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As a general rule, the most successful man in life is the man who has the best
information
In 1873, the Fourth Coinage Act was enacted
by the US Congress. Western silver
miners labeled this measure the "Crime of
'73" because it stopped the printing of US silver
dollars. The US had, unofficially,
abandoned its bimetallic standard in favor of
a monometallic one – gold.
The supply of silver not being used for coinage increased - European Nations had just gone from a silver to a gold standard, the US was
no longer coining silver
dollars and these two factors, when coupled with massive new silver discoveries in the
American west, caused the
price of silver to
collapse.
"There was
once a time in history when people acted. . . . Farmers were trapped in debt. They were
the most oppressed of Americans, they experimented with cooperative purchasing and
marketing, they tried to find their own
way out of the strangle hold of debt to merchants, but none of this could work if they couldn't get capital. So they had to turn to politics, and they had to organize themselves into a party. . . .
The populists didn't just organize a political party, they made a movement. They had picnics and parties and
newsletters and classes and courses, and they taught themselves, and they taught each
other, and they became a group of people with a
sense of purpose, a group
of people with courage, a group of people with dignity."
Lawrence Goodwin, author
of The Populist Moment
Western miners, seeking the right to turn silver directly
into money, mid-western
grain and southern cotton
farmers (who both had immense debts because of price deflation caused by overproduction) rallied to silver’s cause
and the movement became known as Free Silver. The Populist Party had a strong Free Silver element and its merger with
the Democratic Party moved
Democrats from being in support of a monometallic
gold standard to the Free Silver position.
Free Silver supporters were called "Silverites."
Silverite’s argued
that silver should continue to be part of
the monetary standard with
gold, their slogan was
"16 to 1" – sixteen ounces of silver would be equal
in value to one ounce of gold, using
the ratio established in the Coinage
Act of 1834.
Silverites also
wanted "free coinage
of silver" as authorized
under the Coinage Act of 1792. Free coinage meant anyone who possessed uncoined gold could bring it to one of the United
States Mints and trade it for its equivalent
in gold coins, less a small
deduction - Free Silver advocates wanted the mints to accept silver on the same principle. These inflationary measures would have increased the amount of money in circulation and helped
debtors pay off their debts, while harming creditors and savers.
Opponents to the Free Silver movement were mostly the financial establishments of the Northeast
- the moneylenders, creditors,
banks, leaseholders, and
landlords - they backed a
monometallic gold standard - the expanding economy had constrained the money supply available on a gold only standard, this had made the dollar stronger
and decreased prices, opponents of Free Silver wanted to keep it that way.
The Republican
Party was against Free Silver, the party’s
position being that the
best way to national prosperity
was "sound
money." Republicans favored
a continued strong
dollar, which rewarded savers and creditors.
Battle lines were drawn,
on one side were the Free
Silver proponents –
miners, farmers, debtors and Democrats - who wanted a bimetallic standard, the free coinage
of silver and inflation. On the other
side of the line were the
creditors and Republicans
who wanted to keep a strong currency using a gold only standard.
Intense pressure
caused the U.S. government
to agree to the Bland-Allison
Act of 1878, this act directed the Treasury to purchase silver at a high
price. The Sherman Silver
Purchase Act was enacted on July 14, 1890.
It didn’t authorize
the free and unlimited coinage
of silver that the Free Silver supporters wanted, but it did increase,
by a large amount, the amount
of silver the government was required to purchase every month.
Using a special
issue of Treasury Notes that
could be redeemed for either silver, or gold, the US government
became the second largest
silver buyer in the world
- after the government of
India.
By 1893 the US was in one of the worst depressions in American history
and people were turning
in the new Treasury Notes for gold and depleting the government's gold
reserves. President Grover Cleveland (R) forced the
repeal of both the Bland-Allison and Sherman Silver
Purchase Acts.
Democrats failed
to win any presidential elections in which the Free Silver issue was front and center. When a Democrat, Woodrow Wilson, won in 1912 he signed
into law, in 1913, the Federal Reserve Act that created
and set up the Democrats version of a Federal Reserve - having congressional oversight.
The Republicans had their Aldrich Plan for a Federal
Reserve - it gave control to private
bankers. There was strong opposition, mostly from rural and western states. They
feared that the Fed would become a tool of rich and powerful eastern bankers based in New York City
- the "Money Trust.”
In 1913 the Pujo Committee Report concluded that a group of influential financial leaders had gained control of US manufacturing, transportation, mining,
telecommunications and financial
markets - no less than eighteen different major financial
corporations were under
control of a cartel led by J.P Morgan, George F
Baker and James Stillman.
Silver metal
was recognized as more precious than gold when bartering in ancient Egypt - this recorded as early as 930 BC. Silver’s
use as money in coin form began
around 2600 years ago. Silver and gold have stood the test of time, as a medium of exchange, a storehouse of value and a safe haven in times of turmoil.
