Iran Could Make Silver Bugs Filthy Rich

If the first year of the Iraq War of 2003 offers up some clues to the potential move in the silver price following an invasion of its neighbor Iran, then grab as much of the white metal as you can and enjoy the ride.  This ride could be for the record books.  Sign-up for my 100% FREE Alerts

On the officially day of the U.S. invasion of Iraq on Mar. 20, 2003, silver traded at the lowly price of approximately $4.35.  On the first anniversary of the invasion, the silver price reached nearly $8.00, for an 83 percent return (see graph, below).

But an attack on Iran could make an 83 percent return seem miniscule.

Backing up for a moment, however, an obviously important question, first, should be: how likely is an imminent attack on Iran?

With reports of American troop movements into Israel, along with Reuters reports of two U.S. aircraft carriers headed to the Persian Gulf and a lot of chatter from Washington command appearing on television as salesmen for an attack, a military strike on Iran is likely, according to Jim Rickards, adviser to government personnel on U.S. national security issues and frequent guest of King World News.

“Eric, this really could not be more serious,” Rickards told Eric King’s KWN.  “The fact that we, meaning the United States, are on a path to a war with Iran is very clear at this point.  It does seem the countdown has begun and it’s coming to a head sooner rather than later.”

And following Iran’s announcement that it will no longer accept U.S. dollars for Iranian oil, the U.S., really, must respond (1).  If not, OPEC gets the green light to dump the dollar and it’s game over for the U.S. without a shot being fired.

Consider, too, recent data from the Fed, which show clearly that foreigners aren’t buying enough Treasuries to even remotely match the increase to the central bank’s balance sheet.  In fact, according to the chart, below, a war with Iran is a most likely stab at coaxing global money back into preventing a waterfall in the dollar after bond vigilantes are done with Europe.

Source: zerohedge.com, Foreigners Sell Record $85 Billion In Treasurys In 6 Consecutive Weeks – Time To Get Concerned?

But here’s why the silver price could triple, or more!

The difference between the Iraq War and a war with Iran is:  Iran isn’t Iraq!  Saddam Hussein’s regime had no friends in the region, and certainly didn’t attract meaningful help from Russia or China before, or during, the conflict.

Hussein was essentially a rogue operator, according to William Clark, author of Petrodollar Warfare: Oil, Iraq, and the Future of the Dollar, which, by the way, offers a good foundation to Jim Rickard’s book, Currency Wars: The Making of the Next Global Crisis.

Because of the well-known and long-standing commitment from Russia and China to defend Iran, a war with Iran could turn into a proxy for WWIII, a notion widely offered in the public domain.

In other words, if Iran is attacked, the move in the silver price could be monstrous—with two and three-bagger returns very likely, with oil and other commodities soaring to unthinkable levels as China utilizes one of its financial weapons in response to military aggression.

The cost of a war with Iran will soar off the charts to an already hopeless U.S. debt level.  In fact, a planned dollar devaluation could be the motive behind an Iranian attack.

According to a policy paper penned by Felix K. Chang and Jonathan Goldman for the U.S. Army and posted on the U.S. Army Web site, titled Meddling in the Markets: Foreign Manipulation, the threat by China, Russia and sympathetic nations against U.S. aggression, a war with Iran will not be a cakewalk by any stretch of the imagination.  Link to document file, here.

According to Chang and Goldman, Iran puts at risk the U.S. dollar in a very meaningful way.

The simultaneous dramatic devaluation of the U.S. dollar and a sharp increase in oil prices would immediately unsettle global equity and bond markets. During such times of uncertainty, institutions and investors normally seek a safe haven where their assets will hold value. For much of the twentieth century, that haven has been the dollar. In this hypothetical, however, the dollar would be at the epicenter of uncertainty, as China unloads its U.S. Treasury securities in favor of gold or euros. Aggravating the situation, institutions and investors of all stripes would magnify the selling pressure as they tried to shed their own devalued U.S. assets—liquidity would rapidly disappear. [emphasis added.]

