GOING BACK TO BASICS
Interview with Theodore Butler
With James Cook
Since we have added a lot of new readers lately it seems like an appropriate time to discuss silver’s fundamentals. For those who don’t know Ted Butler, he is considered to be the preeminent silver expert among those who follow the metal. He has been a paid consultant to our firm for thirteen years. His predictions and his revolutionary insights into gold and silver have been exceedingly accurate for over a decade. He also writes an influential precious metals newsletter.
Q: How much silver is left in the world?
A: For the most important form that matters, 1,000 ounce bars, around 1.3 billion ounces.
Q: Why is that the most important form?
A: Because that is the industry standard form, demanded by industrial users and fabricators and large investors. That is the form which will determine the coming physical silver shortage. It’s hard to believe that 70 years ago, there were 10 billion ounces in the world.
Q: Where did it all go?
A: It got used up and vaporized in the silver consumption deficit that lasted for 65 years, until 2006.
Q: How much is being used each year?
A: Close to a billion ounces between all fabrication and investment.
Q: Will we run out?
A: Not in the immediate future, because we are currently adding 100 million ounces annually to the depleted inventories.
Q: Do you envision a shortage?
A: Absolutely, just as soon as investment demand kicks in again.
Q: What would that do to the price?
A: It’s not possible that the price won’t explode in a shortage.
Q: Is investment demand a big factor?
A: It’s the most important factor, even though it only makes up 10%-15% of total demand.
Q: How much investment demand does there have to be to cause prices to rise dramatically?
A: Remarkably little – just enough to cause delays in deliveries of 1,000 ounce bars. If those delays occur in deliveries to industrial users, which we came close to realizing in 2011, dramatic won’t be strong enough to describe the effect on price.
Q: How high will silver go?
A: Certainly a lot higher than ever before because the world has never been in a full-blown silver shortage.
Q: When do you expect this to happen?
A: When sufficient investment demand kicks in. Be on the safe side – give it a few years not to be disappointed. However, investment demand can kick in faster than any other demand.
Q: You’ve written a lot about JPMorgan manipulating and controlling the market. Some people think this makes you a conspiracy nut, does this bother you?
A: It’s a heck of a lot easier for critics to call someone a conspiracy nut than refute JPMorgan’s documented controlling market shares. I rely on government statistics like the Commitment of Traders report published by the Commodity Futures Trading Commission. That’s absolute proof.
Q: Do you believe in conspiracies?
A: Not particularly, but I do take note of all the recent findings and allegations that the banks conspired in interest rates, currencies, mortgages, credit cards and in just about every other line of business. It would seem that the banks are only clean in precious metals; which is absurd.
Q: Is silver being held back?
A: Of course it is; principally by JPMorgan and trading practices on the COMEX.
Q: What’s the reason for this?
A: There are many possible reasons, ranging from profit seeking, to being on the wrong side of the market to knowing a silver price explosion would expose the fraud. But in the end, what matters more is that it is being held back rather than the reasons.
Q: How do we get around it?
A: Ultimately, the coming physical shortage will break the manipulation, but there are other things that could break it sooner.
Q: Like what?
A: Like a well-researched lawsuit against JPMorgan and the COMEX.
Q: Is that in the cards?
A: I don’t know, but I am personally encouraging such a lawsuit.
Q: What about the regulators, they’ve talked a good game?
A: Talk is cheap, especially from the regulators. That’s why I’ve switched from pushing for a regulatory resolution to a civil case against JPMorgan and the COMEX.
Q: This long term price suppression is really quite bullish isn’t it?
A: It sure doesn’t feel bullish on the down days, but of course a suppressed price means you can buy at a discount.
Q: You’ve called silver a miracle metal. Care to elaborate?
A: I’m sure I wasn’t the first person to use that term, but silver has so many different industrial and chemical properties, including in health care, that it truly is a miracle material. Silver has more industrial applications than any other metal, perhaps more than all metals combined.
Q: I know you are not much on gloom and doom. However, for those of us who believe there is a steep price to pay for runaway spending, exorbitant taxes and money printing on a grand scale, wouldn’t silver be among the best assets to own in a financial crisis?
A: Absolutely. If things really got as bad as many predict, it’s hard to fathom how silver wouldn’t be among the best assets to hold. But the kicker is how good it should do if things don’t turn bad. Silver is both a good news/bad news asset because it should do well in any future economic circumstance.
Q: Any more bullish factors for silver?
A: Let me see; so far I’ve given you an extremely limited finite supply of a vital material, potential investment demand that could erupt on a moment’s notice, a virtual mountain of new dollars and buying power being created and the fact that the price is manipulated by the nation’s most important bank, making the current price a bargain and you’re asking for more?
Q: If you sit down one on one with our readers and have a private conversation, what would you tell them to do?
A: Certainly nothing different than what I write, but I would emphasize that they take the “silver challenge” and check out the facts as I claim them to be. I know it seems improbable at first that the silver story is as I describe, but I am careful to base my analysis on the facts. Thanks to the Internet and the ability to search out data, there’s never been a better time in human history to do so. If someone invests the time and remains objective, that person will probably end up buying silver.
Q: Is it really the best thing to own?
A: Not too many years ago, silver was proven to have been the best thing to own (for a while), so it’s not theoretical that it could be the best again. Based on the facts as I see them, I’ll certainly be surprised if silver isn’t the best once again.
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