The Phaserl


The Chinese Silver Fox …

by Bill Holter, JS Mineset, via SGT

I recently had a long and very interesting conversation with John Embry of Sprott Resources. It is always good to speak with him as I consider him one of the five sharpest economic/precious metals minds I know of and certainly value his opinion. John’s name came up a couple of days ago when someone asked “where is all this silver coming from” to meet the outsized physical demand? I said “this is the number one question John Embry and Eric Sprott have been asking for about a year now”.

Our conversation was quite broad but let’s zero in on the “silver supply” aspect because I believe it is more important than anything else in our world today. That is a very big statement but stay with me as you will see toward the end why I believe this. John asked where IS all the silver coming from?

Let me first say what follows was my best educated “guess” and I know of no one who has the firm and hard answer; I told him during the 80’s and early 90’s the amount of “scrap” could be a very logical explanation. Then during the 90’s and early 2000’s the silver deficit could be explained by the huge amount of silver recovered from the “Manhattan Project” estimated to be nearly 1 billion ounces. I also believe the Chinese lent somewhere around 300 million ounces of silver to the U.S. back in 2003 for a 10 year term which expired in that “magical year” 2013. If this was true, it would explain the massive paper takedown in May of 2013 because the lease was “up”. I believe silver had to be taken down as the price was getting away and threatening $50. A collapsing price would allow the U.S. to say “don’t worry, you will get your silver back as we have the price under control”.

Here is where I believe the silver to meet delivery has come from, CHINA! But why? First and foremost, China was a “silver nation” and had used silver as money for longer and in greater quantity than any other nation. In other words, the silver has come from the only place it could have because China had it. OK, but even if China was the only large stockpile, why would they “throw good money after bad” if they were already defaulted on? I believe they wanted the crowned jewel of the West, Gold! They had silver but the West had the gold accumulated during the 1900’s and especially after WWII. Yes the U.S. dishoarded in the 50’s and 60’s but we did still have 8,000 plus tons left and are (were?) custodian for other Western gold holdings. It is my contention a deal was made where silver has been supplied by China to prevent the Achilles heel (silver) from defaulting and blowing up everything. In other words, keeping the game going for longer would allow China to accumulate gold and drain what is left, had the game blown up in 2013, China would not have had the ability to accumulate what they have since then. Call this “dropping pennies to pick up dollars”.

Getting back to what I said at the beginning where I said “silver is more important than anything else in the world”, please follow this through. Silver is a very small market, some would say unimportant except for its various technological, medical, etc. uses. However, in no way could silver’s price get away to the upside without dragging gold with it. Were the price of gold to get away to the upside, demand would explode (particularly in China where they are known as speculators and “chasers”). Were this to happen, the existing supply would be chewed up and the uncomfortable request “please deliver my gold” would become prevalent. At this point the game would be over as the scam of fractional reserve gold (and silver …and everything else) would be public knowledge.

You see, “trust” is at the heart of it all. Our entire financial system is based on trust. Trust in government, trust in fiat currency, trust in cross trading partners, trust in your bank or your broker… it is ALL TRUST! What would happen to this trust if it turned out that a Ponzi scheme turned up somewhere? Not just any Ponzi scheme like Madoff but one where the exchange itself was running a fractional reserve fraud and could not deliver? Trust …IN EVERYTHING would fail!

As usual I am sure I will be trolled for the above and called an idiot but I must ask you this- If global gold supply has not met demand for 20 years or more, where can the metal have come from to meet the deficit? The same goes for silver and even more so because the supply/demand deficit has been even more severe and longer in duration? The answer is most obvious, the metal had to come from the only place available, above ground supplies. For gold, that can only mean “official” stockpiles (vaults). For silver, I believe the only large above ground stockpile left was legacy silver in China.

Please do not point at the price and say “see, there are no shortages” as we have seen shortages, rationing and backwardation in both silver and gold over the last two years. If you gave me 100 billion counterfeit shares of IBM I could sell whenever I wanted, I am pretty sure I could make IBM look like a falling down drunk whenever I wanted and the price would certainly be depressed! Herein lies the fault, gold nor silver can be “printed” and when all is said and done investors holding receipts for same will be in for a very big and very bad surprise!

To finish, if I am correct about the silver for delivery coming from the most likely of all places, China, then I believe this will be looked back on by historians as “the Chinese silver fox in the West’s golden hen house! Am I correct? I don’t know but we will soon see as the global paper financial edifice is quaking on its own. John Embry told me, “of all the many theories I have heard so far, yours makes the most sense and is the most logical”. I mentioned this topic to Jim yesterday and he told me when we first talked about it six months back he was skeptical but the more he has thought about it …the silver can ONLY be coming from where it exists…Chinese legacy silver!