While many of traditional media may repeat the mantra that precious metals are risky investments, the facts about war and money show otherwise.  At risk here is the dollar.  Sign-up for my 100% FREE Alerts

Footnote:
(1) The Invasion of Iraq: Dollar vs Euro: Re-denominating Iraqi oil in U. S. dollars, instead of the euro

The unprovoked “shock and awe” attack on Iraq was to serve several economic purposes: (1) Safeguard the U.S. economy by re-denominating Iraqi oil in U.S. dollars, instead of the euro, to try to lock the world back into dollar oil trading so the U.S. would remain the dominant world power-militarily and economically. (2) Send a clear message to other oil producers as to what will happen to them if they abandon the dollar matrix. (3) Place the second largest oil reserve under direct U.S. control. (4) Create a subject state where the U.S. can maintain a huge force to dominate the Middle East and its oil. (5) Create a severe setback to the European Union and its euro, the only trading block and currency strong enough to attack U.S. dominance of the world through trade. (6) Free its forces (ultimately) so that it can begin operations against those countries that are trying to disengage themselves from U.S. dollar imperialism-such as Venezuela, where the U.S. has supported the attempted overthrow of a democratic government by a junta more friendly to U. S. business/oil interests.

Silver Price: Attention All Crybabies, Get the Checkbook Out!

The tears stream from the faces of the silver bugs.  Boo-hoo!  Where’s my $100 silver?

Toughen up!  Better yet, go buy a 10-year Treasury, then.  I hear Greek 1-year paper is even better, paying out 150 percent.  What a deal!

Look! The Fed wants you OUT of precious metals.  Understand?  Sign-up for my 100% FREE Alerts

But before you hit that sell button, there are some pretty smart fellas who’ve done a lot of legwork and research on the subject of silver and see $100 as chump change when the dust settles from these manipulating bankers.  Keep the faith.

Physical buyers will break the cartel, and not by Max Keiser’s gang of JP Morgan haters getting together to clean out the COMEX, though Keiser’s laudable efforts will aid the cause of protecting investors from the Fed’s insanity.

No sir.  It will be China who will drive the silver price higher for all silver bugs.  So relax, be patient and enjoy.

One man who provides the silvery details to the China story, Stephen Leeb Ph. D, economist, NY Times best-selling author, and promoter of his latest book, Red Alert, is back to remind silver bugs of the bright future for the silver price in his latest  interview on GoldSeek Radio (GRS).  (Previous BER articles about Leeb and silver, click here and here.)

“Silver is an utterly critical metal when it comes to renewable energies, solar panels; there’s no other game in town,” Leeb told GSR.  “ . . . Silver-based solar is going to play a major part in our energy future . . . China used to export silver, now they’re importing, and they are very big importers.  And they [China] went on to say that they’re not going export any silver what so ever.”  Though China recently relaxed its strict export quota of rare earths, silver was not included in the increased export quota.  And for good reason, according to Leeb.

Who is Stephen Leeb.  He’s not the marquee name in Google’s search results.  He is not as well-known as Jim Rogers; he’s not Marc Faber; and he’s not Peter Schiff.

Leeb is, however, a prolific author and researcher who’s looked at China’s multi-decade economic plans—plans that require a monstrous amount of critical industrial metals, including silver, to fulfill a national, strategic goal of reducing fossil fuels consumption within the People’s Republic.  Leeb predicted the oil price would top $100 when it traded at $27.  Now, he’s more alarmed at what he has discovered about China’s future consumption needs for the new energy commodity, silver.  (See Robert Hirsch interview (audio) on the subject of Peak Oil on Financial Sense Newshour of Dec. 15.)

Leeb’s emphasis on detailed points about silver and its importance to renewable energy projects in China is ahead of the curve from most precious metals advocates—though, Rogers, in a broader sense, has already taken Leeb’s thesis regarding China voracious needs to include almost any commodity.  And according to Leeb (echoed by Jim Rogers), the supply and demand characteristics for silver in the renewable energy sector must include a much, much higher price.

“I do believe [$200] is not an unreasonable target” for silver, Leeb told GoldSeek Radio host Chris Waltzek.

Leeb believes the silver’s industrial usage for renewable energy will greatly outweigh its usefulness as protection against central banker monetary profligacy.  The need for silver will become a global security issue at some point, especially in the US, but the America must “wake up” to, first, address the issue of Peak Oil and publicly recognize the vital commodity for the next decade or two will be silver.

