silver ~ an interesting analogy.....

.....from Jason Hommel.

WEEKLY COMMENTARY (All new in this section):

Silver is money. As such, you cannot analyze silver by looking at current supply and demand factors within the silver industry. We need to look at the supply of paper and electronic money!

Because silver is money, then demand for silver, as for gold, has strong potential to become a positive feedback loop. The higher the price, the greater the demand, because a rising price means it's the better money. Paper money crashes can happen extremely quickly, and thus, rises in the price and value for silver happen equally fast.

People want their money to increase in value. As paper money loses value, people will want it less. The only other alternative to paper is gold and silver. Everything else one may buy is NOT money, and will never become money.

Oil is not money, because if you want to store $4300, you'd need to buy 100 barrels of oil! Where would you go to get the oil? Where would you get the barrels? How would you transport them? Could you have them delivered? And where would you put them, on your front lawn, or backyard? It isreproduciton impractical and difficult to use oil as money.

Zinc is not money, because 46 cents of it weighs a pound! Are you going to haul a pound or two of zinc to the store to buy a pack of gum? Never! Or would you haul 200 pounds of zinc to the store to buy less than $100 worth of groceries? Never!

Silver is money, because 46 cents worth of silver (at $6.50/oz.) is a silver dime. It's very efficient and lightweight, even at these low prices, which means it's actually much heavier than it should be. A silver dime was also once a day's wage--worth about $100!

Silver is money because if you want to store $4600, all you need is about 55 pounds of it; a bag of $1000 face value of 90% silver coins dated 1964 and earlier. And if you want to store $100,000, all you need is about 21 bags. Of if you need to store $500,000, all you need is about 96 bags. The problem today is finding a dealer who has that much silver in inventory, which is why, today, silver is the best money there is. It's real money, and cheap, and scarce.

To determine the potential demand for silver, you cannot look at existing supply/demand for silver. You need to look at the existing supply of paper money. Then, you can gain some perspective of what will happen.

There are trillions of dollars in bonds, perhaps 20 trillion or more! 9 trillion money in the banks! But less than half a billion dollars worth of silver is available at the NYMEX 52.9 million ounces, the last place to get silver after about 5 bullion dealers are cleaned out of $2.5 million in silver bullion.