I think China has done some very intelligent maneuvering particularly since the 2008 crisis. They figured out our fractional reserve scheme was toast but they played along anyway. They even levered up as much or more than we did since then. However, with this increase in credit they have built infrastructure in the form of roads, bridges, cities, plant and equipment …all for and with future uses. The West on the other hand has thrown a “standard of living party” and neglected infrastructure to the point of dilapidation. Yes China’s financial system will implode with all the rest, they may even lead it! But, they will be left with new infrastructure and “money” (our gold) to get started again. President Xi has even said this to his people and to the world. He said the short term would be difficult but the long term beneficial. I think he is telling the truth!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome! [email protected]

Help us spread the ANTIDOTE to corporate propaganda.

Please follow SGT Report on Twitter & help share the message.

13 comments to The Chinese Silver Fox …

  • lastmanstanding

    Good God…these guys just won’t quit. As long as they all have asses, they will be attempting to pull something out of it.

    I know what it takes to survive in adverse conditions. Hope I’m never there ever again but it sure doesn’t look promising with the weak leadership that we have had since Ronald Reagan…and he made some mistakes that are showing up today.

    Let’s keep throwing shit at the wall until it sticks.

    Here is some better advise…take advantage of real things that are available to you at low cost and effort. Step outside and embrace the force of the earth and what you can do for one another. Support your local community. Be aware of everyone and everything in your surroundings.

  • Jaxon

    Love the theories, but ALL that matters is WHEN the suppression ends and the price surpasses the 2011 high. Until then, storage costs on top of price declines are killing most including those that dollar cost averaged, only wanting to protect & stabilize their wealth outside of the banking system and US dollar. If those folks have to sell for any reason (health, unforeseen catastrophe, etc.) they’re screwed and looking back on the worst investment decision of their lives. The “I can’t wait for silver to go to zero so I can back up the truck” crowd are morons. You can likely put their big “stack” in a shoe box.

  • AgShaman

    The other side of the trade will always need the other. #’s 79 and 47 are linked.

    As much as it seems an oddity. Silver stackers can only protect their stack with skills, time, and gold. And in that order.

    Good luck stackers

  • The Truth

    Many who bought gold and silver as an investment don’t know a damn thing about investing. Gold and silver are “Money”! You don’t exchange fiat for money(gold & silver) as an investment, you Invest fiat in the stock market(etc), make some more, then exchange for real money. This is the real reason people have gotten their asses handed to them on a platter. Ignorance is bliss!

    E.g When we go to the supermarket and purchase food with FIAT, we never say we are investing in food. We may say we are exchanging our FIAT for food or buying food. Well the same applies to gold and silver. You don’t invest in food for a profit, and should never think about investing in gold and silver for one either. Just as the food is insurance against starvation, gold and silver are the same against financial ruins.

    If anyone wanted to invest in anything, the stock market is and was always there over the past years. Ask anyone who has wealth how do they save? I can guarantee they will tell you of some shiny yellow metal somewhere in a safe, if it is not buried. Matter of fact, they may not even tell you for FEAR of being robbed.

    Many fail to understand that the FIAT currency is the pricing mechanism we use. It is not money. How much will an ounce of silver or gold be when the pricing mechanism(aka dollar) fails? Who can tell the purchasing power of an ounce? You don’t buy gold or silver or even land in our current situation because you want to make a profit. You buy them as a store of value or savings against the failure of our current pricing structure. If and when we get another one, the first thing that will be valued is assets, then labor. Its evil and vain but it is how the world has been running.

    P.S When SHTF, food is the ultimate asset! Then toilet paper..:)After all when one is finished eating, they will be FOS(Full of Shit). Without Toilet paper, they will be SOS(Stink of Shit) and you never want to be SOS!