“But the problem is,” Leeb continued, “once it reaches one hundred [dollars], people start getting very, very nervous.  It’s a very, big broad round number and they [bankers and/or government] start taking action; they might consider outlawing the ownership of silver as a monetary metal.”

The future must include breaking from fossil fuels as a source of energy; there’s just not enough cheap oil to go around, and China doesn’t want to take on the U.S. military to get the amount of oil it needs to increase its own GDP, according to Leeb in an earlier interview on Financial Sense Newshour of Nov. 10.

Wind and solar power are the future, and China “gets it,” he said.

“Along with rare earths, which are obviously so vital, so critical, you also have copper, which is on no one’s radar screen as a potentially scarce metal,” Leeb said in his most recent GSR interview.  “And you have silver, which is on some people’s radar screen, but they don’t know if it’s like gold, a precious metal, or whether it’s an industrial metal. Well, it’s both.

“But I do believe that its primary purpose over the next five to 10 years is going to be as an industrial metal; it’s going to be critical to defining our energy future.  And China really does get this.  They’ve written about peak oil and they’ve written about peak coal.  So they’re preparing.”

Shedding some light on the probably plans for China’s $3.2 trillion reserve, Leeb expects a lot of that money as well as future reserves will be spent on stockpiling strategic metals instead of using the cash to build a powerful war machine to match Russia to collectively compete directly against the U.S. and its allies during the remainder of the decade—speculatively speaking, a sort of a Sun Tzu tactic inspired by the book, The Art of War (English translation & Wiki synopsis), which has been reported by several sources as required reading for all Beijing senior officials.

“Their major expenditures . . . they have cited seven industries, of which, the most important, are energy based industries, which they plan to spend, I would guess, nearly $5 trillion to the end of the decade.  That’s the equivalent to two world wars . . . and they’re going to spend that over the next eight or nine years.”

How much silver will be needed during this $5 trillion outlay in renewable energy projects in China?  “Mind-boggling” amounts, according to Leeb.  And as far as price, Leeb steps up his $200 per ounce easy layup prediction to venture into much bigger price levels as possibilities for the white metal.

“There’s no way of saying how high it [silver] will go; it’s dramatically high[er],” according to Leeb, when taking into account, too, central banks opting to inflate out of a debt bubble gone popped.

At $27 silver, the price is “ridiculous,” he said, and added, “I’m a believer of $10,000 gold. . . but I would not be surprised, if we avoid a Depression between now and the end of this decade, I would not be surprised if gold doesn’t touch $10,000.”

Given Leeb’s prediction of a gold/silver ratio touching at least 7.5, that calculates to a silver price north of $1,000 by the end of the decade, making a $200 prediction seem easily attainable, indeed, under a Leeb scenario.  Sign-up for my 100% FREE Alerts

Silver price: Hey Silver Bugs, You Cryin’ Yet?

The more silver bugs cry as they watch the latest breakdown in the silver price the better it is for the rest who will make it through to the other side of the biggest financial crisis since the Civil War.  Sign-up for my 100% FREE Alerts

Take in the economic scenario the Fed faces, then ask yourself what the Fed will do about it and which planet will the silver price orbit after the dust settles.  Here are the facts that should calm investor fears:

“Let us be honest. The U.S. is still trapped in a depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP,” The Telegraph’s Ambrose Evans-Pritchard penned in a Jul. 4, 2010 article.

Now look at Shadowstats economist John Williams’ chart, below.  GDP is again dropping, 18 more months later, from Evan-Pritchard’s last year’s Independence Day article. (The real GDP is calculated by Williams, shown by the blue line.)

Now, take a look at the number of U.S. food stamps recipients?  Does the graph, below, square with an employment rebound?

If the economy has been on the mend, slowly creating jobs for nearly a year now, why have there been 4 million more food stamps recipients in the U.S. since July 4, 2010?

Note the blue line in John Williams’ graph, below.  That’s the real unemployment rate (approximately 22.5 percent)—the rate that would have been reported by the BLS during President Ronald Reagan’s first term (1981-85).

And the jobs created which blunted a crashing jobs market have been the throwaway kind.  See BER article, Gerald Celente:  Brace for Economic 9/11.  The trends forecaster describes the type of jobs created, mostly the type of local jobs that you would find on the tropical island of Fiji, not the high quality jobs found in Germany or Switzerland.

