A Tale of Two Silver Salesmen, Part 1

Silver Salesmen

Dis-Claimer: All characters appearing in this work are not fictional. Any resemblance to real persons, business entities, or institutions, living or dead, is purely intentional.

Chapter One- Who’s Business?

Let’s suppose you want to buy a substantial amount of silver and then meet over the phone with two different silver salesmen.  You ask them to give you their pitch, after which you will consider their offer and decide what to do.

Your call to the first salesman is to a physical silver salesman.  He tells you that he can sell you a heavy hoard of silver which you will have to make time and arrangements to pick up, or have it delivered to you. If it is delivered, you will incur the cost to both deliver and insure it.  Then you will have to pay monthly rent for a large safe deposit box at a bank or go and spend a few thousand dollars to purchase a large safe plus the additional costs of carrying the safe into your basement and anchoring it onto your basement floor.  When your silver arrives, you will most likely need to hire an armed guard to protect you while you carry it to your safe location, and then hire a security company to put in an appropriate alarm system to alert you and the police if anyone starts sniffing around while you are away.

The second salesman is a paper contract salesman.  He tells you that you should not bother handling a heavy chunk of metal.  There is no need to ship it to you.  He goes on to say that there is no need to incur a cost to insure it or rent a deposit box or purchase a safe of your own in which to store it.  That method of purchase carries too much risk, too much expense, and too many hassles compared to just buying silver on contract.  The second salesman tells you that you can get all the benefits of owning silver with none of the hassles or expenses of handling it, insuring it, shipping or storing it.  He even tells you that buying silver on paper is way cheaper because you can buy it on margin and get a whole lot more for your money.

After listening to each of the salesmen, you informed them both that you would consider their claims and get back with them to tell them your decision.

You start with a mental review of what you heard in the sales pitch from the physical silver salesman.  As you go down the checklist in your mind it seems that everything he told you smacks of truth.  You say to yourself, “yes, silver is heavy.  I would have to insure the delivery and pay the cost of that delivery.  Then I would have to buy a safe or pay for a rental of a safe deposit box at a bank.”  It appears to you that buying silver the physical way will incur a lot of expenses and hassles above and beyond the price of the silver itself. Your first review brings the judgement that the claims of the physical silver salesman seem to be true, and also that there are many more hassles and expenses involved than you initially supposed.

Then you move over to considering the sales pitch from the salesman who wanted to sell you silver on a paper contract.  As you go down the checklist of things you heard from his pitch, his claims starts out seemingly true too.  You say to yourself, “yes, if I put my money into a contract of some type that says I own silver it would be lightweight, fast, and easy.  It wouldn’t take very long, it wouldn’t require me to travel or wait for a delivery except perhaps the wait for a receipt in the mail.”  You realize that you wouldn’t have to pay insurance or storage fees or buy a safe.  But, when you get to the part when he told you that you can get all the benefits of owning silver with none of the hassles and expenses of handling it, insuring it, shipping or storing it as you would if you bought physical silver, you pause....  Suddenly it dawns on you that you hadn’t actually told either salesman what benefits you actually wanted by owning silver!  In fact both salesmen never even asked you why you wanted to own silver!  Perhaps they just assumed that you knew why you wanted it.

So you digress from analyzing which salesman’s pitch was the best for you and you begin to ask yourself some very poignant questions.  You may even start to feel uncomfortable because the questions you ask are somewhat difficult for you to answer because they take on a philosophical element that you may not have faced before.

First you ask yourself, “Why am I buying silver?”   And then the actual answer wakes you, as would a sunbeam straight into your eye.  With embarrassment or chagrin,  you face yourself squarely and see that when you buy a car, you don’t settle for a picture of a car and walk home.  When you buy a suit, you don’t walk out naked carrying a picture of a suit.  When you buy groceries, you don’t go the store and give them money so you can carry out a picture of food.  For most of the value in your life you trade fiat dollars for really tangible things.  Then you wonder, “Do I really want to buy just a picture of silver ownership?  Would I really feel comfort in a belief that somewhere there is some silver with my name on it in somebody else’s hands? Or, do I want the real thing so I can look at it in my own hands, see it, and know that I have it for my use any time I want, anywhere I want, without having to go ask someone else to give it to me?  The magnitude of that shakes you, but not half so much as your second reason for wanting to buy silver.
The second reason you wanted silver also dazzles you with even more blinding light than the first.  You suddenly realize that somewhere you became a believer that silver was going up in value against paper currency.  You are aware that what you really want from owing silver is the protection of your wealth even if some of that protection only comes in the form of a relative value against paper investments.  And then you remember how warehouses, which stored the assets of their depositors all through history, practiced a fractional reserve banking policy.  You recall how eventually every warehouse that practiced a fractional reserve policy reduced the value of the paper promises into sheer non-reclaimable debts.  

