Saturday, August 20, 2011

Q&A With The Doc: Did Venezuela Change Things?

Ennis writes:

Doc -
My questions here might test the topic boundaries of this site a bit, and may go into a thing or two that I don't know if you would want to, but....
Do you place any credence in FOFOA's $50K for gold?
If so, do you really mean to say $10k at least for silver?
(That really would flip a lot of who is wealthy and who isn't, wouldn't it.)
That would also put you in Bix Weir's territory projection-wise.
Do you place any credence in the rest of Bix Weir's "theory"?
(Is that an OK question for this site?)
(All the numbers just mentioned are referencing a value in today's purchasing power, regardless of future inflation or hyper-inflation.)

In your opinion, Who blows up first: LBMA or Comex?
Gold or Silver? - Did Venezuela Change things...?

Great questions Ennis, I will do my best to answer them all satisfactorily.

As to whether I give credence to FOFOA's $50,000 gold prediction- I think it is entirely in the realm of possibilities, although personally I would put my gold prediction in the realm of Alf Fields/ Jim Sinclair in the $10,000-$12,500 range.  (Obviously hyperinflation were it to occur will send both gold and silver far beyond even the $50,000 fiat number)
Before the end of this bull market, I expect silver to hit a minimum of a 5:1 silver/gold ratio, and I do believe there is a decently high probability that silver actually temporarily achieves 1:1 parity with gold or better.
I do not believe this will last long, as even though much silver has been consumed in industry and there currently is move above ground available gold than silver, this would rapidly change should silver reach price levels in the 5:1 - 1:1 range vs. gold.
First of all, I disagree with many silver analysts that all silver used in consumption is gone forever.
Some of it is undoubtedly lost to landfills, and silver used in impregnated clothing, medical supplies, colloidal silver etc is obviously not recoverable, but much industrial silver is simply unrecoverable today at silver prices near $40/oz. 
A silver price above $500/oz will induce recovery/recycling of much greater quantities of silver than is seen today.
Second, silver is still found in a much greater ratio to gold in the earth's crust, and astronomical silver prices will make the mining and recovery of deep underground silver deposits suddenly economical.  (in a similar way that $100/barrel oil makes deep sea oil rigs profitable)

Obviously this does not mean I am bearish on silver, just that I believe silver's potential spike to parity with gold will likely be temporary in my opinion, before correcting back to a closer ratio to historic norms (perhaps 10:1 - 15:1.

Ok, moving on to your second question- do I put credence in Bix Weir's theory that the good guys are planning the collapse of the dollar and our current debt system in order to bring back gold and silver as currency (i.e. that Alan Greenspan and The Fed are actually good guys)?
I do read Bix Weir, and I have read The Road to Roota children's book issued by The Fed upon which Bix bases his theories.
I think Bix' theories are plausible and I attempt to keep an open mind, but personally I am unconvinced.
I understand Alan Greenspan and Warren Buffet's backgrounds and history regarding gold and sound money, but I also believe that money, greed, and power both can and do corrupt good morals.
I tend to view Bix' theory similarly to how I view Ted Butler's beliefs regarding the new CFTC actually attempting to end the silver manipulation.
Until I see proof otherwise, I remain skeptical and believe that the Fed and government officials are acting in their own personal self interests, as well as in the interests of the elitist banksters such as the Rothschilds and Rockefellers.
Time will tell.

As to which blows up first...COMEX or LBMA, gold or silver...certainly the physical supply in COMEX silver is the tightest.  Even after recent frequent adjustments from eligible vaults into the registered (deliverable) category of over 5 million ounces, there remains a mere 30 million ounces of deliverable silver in the COMEX
At current silver prices of $43/oz, this is a mere $1.29 Billion needed to take delivery of all available silver on the COMEX....mere child's play when you consider annual US budget deficits the past few years have been well over 1,000 TIMES this amount (i.e. the US runs a DAILY deficit of nearly 3 times the amount needed to break the silver COMEX)!
The COMEX gold inventory by comparison has 1,795,729 ounces remaining in the registered category, or $33.22 Billion at $1850 gold.  Thus it would take nearly 30 times the capital standing for delivery to bust the gold COMEX as it would the silver COMEX.

Certainly however, Chavez demanding that the Bank of England and other various banks repatriate Venezuela's 210 tons of gold changes things,  as JPM has a mere 10.6 tones or 338,303 ounces of gold in their registered vaults.
What has not yet been discussed or contemplated (at least to our knowledge in the alternative media, and definitely not in the MSM) is Germany.

Germany's foreign gold holdings makes Venezuela's 210 tones look like breadcrumbs.
Germany has over 7,000 tons of official gold reserves, with over 3,400 tons held in the US at the NY Fed.  Most of the rest is held in London and Paris.
If Germany were ever to panic and demand the return of their gold reserves, it is instantly GAME OVER, and SYSTEM RESET time. 

So yes Ennis, there is the potential that Venezuela has initiated a sovereign run on gold that has the potential to blow up gold before silver's manipulation and chronic deficit blows up the silver COMEX.

Thanks for the great questions, hope this helps.