And it’s about to get worse, as Celente predicts.

The U.S. is “tipping into a new recession,” ECRI’s Lakshman Achuthan told Bloomberg Radio on Sept. 30  “We don’t make these calls lightly. When we make them, it’s because there’s an overwhelming objective message coming out of our forward-looking indicators. What is going on with the leading indicators is wildfire; it’s not reversible.”

Since Sept. 30, Achuthan hasn’t budged from his dire forecast.  (See Economic Cycle Research Institute—ECRI, here and, of Dec. 9, here.)

Okay, the Fed faces a U.S. economy that’s rolling over—again—from an already negative GDP, according to John Williams.

So, what will the Fed print to prevent an economic collapse?

Watch it; it’s a trick question!  Jim Rogers explains in a Dec. 14 interview with TheStreet:

TheStreet Reporter: What should the Fed do at their upcoming meeting, aside from QE3?  We’ve seen more Fed presidents come out and call for more monetary easing.  What should they really do?

Jim Rogers: They’re already, Alex, they’re already . . . QE3 is already here, Alex.  Get out the numbers for non-seasonally adjusted M2, and you will see that Mr. Bernanke said, in the summer, we’re going to keep rates artificially low. You can’t just say the words, you got to do something.

Rogers goes on to say that the Fed hasn’t stopped printing money since QE2; it just wants people to think it has.  And thanks to a complicit media, whose been told to repeat the con over and over in an effort to prevent a bona fide run on currencies, some investors still believe the Fed has stopped printing.

Look at the chart, below.  A couple of months ago, the Fed was expanding M2 money supply by 20 percent!  That’s a rate that even former Fed Chairman under President Nixon, Arthur Burns, would blush at, as the maestro of the 60s and 70s presided over the highest U.S. inflation rate since the Civil War.

The Fed never stopped printing!

Silver investors now wait for Bernanke to announce even more printing! That’s when the top blows off the gold and silver market, according to Jim Rogers, Peter Schiff, Jim Rickards, Marc Faber, James Turk, James Sinclair and FX Concepts John Taylor.

That signal could come in late January, maybe tomorrow, or next week, but it’s coming.  Let’s see what more Fed money printing will be called this time.

Back to the Rogers interview.  Notice how the scripted question by TheStreet reporter was written in a way to fool the public into thinking that the Fed hasn’t been printing money since so-called QE2 ended on June 30?

It’s the ol’ leading the witness trick, with a false premise to plant a lie in the minds of the observers, to throw them off the track to the truth.   At least TheStreet reporter didn’t stoop to the, “Well, of course you’re going to say that, Jim, you sell your Rogers Commodity Fund” line, or something along those lines.

Here’s another example of the vicious propaganda thrown at some pretty smart guys who warn of a coming tsunami of commodities price inflation in 2012:  Witness the Marc Faber interview on CNBC, last week.

In his interview with CNBC’s ‘working girl’, Maria Bartiromo, Marc Faber got the better of the dullard Bartiromo, working her over pretty well (if she noticed).  Faber’s had 20+ years experience dealing with such nonsense during his time living in Thailand.

Do a Google Images search on the term, “Maria Bartiromo.”  You’ll see endless poses in the search results.  That’s what CNBC thinks of you—a 20-year-old drunk on a Thai vacation.

Bartiromo, after hearing Faber’s gruesome assessment of the world economy, said, “Okay, you think the world is ending, so which five stocks would you buy?”

By the way, if you didn’t listen to the Bartiromo interview, Faber outdid himself with yet another one his great Faberism.  He retorted, “I Have A Very Special Stock Tip For You. The Symbol Is G-O-L-D.”  Now, that’s a great Faberism!

And finally, and more dramatically, The Hat Trick Letter’s Jim Willie explains the Fed con in a really classic Jim Willie style—his style is the rambling and information-packed rant!  See BER article and link to audio interview here.  Willie covers almost everything in this interview that silver investors should know.

So we see sub-$30 silver.

Now for the question that’s on everyone’s mind . . . drum roll please. . . how far will the silver fall?

