Exposing Silver Mythology: Opinion, Part 3

(Corrects story to excise personal attacks against Kitco's Jon Nadler. TheStreet, in encouraging civil debate, regrets the remarks.)

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Bullion Bulls Canada ) -- In parts one and two, we were presented with a shocking perspective on the silver market. The principal record-keepers for the silver sector, and the largest single regulator of the silver market both display not only an abysmal level of ignorance concerning the silver market, but the seeming incapacity to even understand basic arithmetic operations.

The result of this display of ineptitude is that the mainstream data and analysis which reaches the market from these official and quasi-official sources has absolutely no basis in reality. It is precisely this sort of vacuous nonsense which is relied upon by mainstream silver bears when they spew their negative drivel.

Kitco's Jon Nadler has gone through a 10-year-plus bull market for gold without acknowledging it. He was particularly dour on silver in a recent article on silver. First the context:

Some market watchers are warning that silver faces a vicious bear market that could eventually take the price to the mid-teens...

What clearly identifies this as misguided is the following passage:

...the problem with the bullish case for silver, at least over the near term, is the threat of growing supplies.

A key industry figure highlights the problem. According to the trade association the Silver Institute, the average cash costs at silver mines...worked out to a mere $5.27 an ounce in 2010...

Note that the article talks about "the threat of growing supplies" without data about actual growing supplies. The implication that the current profitability of silver mining will thus flood the market with silver "over the near term" is the precise opposite of reality.

1) Despite a 10-fold increase in the price of silver off of its 600-year low (spread over a 10-year-plus period), we have seen no more than a 1% to 2% annual increase in silver production throughout that period. This means there is absolutely zero empirical evidence to support Nadler's assertion.

2) The approximate time to bring a new mine into production typically falls into the range of five to 10 years. Thus the profitability of silver mining today couldn't possibly have a significant impact on silver production until (at least) the middle of this decade. This means that the ridiculous assertion of a surge in supply "over the near term" isn't even theoretically possible.

Like Jeffrey Christian, Nadler parrots the view that Western central banks have no interest in manipulating the gold market. Yet all serious precious metals investors are familiar with the infamous promise made by the Federal Reserve's Alan Greenspans that "...we stand ready to lease gold in ever-increasing quantities," and it can only be interpreted as intent to squash the price of gold -- should its soaring price ever sound the warning that the bankers' money-printing atrocities were mushrooming out of control.

More recently

acknowledged the bankers' willingness to use gold as a tool to deal with exchange-rate instability, which is saying precisely the same thing, except framed as a euphemism. Just as some precious metals analysts and traders distort data and fundamentals -- since the real facts completely contradict their spurious attacks -- they are equally willing to flatly deny words and events which have existed in the public domain (in some cases) for decades.

The motive for suppressing the price of silver (as with the price of gold) is maddeningly simple and obvious. What has changed since silver was $5/oz and gold was $300/oz? Nothing has changed with the metals. An ounce of gold in the year 2000 is just the same as an ounce of gold in 2012. Obviously the rising prices for these metals can only mean the paper the bankers are printing has been losing value -- and rapidly.

This is why anyone/everyone who understands the fundamentals of precious metals refers to these metals as "the canary in the coal mine." If prices for precious metals start to rise rapidly, this is a direct warning to us that our banker-paper is rapidly losing value. The banksters' age-old con of stealing by dilution is thus exposed to the masses.

Yet we have the CFTC in 2004 and Jon Nadler today insisting that it's impossible to see any genuine motive for suppressing the prices of gold and silver. Meanwhile, we have our governments trumpeting the news that they are engaging in competitive devaluation: racing to see which of them can drive their currency (our "money") toward zero the fastest.

Why isn't there rioting in the streets? Because the apathetic sheep who vote for them (up until now) haven't bothered flicking the "on" switch with their brains to process what competitive devaluation really means.

But what happens when gold surges above $2,000/oz, and silver surges above $50 (as is inevitable as long as competitive devaluation continues)? Will the switches go on then? Or will it take $2,500 gold and $75 silver? At some point the canary in the coal mine will wake up the masses, and the "marks" will be aware of the con-men's game. And then it all comes to an end.

Source: TheStreet.com, 1 February 2012