Many people have been lulled into thinking that silver is a precious metal. But the question remains, is it really that precious, and does it make sense to own Silver Eagles or silver bullion at all? Looking back in history you will find that the U.S. stockpile inventory in 1981 of silver was 139.5 million ounces, and Congress authorized a series of auctions to sell off the entire inventory over a three-year period — 105 million ounces — to raise funds for purchase of other critical and strategic materials. However, at that time congressmen from the silver mining states resisted the liquidation of the silver stockpile and delayed the entire liquidation for several years.
The General Accounting Office (GAQ) recommended that silver from the stockpile be used for coinage rather than sold on the open market. The GAO’s proposal assured that using silver to mint a bullion coin and other forms of coinage would minimize or eliminate any short-term market price disruption by developing new demand to offset the increased supply. In effect, the GAO’s proposal was implemented when Congress created the American Silver Eagle bullion coin in 1986 and specified that metal for the coin be drawn from the stockpile.
As you fast forward to December 1999, the Defense Department’s silver stockpile totaled 21.2 million ounces, down 85 percent from its opening balance of 139.5 million ounces. In 1999 alone, the Mint issued nearly 9.5 million ounces of American Eagle Silver bullion coins and proofs, and consumed roughly 460,000 ounces in the manufacture of commemorative coins. Why was the silver put on the auction block in the first place?
In 1981, according to Roy Markon, then the commissioner of the Federal Property Resources Services and the official in charge of sales and purchases for the stockpile, “We do not have silver missiles or silver bullets in our arsenals. It is far more important for us to have adequate supplies of cobalt, chromium, manganese or titanium than it is for us to maintain excess stocks of silver in our inventory.” To explain further, today several agencies oversee what is deemed “strategic materials” for the United States.
These agencies are in charge of the efforts, including the Defense National Stockpile Center (DNSC) which studies the projected domestic and foreign economic effects of all acquisitions and disposals of materials from the National Defense Stockpile (NDS) that are to be included in the Annual Materials Plan (AMP) submitted by the DNSC to Congress. This advice helps the DNSC meet its statutory obligation to limit undue market impact caused by material acquisitions or disposals while also protecting the government from avoidable loss.
Formally established under the National Defense Authorization Act of FY 1993, amending the Strategic and Critical Materials Stock Piling Act, the MIC is co-chaired by the Departments of Commerce and State and includes representatives from the Departments of Interior (Geological Survey), Treasury, Transportation, Agriculture, Energy, and Defense (DNSC), and the Federal Emergency Management Agency. Commerce is represented on the MIC by SIES staff with technical support provided by the Office of Materials, Machinery, and Chemicals of the Department’s International Trade Administration. These agency representatives bring substantial experience and expertise in mineral commodities markets to MIC deliberations. The NDS is a reserve of strategic and critical materials that are unavailable in the U.S. in sufficient quantities to meet anticipated national security emergency requirements. DNSC manages the Stockpile by acquiring, disposing, and warehousing these materials. Because there is little need to maintain an extensive stockpile in the global marketplace of the post-Cold War era, Congress has authorized the disposal of most Stockpile materials.
If Congress decided in the 1980's that the United States should dump all their reserves of silver bullion, then why is it smart for me to own Silver Eagles? With million and millions of Silver Eagles being made, is it smart for me to pay such a high premium over the actual silver value for these coins? After all, it is just silver bullion in the first place, right? What about other silver bullion? Is it smart to own that as well?
Trying to be fair and offering both sides of the coin, I am sure there are people that will tout that since the U.S. Mint has used most of the stockpile, it must purchase silver for its coinage programs from the open market which should boost silver demand. Also, the structural deficit between fabrication demand and conventional supply (mine production and recycled scrap) continues to grow. These are all facts that I cannot dispute. In the end it will be the consumer that will decide if investing in Silver Eagles or silver bullion makes good common sense for them. I hope these facts, however, will now shed some new light on the subject.
Sources:
Sinclair, James E. and Parker, Robert. The Strategic Metals War, 1983 ISBN 0-517-54826, page 122.
DiRienzo, Mike, U.S. National Defense Silver Stockpile Eliminated - November 27, 2000, The Silver Institute, 1200 G Street, N.W., Suite 800, Washington, D.C. 20005 www.silverinstitute.org
Defense National Stockpile Center www.globalsecurity.org
I think the point is that silver and gold have historically been considered precious metals for reasons that are not necessarily relevant in today's world. Aluminum was once rarer than either gold or silver, but there was no demand for it, so it's value was less.