And the answer is the same as it has been since the bull market began in 2002: When every last ripe apple falls from the shaken tree.  That’s when the price will stop falling.

And right now, the tree needs to be shaken as hard as the Fed can shake it, because the next move up in silver will most likely be akin to the last one.

You remember, the move from $17.50 to $49.94, from August 2010 to April 2011, a 177 percent price explosion higher within 8 months?!

The Fed would just prefer the base of the next move for silver (gold, too, as well as oil and other commodities) is lower before the massive catapult higher.  Also, remember, north of $50 in the price of silver unleashes the metal; there is no resistance levels above that price.  This is the last stand for the Fed, and it will make the best of it.

Silver Price much too Low, Eric Sprott

Nervous about the silver price during the worsening global economic slowdown?  Don’t be, according to Eric Sprott, CEO of Canada’s largest independently-owned securities firm Sprott Asset Management.  Silver (and gold) have become de facto reserve currencies, according to him.

In the silver market, “we’re going hand to mouth these days,” Sprott told listeners of Financial Sense Newshour.  And Sprott, of all people, should know; the last significant order placed in the open market by his firm in late 2010 took three months to arrive, he said, “and some of the silver that was delivered to us was manufactured after we purchased it.”

Following the massive ambushed on the silver market by Fed proxy JP Morgan during the month of May, Sprott, has noticed a radical change in the dynamics between the paper market for silver and the physical market for the white metal.

“The physical market is what I analyze more than anything else, and all I see is buyers,” Sprott said, at which point FSN host James Puplava chimed in, “That’s what the dealers are telling me.”

In the past, a Fed ‘take down’ caused demand for physical to cool significantly.  Today, however, typical supply/demand norms have been righted—that is, lower prices increase demand and visa versa.  In other words, the silver market has become functional through its physical market participants.

“It was very convenient for central bankers and governments, the price of gold fell off exactly as Europe hit its sort of peak in risk of the financial arena in the sovereign thing,” Sprott mused.  But, this time, the Fed-led take down of silver and gold prices revealed a large crack this time in its scheme to suppress precious metals demand in the physical market.

Sprott suggested that the evidence gathered from buyer demand in physical bullion at his firm, and others he deals with, has led him to conclude that gold has finally taken on the role as the preferred reserve currency, a conclusion also drawn by Grant’s Interest Rate Observer author and publisher James Grant, World Bank President Robert Zoellick, Euro Pacific Capital’s Peter Schiff, as well as bullion experts James Sinclair and Goldmoney’s James Turk.

“The markets have made gold the reserve currency.  That’s what I believe, that’s gone up 100 percent against every currency in the world,” Sprott explained.  “So, it is the world’s reserve currency, as far as the markets go.”   “And as an offset to that, gold is not going to be a reserve currency without silver playing a hand here.” Get my next ALERT 100% FREE

If an investor takes a three to five-year horizon of the silver market, according to Sprott, the historical ratio between gold and silver of approximately 15:1 (a geological observation of relative scarcity of earth deposits) will, again, be achieved as investors realize that a decision to buy precious metals to offset ongoing devaluation of fiat currencies across the globe will more likely favor the relative cheaper of the two metals to the other.

Moreover, as Sprott points out, mining production statistics throughout recent years reveal a decline in the historical ratio of availability between silver and gold ores.  Today, it appears that the ratio has been stuck at approximately 10:1 for some time now, suggesting to some analysts that maybe ‘peak silver’ is upon us.

“So why should it trade to a 50:1 multiple?” posits Sprott. “Give it three to five years; we’re going to get back to ratios which are way more appropriate to the underlying fundamentals of gold and silver.”

At today’s gold price, a reversion to the historical norm calculates to a silver price of $110, or a whopping 70% discount to today’s $32 price tag, under the Sprott thesis.

As approximately 57% of the world’s GDP, that percentage, which is the combined GDP of the U.S., EU and China, appears to be collapsing—again (see IMF), a well-founded sense of gloom for a coming worse economic time has gripped global markets rather quickly, creating fear of another Lehman-like unwind of money flows out of dollar and euro-denominated assets, back into those currencies, which could, then, take down the precious metals complex.