A sudden vision enters your mind of a future day when people run to the storehouses to get their silver out before the others can.  You see the angry and saddened faces of the people who got there too late.  You see the possible collapse and the default of the warehouse that might have housed your silver had you bought a paper contract.  It makes you reel in awe at the shocking downside expense of the possibility of losing all your investment if such a thing would ever happen again.  

You try to tell yourself that a run on the fractionally stored warehouses could never happen again, but a chilling inner voice keeps saying, yes it can!  You try to tell yourself that paper investments are safe and secure, that you can rest on the promises of others;  but that same chilling inner voice inside asks, “Oh yea?  Do you really believe that?”  

You try to say, well if a financial crisis ever happens, I can run to the warehouse faster than anyone else and get my silver out.  But your  inner voice says, “Really? Then why aren’t you running to the bank today to take out your physical silver?  Don’t you know that a crisis is looming? Why do you want to wait till the crisis is in full swing?   Don’t you know that it is wiser to get your silver out of the warehouse before the crises hits? Don’t you know that it is easier to take it out when the delivery systems are still intact?  Don’t you realize that the best insurance is having your silver right in your own hands? Why don’t you take the delivery now when there is still time to do it without panic?  Why not get silver now when there are still safes available for you to buy?  Why not be the first in line long before the crisis hits by taking physical delivery today?  Do you really think the cost of being first in line too high now?  How will you feel about the cost of being first in line now if you ever get to be the last in line then?  Think about it, you dummy!  You feel thoroughly reproved by your inner self.

By this time you don’t even need to ask yourself for a third reason to own silver. The retinas of your soul have already taken in enough light to fry you guilty for ever thinking that you wanted to buy a paper promise. You call up the physical salesman and tell him that after serious consideration with your inner self you have decided that his pitch was best.  You tell him that you want to pay the extra price for physical silver because you realize that it is cheaper today than it will ever be in the future.  You tell him that you realize that the only way you can have all the benefits that you want in owning silver is to own it physically, right now.  You don’t want someone else enjoying your silver in their possession; you want to see it in your own possession as you do your car.  You don’t want someone else having the power to tell you when you can have your silver it or use it.  You want all that power in your own hands; and you want it now.  You ask, how soon can he ship it?

This first chapter of the essay is about the ultimately grand deception of selling silver on paper, which for the most part has allowed big banks to sell endless empty promises for it.  This has kept the silver price low for a long time because of the resulting paper games.  However, a great divergence between the paper market and the physical market is about to crack wide open, and this is because there is a looming shortage of silver.  Ironically, the looming shortage will continue to bid up prices with higher and higher premiums because of a scarcity of the real metal, which will make the paper games seem more appealing.  Think about it.  If the physical salesman says the premium on physical silver is going up every day and the paper salesman says by contrast the price of just taking a promise is going down every day; which will look cheaper?  

I personally foresee a complete separation of the paper market developing wherein the actual owners of silver will be able to ask for sky high prices over the paper contract promises.  It will occur when silver becomes so scarce that the paper promises cannot be met.  When the eventual run on the exchange warehouses happens by people who have already paid for silver that isn’t there, the physical market will supercede the paper market as the best deal. The folks who want to own silver will not trust the warehouses ever again.  

The demand for silver will change over to immediate delivery instead of indefinite future such as is the case for paper contracts in futures. Immediate demand will overwhelm long term demand.  When it happens, Those who bought into empty promises to save a few dollars in shipping and storing expenses will discover to their horrer that they were scammed by crooks who sold them empty promises.

The tale of two silver salesmen will end with only one of them standing, and that will be the physical silver salesman.  Bet on it. Chapter 2 will tell you who that last standing silver salesman is.

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