Back to the
future where we find the little bit of history, just presented, made even more fascinating by events unfolding in a Far Far Away place - Washington. Interesting to read a bit about
the history of both sides in the now concluded debt ceiling debate.
“One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric
being thrown around, the real debate is over how much government spending will increase.
No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are
not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving"
$100,000 in expenses by deciding
not to buy a Lamborghini, and instead
getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly
serviceable Honda. But this
is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the
American people.” Ron Paul (R)
Only a third
of mined silver
production comes from the
production of primary silver
mines, the rest comes from mined production of other metals, namely zinc and lead, 25% is from production of copper mines
(Chile has very little primary silver production but is the fifth largest silver producing country) and the rest
is from production at gold mines.
Mined silver
production rose by 2.5 percent to 735.9 M oz in
2010 - gains came from primary
silver mines and as a by-product
of lead/zinc mining activity.
Silver produced as a by-product of gold mining fell four percent in 2010.
Tom Albanese,
CEO Rio Tinto Group, the world’s second largest mining company, said that the copper industry has struggled to maintain supply because of declining ore grades
(ore grades averaged 0.76 percent copper content in 2009, compared with 0.9 percent in 2002), delays to mine
expansions and disruption from strikes.
Christine Meilton, chief
consultant at CRU Group said
there was a risk some copper
projects, expected to
come on stream in 2012
and 2013, will be delayed because of red tape, poor infrastructure
and funding difficulties.
A Report by the
APS Panel on Public Affairs and the Materials Research Society coined the term “energy-critical element”
(ECE) to describe a class of chemical
elements that currently appear critical to one or more new, energy
related technologies.
“Energy-related systems are typically materials intensive.
As new technologies are widely deployed,
significant quantities of
the elements required to
manufacture them will be needed. However,
many of these unfamiliar elements are not presently mined, refined, or traded in large quantities, and, as a result, their availability might be constrained
by many complex factors. A shortage of these energy-critical elements (ECEs) could significantly inhibit the adoption of otherwise
game-changing energy
technologies. This, in turn, would
limit the competitiveness
of U.S. industries and the domestic scientific enterprise and, eventually, diminish the quality of life in the United States.”
The focus of the
report was on energy
technologies with the potential
for large-scale deployment
so the elements they listed are energy critical: silver was listed
as one of their choices based on its use in advanced photovoltaic solar cells, especially thin film photovoltaics.
Conclusion
Silver investment
rose by 40% during 2010 to 279.3 million ounces, almost double the amount for 2009. Demand increased to 167.0 M ozs
(+5.1%) for jewelry and 101.3 M ozs
(+22%) for coins. Other major usage categories are photography
(72.7 M ozs, down 8.3%), and silverware
(50.3 million ozs).
Industrial use accounted
for the bulk of silver
fabrication demand in
2010, 487.4 million ounces, up from 403.8 million ounces in 2009 - an annual increase of 20.7 percent.
Total silver demand in 2010 jumped 14.59 percent while the silver surplus - the difference between supply and fabrication demand -
dropped 12 percent to 173.4 million ounces. Primary silver mining cash costs were unchanged
at $5.27 an ounce in 2010.
The Federal Reserve first issued its debt based
paper money in 1913. Since then the US dollar has lost plus 95% of its value. The history of fiat
money has always been one of failure.
The US dollar was backed
by gold and silver, then just gold - the dollar use to be
the rock all the worlds currencies
were anchored to but when it became
fiat, all the worlds currencies
became fiat.
The Hong Kong
Mercantile Exchange (HKMEx) has recently
announced that they will roll out Yuan denominated silver futures contracts. This exchange will:
- Grant Asian
investors direct access
to silver futures
- Blunt U.S. dominance in silver trading by reducing the importance and influence of the Chicago
Mercantile Exchange (CME)
According to the HKMEx China is already becoming a factor
in the silver market. From 2008 to 2010, silver demand soared 67% in China and
China accounted for nearly
23% of global silver consumption
in 2010.
In 2010 India
consumed 2,800 tonnes of silver,
2011’s consumption is
forecast to rise to 5,000
tonnes. India’s state-owned
trading company - Minerals and Metals Trading Corporation (MMTC) said
it would import 1,200
tons of Silver in
2011-12 as demand for the precious
metal is rising fast.
The rising demand for silver bullion products with 99.99% fineness has started a new
trend - silver denominated
notes reminiscent of turn
of the century American silver
certificates are becoming
quite popular in India, the difference is, these Indian
notes are actually made of silver.
The silver notes closely resemble the country´s rupee and are very popular among the country´s younger generation and rapidly growing middle class. The nominal value of each note corresponds to its
respective weight in silver
- a note with a face value of 10 rupees is equal
to 10 grams of silver.
Silver should
be on every investors radar screen. Is it on yours?
If not, maybe it should
be.
Richard Mills
Aheadoftheherd.com
If you're
interested in learning more about the junior resource market please come and
visit Richard at www.aheadoftheherd.com. Membership is free, no credit card or personal
information is asked for.
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