Jason Hommel
The overall systemic "silver shortage" is much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, bigger than the lack of retail items.
I wrote the word "much" 17 times, because the size of market of the paper silver market, which shows the systemic silver shortage is about 17 times greater than the retail silver market!
I estimate that there is about $17 billion worth of "paper silver" out there in the world in the form of silver futures contracts, unbacked unallocated accounts, and ETFs. That's about $7 billion in futures contracts, and I'd estimate an equal amount of another $7 billion in unallocated "bullion" accounts at various LBMA member banks, $2.2 billion in the SLV ETF, and $1.5 billion in paper certificates with the Perth Mint.
The 2008 Perth Mint annual report is out:
http://www.perthmint.com.au//documen...
If any of my readers still hold Perth Mint certificates or unallocated accounts, you will want to read that report to see if you can discover where your metal went.
I repeat: LBMA banks ADMIT that unallocated accounts are merely a dollar priced liability and do not need to have any real metal behind them. Read their own description and disclaimer of unallocated accounts here:
http://www.lbma.org.uk/london/accounts
"This is an account where specific bars are not set aside"
"the balance represents the indebtedness between the two parties."
"The client is an unsecured creditor."
In contrast to the approximate $17 billion of silver liabilites and "indebtedness", there is probably less than $1 billion worth of physical silver available to buy.
And meanwhile, the government prints up $700 billion in a bailout, that is really more like $3,000 billion to $10,000 billion.
So, if I say to buy silver, to protect yourself from the paper money scammers, and if you get paper silver instead, which is about 17 times as likely to happen, then you are likely to get scammed by the scammers that you are trying to protect yourself from.
That's why there are "position limits" that apply to longs in the futures markets, but not to the shorts.
The position limits prove there is a shortage of the 1000 oz. bars that they are afraid they cannot obtain to deliver to meet the terms on their unlimited numbers of short sale contracts.
Nevertheless, it is possible to buy 1000 oz. bars in small quantities of only a few hundred at a time, but that does not disprove the broader and greater silver shortage worldwide, because it's a matter of scale.
The mines produce 650 million ounces of silver per year, but the futures contracts often exceed 800 million ounces, while only 130 million ounces sit at the COMEX warehouses, and only about 75 million ounces of silver back up the LBMA member bank "unallocated" accounts.
So, in that context, 300,000 ounces of available silver which can, indeed, be purchased from Penoles (minimim order size) is nothing, and not even remotely capable of backing up the institutional and systemic shortage of silver that exceeds $17 billion, or about 1,700,000,000 ounces.
Further, silver investors are only buying about 75 to 100 million ounces per year. That's a paltry 2 million ounces per week, or less. Any significant increase in investor demand will cause further shortages of investment silver products such as 100 oz. bars and rounds, and will put a further strain on the limited 1000 oz. bar supply as well.
Silver investors are the strongest buyers in the silver market. They are willing to "pay any price" to obtain one of two major monetary elements that are available on earth to protect their wealth. They can potentially outbid most all other buyers for other uses, and yet, most other uses can also bid silver prices extremely high, because such small amounts of silver are used in industrial applications, and most often, there are no substitutes.
The big change to silver in 2008 was the dramatic increase in investor buying, and the dramatic decrease in investor selling. At this point, investor buying will likely continue to increase.