Sprott believes that argument will ultimately prove to be a specious one, a throwback to another time when the U.S. dollar (and euro) was readily accepted as a reliable medium of exchange.  Today, investors should, instead, focus upon horrendous supply constraints and mushrooming investor demand, driven by eroding faith in the both the dollar and euro.  Violent short-term swings shouldn’t dissuade investors from holding silver for a three to five-year outlook, according to Sprott.

“God forbid that we actually end up with a seriously declining economy,” he said facetiously.  “Because if you think it’s bad for banks, today, wait until you have to deal with a couple years of negative GDP growth and what happens to value of those paper assets that they own.”

Sprott added, “The ultimate destiny for gold and silver is that people will prefer to own those investments rather than have money in the bank.  And there’s a lot of money in banks.  People don’t yet perceive that gold and silver are the superior investment, but in my mind they are.  Because when you have money in the bank, there is tremendous counter-party risk.”

Counter-party risk?  That’s a Goldmoney’s James Turk’s theme—a theme, Turk believes will seep into investor consciousness over time, catapulting silver to phenomenal heights in the coming years.  Ditto for Eric Sprott, who said in a MineWeb interview of April 5—“Silver is the investment of this decade as gold was the investment of the last decade.  So we’re sitting back waiting for things to evolve here.”

Silver So Critical, “Government may even Ban Public Ownership”

In an interview with GoldSeek Radio Chris Wolzcak, Dr. Steven Leeb, the co-author of the upcoming book, Red Alert: How China’s Growing Prosperity Threatens the American Way of Life, began the interview somewhat loathed in his strong recommendation for owning precious metals at this time, noting that a rise in the price of gold, especially, denotes the dollar’s expected fall from grace—which he said will turn “tragic” to citizens of “our great nation.”

As dire as the future of the U.S. economy may turn out, however, he told listeners the only way out of becoming a victim of the vicious currency war to the bottom is to hold gold.

But, when Wolzcak steered the conversation to the potential for the silver price during Leeb’s expected continuation of the precious metals rally, Leeb raised his level of enthusiasm a notch, and stated, “silver is going to triple-digits, I mean, I think there’s little doubt of it, because, you know, it’s a monetary metal with probably a longer history than gold’s.”

But here’s where the Leeb interview went beyond the overcooked reasoning behind silver’s expected rise as a hedge to the world’s currencies debasement war.  Leeb continued, “I emphasize this, [silver is] a critical . . . the best thermal conductor in the world, the best electric conductor in the world, and one of the best reflectors in the world.”

“And as a result, silver is a critic ingredient in solar panels. . . so silver is critical to making the transition to renewable energy . . . in computers . . . it’s critical in many, many areas,” he added.  “So silver has the potential to truly go exponential.”

Leeb builds a compelling case for owning silver by citing China’s plan to spend up to $1 trillion in renewable energy projects each year for the foreseeable future, which will destroy replenishing stocks from mining and recycling activities.  He then surmises that alarms will trip in Washington to a point of near panic level.

And World Gold Council data back Leeb up. The WGC reported China imported 3,500 tons of silver in 2010, and that’s in addition to India’s growing demand (and China’s) for the metal as an alternative to gold’s demand as an inflation hedge.  Further increases of silver imports, not only into China, but into India, too, could choke silver supplies a lot faster than people now think.

“I mean, once the Chinese build out their solar energy, and they haven’t up to this point, but they will, they’ll start accumulating silver, added Leeb.  “In fact, I wouldn’t be surprise right now if they weren’t accumulating a lot of silver.”

“And my prediction is that silver will go high enough, and if we recognize it’s so critical, that the government may even ban public ownership of it, like the government banned public ownership of gold during the Depression,” Leeb continued.  “I think, well, silver over $100 per ounce—I almost think it’s inevitable, that silver hits three digits to be honest with you.”

And it gets better for the silver junkies.  Leeb said, though the price of silver has soared nearly ten-fold during the bull market, mining activity during the decade-long run has been abysmally low, because, he said, silver has begun to move into the category of rare-earths.

And because of the powerful mismatch between expected world supplies and demand for gold’s kissing cousin, silver will become increasingly more rare, according to Leeb.  The Chinese, he speculates, “know they’re going to need more than there is to build out their solar energy.”  As crazy as the fundamentals sound for the outlook for silver, he said, “It’s documentable.”