Silver Eagles. When it dawns on them that there is a shortage to boot, they’ll like them even more. That’s just human nature. Sales of Silver Eagles could surge to 20 or 30 million ounces a year. The US Government must now buy that silver on the open market. The market will see Uncle Sam coming and their buying will not be at the low price they got when they sold their silver. This isn’t sophisticated analysis - it’s common sense. If you can see how profound this change is, then beat the rush and buy silver now, while it’s being given away at these artificially low prices.
"Some people may argue with my thesis that there will be a price explosion that sends silver to $50 or $100 an ounce. Consider that ten years ago, palladium was selling for $60 an ounce. If someone had predicted that it would rise over 15- fold on pure supply/demand, he or she would have been ridiculed. Unlike silver, palladium did not have the world’s largest short position. It did not have a 50 year deficit. It did not have the prospect of the world’s largest and most consistent former above-ground supplier (the US Government) turn into a permanent buyer."
Mr. Butler also made the crucial point that governments can sell gold, but they can no longer sell silver."The U.S. authorities will never be able to cap any silver rally, by selling, or threatening to sell real silver to cover a market shortage. Oh, the rules may be changed on the COMEX, but no real silver will be dumped by the Feds."
Mr. Butler also looked at the U.S. running out of silver from a completely different viewpoint. He worried about the effect of this depleted silver inventory on the production of U.S. military hardware. On the eve of a possible confrontation with Iraq, his remarks are particularly trenchant."This historic military buildup which you will see unfolding before you, if you look, will be a special buildup. It will be a hardware buildup. It will not involve a buildup of the infantry. It will involve the production of missiles, sophisticated aircraft, ships, and weapons of all types, including space weapons and lasers. Every single bit of hardware will require silver. More silver than was ever needed before. Yet the U.S., for the first time in its history, has no silver. They have recently transferred the last of the silver from its National Defense Stockpile to the Mint for coin production. Think about that for a moment. Why was silver in the National Defense Stockpile in the first place?"
And Butler’s biggest bombshell may be set to go off soon. I’m referring to his campaign aimed at the Commodity Futures Trading Commission to end what he calls the"uneconomic and manipulative concentrated silver short selling on the COMEX by four of less commercial traders." I have watched this effort with great interest. I’m struck by the logic and simple manner in which Ted Butler has outlined the problem. What also stands out is the complete lack of disagreement or argument by the CFTC, or anyone else, to Butler’s specific allegations. That tells me he could be right on, and that this could be a significant market development.
There you have it, a compendium of Ted Butler’s thinking before anyone else uttered such words. He is being proven right again, and I think he will continue to be proven right. I listen closely to what he says - so should you.
Gruss Drooy
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