Where has all the Silver gone?

June 6, 2001

The picture below was taken on Sunday, June 3rd at Yankee Boy Basin, 40 miles from my home, in glorious Colorado. One can't Jeep there in winters or even spring, because there is perhaps 50 feet of snow there. But now one can go there in a Jeep. Know where all the snow went? It melted, ran into the Uncompahgre River, which went into the Gunnison River, which went into the Colorado River, and then on through the Grand Canyon, and into Arizona and California, with Mexico getting but a trickle. We know where the snow went, and we also know there will be more, come next fall and winter, but where did all the silver go?

There used to be hundreds of millions of ounces of silver in the US and other government vaults. It didn't melt like the snows of Yankee Boy Basin. It was used. Used for coins, film, computers, and other electronic gee gaws. It was used for sterling flatware and other silver niceties. It was used for jewelry, belt buckles, and other assorted things in common use. Even though the above photograph was taken with a digital camera, regular film that uses silver has by no means evaporated, and will be in common use for many decades to come. There was at one time a rubber tire, but no more, as they are all synthetic. There are a lot of synthetic things, such as margarine that looks like, and even tastes a lot like butter, but there is no substitute for silver. Silver can be used as the lowest resistance wire known to man, and is a superb conductor of heat and cold. Gold isn't a commercial metal, but silver is. The yearly consumption of silver is many times its production. So where did all the silver go? It won't come back this fall like the snows in Yankee Boy Basin, because the price is so low, that no one can possibly mine it for the current price of about $4.40 per ounce. Many of the silver mines are closed.

Not to be a Colorado nut, but the glitzy town of Aspen was a silver town. When the "crime of '93" came about, and William Jennings Bryan was defeated for President, Aspen closed its doors. It was over for Aspen, because the mines had no gold…only silver. Aspen didn't get going again until the late forties when some WWII 10th Mountain Division vets, who had trained there, realized it was a superb skiing area, and the boom began. But the silver mines are beyond recovery, even though there is undoubtedly hundreds of millions of ounces left in Smuggler and Aspen Mountains. It'll never again be mined when it costs $55 a day to ski over all that silver. The silver has all been used up, and little is being produced. There are some processors that recover silver from film developers, but not enough to put a dent in the demand. Some sell the family heirlooms when the need arises, but not enough to put a dent in the demand. There is some dental scrap that finds its way back into the supply, but not enough to put a dent in the demand. The US government doesn't even make its own blanks when they stamp out those American Silver Eagles. It can't, because it doesn't have any silver to make them with, but must buy the blanks from the likes of Englehard or Johnson-Mathey. That's why they cost so much, but you already knew that no government ever does anything economically, didn't you?

Silver is in demand, and the storehouses are empty. As if that weren't bad enough, there are thousands of tons of silver contracts that there is no silver to cover them with if delivery were taken by all the contract holders. It's almost like a huge spring that has been very slowly wound, until it is tight. If the winding continues, the whole thing will break loose with a terrific wallop. The demand is there, (winding) and the spring is tight (silver supply), and the winding will continue. Will the whole thing sort of explode if a lot of people take delivery of their contracts, the price having to go to the heavens to supply them? Could be. Will we all look back on $4.40 silver as we look back on $10 per barrel oil a couple of years ago? Could be. There's a lot more oil in the world than silver. If silver went the way of oil, it would be $12.35 per ounce, and profitable to mine in most places, assuring a supply. But it would take a long time to meet the demand due to lag time, so silver might have to go to $25 until the mines re-opened and supply caught up with demand. It's only a possible scenario, but a realistic one.

Where'd all the silver go? It was, and is still being used decoratively and commercially, that's where it all has gone. But there seems to be no supply near what is being used. If you take more water out of a well than it is capable of producing, there'll be a water shortage sooner or later, and the California electrical thing is the same analogy. Look what happened to California's electrical rates, and transfer that into silver prices, because the comparison is inescapable. Water is expensive when the well runs dry, because you have to pay to bring it in. The silver well has run dry, and it will cost dearly to bring more in. Higher prices makes for production at a profit. Think of the $10 per barrel oil when you look at $4.40 silver prices. Is this fear mongering? Of course not, because no one needs silver like we need energy, food and housing. And oh yes! Food, energy, and housing is what Mr. Green pieces of paper with ink on them does not count in his spurious inflation figuring. This is similar to not counting the gasoline cost in running a car! Just had to throw that in…sorry, but the other writers are correct…Greenspan will not go down in history as a hero!

Don't be left wondering what hit you. The majority has never been right in history. The majority who pooh-pooh gold, and especially silver, touting their worthless pieces of paper with ink on them; savings accounts, CD's, and the other dollar denominated things, are as wet as rain. Pay no attention to the majority and it's seldom that you will go wrong.

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