SHANGHAI SILVER STOCKS CONTINUE TO DECLINE

In a little more than half a year, the Shanghai Silver Stocks have declined to new record lows.  Before the huge take-down in the price of silver in April, there were 1,120 tonnes of silver at the Shanghai warehouses.  By the end of May of this year, the silver stocks fell 32% to only 765 tonnes.
This is a snapshot of the Shanghai silver stocks on April 12th 2013:

From the SRSrocco Report:

and here is the end of May:

By the first week of September, the silver stocks declined another 307 tonnes to hit a new low at 458 tonnes:

What is surprising here is that as the Shanghai silver warehouse stocks have fallen substantially in less than 5 months (April 12th-September 6th), the Comex silver warehouse stocks basically remained in a tight level of 162-166 million oz shown in the chart below:

In their most recent update, the Shanghai silver stocks have declined another 30 tonnes since the September 6th update:

In a little more than a half a year, the silver stocks at the Shanghai warehouses have declined 692 tonnes or 62% of their total before the April 12th silver & gold price take-down.  It is quite interesting that the silver inventories in Shanghai continue to decline, even though at a slower pace in the past month, while the Comex silver levels remain about the same as they were in April.

Lastly, there are some very interesting trends taking place with U.S. scrap silver exports that I will discuss in a later article.  Let’s just say, silver scrap from the United States is showing some significant changes in the amount and type that is being exported.

It Really is a Loss in Confidence

It will play out in all markets. When I say collapse, it is a loss of confidence in paper money.

Take the Fed, for example. The Fed has printed almost $3 trillion since 2007. Now, that is without a liquidity crisis. I mean, we did have a liquidity crisis in 2008. And the first round – I would say QE1 was a legitimate central-bank response to liquidity crisis. But QE2 and QE3: we will look back over them and we will see them as enormous blunders in one of the greatest failed experiments in economic history.

But the problem is, the Fed printed trillions of dollars without a liquidity crisis. What is going to happen when we do have a liquidity crisis, which I expect in the next couple years, where there is a 2008 panic starting again? What are they going to do? Print $6 trillion? $9 trillion? There is a limit on what they can do. And so at some point, it is going to get handed over to the IMF, and they are going to have to print SDRs (special drawing rights). That is the IMF world money. Because none of the central banks have clean balance sheets at this point; they look like hedge funds.

And so it really is a loss of confidence. Confidence is the key word – a loss of confidence in paper money. And that confidence is going to have to be restored somehow. And there are really only two ways.

One is the SDR, which no one understands. So maybe they can re-liquify the world by printing SDRs and that will create massive inflation, but no one will really understand where it is coming from.

And the other way is gold, which would restore confidence. But to have a non-deflationary price of gold, you are looking at $7,000 an ounce – very possibly higher, maybe as high as $9-10,000 an ounce. I know that sounds extreme. But it is really just eighth-grade math, if you look at the money supplies and look at the physical amount of gold. People say you cannot have a gold standard because there is not enough gold. Well, that is not true. There is always enough gold; it is just a question of price. So the theoretical question is, what is a non-deflationary price for gold if you have to go back to a gold standard? And the answer is, it's north of $7,000 and up.

So that is the kind of thing that you might see. It is not what any central bank wants. It is not what the elites want. But it is the kind of thing you could get if you had to restore confidence. So that is what the future of the international monetary system will look like. But right now, the Fed is still behind the wheel, and they are still driving the bus over the cliff.

- Jim Rickards via Peak Prosperity:

http://www.peakprosperity.com/