  • jj

    First of all there is no such thing as “fiat”. This is a term used by PM dealers to make you think “fiat” equates with “worthless”. So many people have bought into this nonsense and now are angry and disgusted because they were promised $100, $200 and even $1000oz silver and it never materialized. Fact is, it won’t! A country’s currency is backed by its total productive resources, (manufacturing, services, innovation,tax rates, etc.), it resources, (minerals, oil, gas, etc.) and the ability of government to manage all of these to full capacity. It is also backed by what it has in its reserves which are US treasuries and dollars to settle international trade, sovereign debt of other countries, gold and what ever other investments it may have. China and Russia understand this and this is the reason they have purchased so much gold, to indirectly back their currencies. To back it directly is the kiss of death for any economy because having a gold backed currency does not provide enough liquidity for growth. This is what happened during the Great Depression. The FED could not print and add liquidity because they didn’t have enough gold and couldn’t purchase any more. This caused the stock market to sell off because people needed cash. By confiscating gold, resetting the price, they were then able to add liquidity to the system. In the 60s the dollar was backed by the ratio of 40%. To pay for the Vietnam War, they printed more dollars than the ratios would allow. With first France and then other countries realizing what the US was doing demanded their trade settlements be made in gold causing Nixon to eventually closing the gold window. There has never been a currency either backed by gold or made of gold and silver coins that has lasted. Governments must provide liquidity for growth and they always end up debasing in one form or another. It would simply be impossible to manage an economy with a gold monetary system today because of the floating price. If the price of gold went down, you only have two choices, 1)pull liquidity out of the system causing your economy to contract or 2) buy more gold to bring the ratios back in balance. Regardless of all the propaganda by the pm dealers of “fiat”, total economic collapse, the COMEX is going to close any day, etc., etc., etc., the facts are the facts. No country on the planet is even remotely thinking about a gold monetary system. It is pure fantasy! As all of the world’s economies are in a deflationary cycle from all the excesses caused by the central banks, the world’s financial system is and has been in a re-balancing mode. Silver unfortunately will continue to fall along with other commodities. This will take years to work out but it will happen without a total financial collapse. One of the major problems is that most of these people who spout this crap have not lived thru any form of a major financial disaster. Most traders on Wall Street have never experienced a bear market. Hell I remember when people said there would be a collapse after the gold window closed, it didn’t, the Arab oil embargo when not only prices of everything went thru the roof but everybody had trouble just finding a gas station that had gas. Let that sink in a minute! Guess what? We all adjusted and moved on. How about when Volker at the FED raised interest rates to 18% to stop the inflation? We adjusted and moved on. How about when every saving and loan in the US was closed down? Let that sink in too! Then we had the crash of 87, dot com bust, housing bust. The US economy has had one disaster after another but unfortunately most people today haven’t lived thru hard times. They are in panic mode but they don’t have to be. Stop believing in all the crap the alternative media is spouting. We will all adjust and move on!

    • Dissolution

      Martin, is that you?

    • lastmanstanding

      jj. Space your thought’s please. I may want to read your post.

      In the old days, we called them paragraphs. Not sure if they teach that in schools these days.

      I am older, have to read with magnifiers. Thanks.

      • Windrunner56

        HAHA. Lastman – I fealt that too. Approaching 60, my progressive glasses steam up when I try to read on and on paragraph.

        We learned how to separate in school. However, perhaps jj is one of these types that type continually while they think. It is quite a talent actually. Good for him, bad for you and me…

        At any rate, keep stacking BUT, keep plenty of fiat under your mattress. You will need both, along with those items THE TRUTH talks of.

        • lastmanstanding

          He may be a deep thinker brother…I used to be and found that listening to others and then thinking worked better and was cheaper.

          Ah the lessons we have learned…the hard way.

          I know how valuable those hard lessons were. Especially, now.

    • Tin foil hat

      It’s truly amazing that you have all the right answers but still cannot come to the obvious conclusion.

      Gold standard monetary policy failed because gold price was fixed. With modern technology, gold is not only traded in the commodity market, it is also bought and sold in the FX market.

      Currency is indeed back by the GDP of its respective nation and the excess which is stored in the reserves. The reserves consist of dollar (mostly in the form of US Treasury), yen, euro, pound or gold – gold is the bastard reserve.

      The problem we have is that dollar is manipulated up (not back up by GDP, trade deficit every single year since 1976), gold manipulated down (law of supply & demand out the window). Yen and pound are the co-conspirators with the dollar in a three cards monte scheme. The FX market which we depend on to pull or push is not a free market.

      We all adjusted and moved on through the previous crisis by expanding the reserves first in order to inflate the GDP later. Now, what we are facing is that the reserves expansion/manipulation has reached critical stage of excess mal-investments which is detrimental to the GDP. This is what happen when a free market is dead. Gold is the canary in the coal mine which was silenced, bring it back will be the beginning of the healing process.

  • Tin foil hat

    “Gold standard monetary policy failed because gold price was fixed. With modern technology, gold is not only traded in the commodity market, it is also bought and sold in the FX market.”

    Being that gold price is not fixed, closing the gold window or confiscation of gold in order to reset the price is unnecessary. All we have to do is stop letting the dollar denominates the price of gold and commodities via derivatives.

  • Tin foil hat

    If gold is the canary to the monetary mine then silver is the canary to the gold mine. The Chinese understand that gold is the ultimate reserve currency of last resort, not silver.

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>