139.5 million ounces of silver, at market value is only a few billion dollars today, and even at the peak 30 years ago was a relatively insignificant portion of the nation's assets. Individuals can collect or hoard silver because it's a relatively compact, liquid, and untraceable asset (gold, too). But these qualities diminish relative to other forms of wealth storage as your net worth increases. Imagine if Bill Gates decided to buy a few billion dollars of gold or silver to stash in his Uncle Scrooge vault.
Quid pro quo. Yes or no?
Comments
By John Minges
From page 10 of the January 2004 issue of Lost Treasure magazine.
Copyright © 2004, 2004 Lost Treasure, Inc.
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Many people have been lulled into thinking that silver is a precious metal. But the question remains, is it really that precious, and does it make sense to own Silver Eagles or silver bullion at all? Looking back in history you will find that the U.S. stockpile inventory in 1981 of silver was 139.5 million ounces, and Congress authorized a series of auctions to sell off the entire inventory over a three-year period — 105 million ounces — to raise funds for purchase of other critical and strategic materials. However, at that time congressmen from the silver mining states resisted the liquidation of the silver stockpile and delayed the entire liquidation for several years.
The General Accounting Office (GAQ) recommended that silver from the stockpile be used for coinage rather than sold on the open market. The GAO’s proposal assured that using silver to mint a bullion coin and other forms of coinage would minimize or eliminate any short-term market price disruption by developing new demand to offset the increased supply. In effect, the GAO’s proposal was implemented when Congress created the American Silver Eagle bullion coin in 1986 and specified that metal for the coin be drawn from the stockpile.
As you fast forward to December 1999, the Defense Department’s silver stockpile totaled 21.2 million ounces, down 85 percent from its opening balance of 139.5 million ounces. In 1999 alone, the Mint issued nearly 9.5 million ounces of American Eagle Silver bullion coins and proofs, and consumed roughly 460,000 ounces in the manufacture of commemorative coins. Why was the silver put on the auction block in the first place?
In 1981, according to Roy Markon, then the commissioner of the Federal Property Resources Services and the official in charge of sales and purchases for the stockpile, “We do not have silver missiles or silver bullets in our arsenals. It is far more important for us to have adequate supplies of cobalt, chromium, manganese or titanium than it is for us to maintain excess stocks of silver in our inventory.” To explain further, today several agencies oversee what is deemed “strategic materials” for the United States.
These agencies are in charge of the efforts, including the Defense National Stockpile Center (DNSC) which studies the projected domestic and foreign economic effects of all acquisitions and disposals of materials from the National Defense Stockpile (NDS) that are to be included in the Annual Materials Plan (AMP) submitted by the DNSC to Congress. This advice helps the DNSC meet its statutory obligation to limit undue market impact caused by material acquisitions or disposals while also protecting the government from avoidable loss.
Formally established under the National Defense Authorization Act of FY 1993, amending the Strategic and Critical Materials Stock Piling Act, the MIC is co-chaired by the Departments of Commerce and State and includes representatives from the Departments of Interior (Geological Survey), Treasury, Transportation, Agriculture, Energy, and Defense (DNSC), and the Federal Emergency Management Agency. Commerce is represented on the MIC by SIES staff with technical support provided by the Office of Materials, Machinery, and Chemicals of the Department’s International Trade Administration. These agency representatives bring substantial experience and expertise in mineral commodities markets to MIC deliberations. The NDS is a reserve of strategic and critical materials that are unavailable in the U.S. in sufficient quantities to meet anticipated national security emergency requirements. DNSC manages the Stockpile by acquiring, disposing, and warehousing these materials. Because there is little need to maintain an extensive stockpile in the global marketplace of the post-Cold War era, Congress has authorized the disposal of most Stockpile materials.
If Congress decided in the 1980's that the United States should dump all their reserves of silver bullion, then why is it smart for me to own Silver Eagles? With million and millions of Silver Eagles being made, is it smart for me to pay such a high premium over the actual silver value for these coins? After all, it is just silver bullion in the first place, right? What about other silver bullion? Is it smart to own that as well?
Trying to be fair and offering both sides of the coin, I am sure there are people that will tout that since the U.S. Mint has used most of the stockpile, it must purchase silver for its coinage programs from the open market which should boost silver demand. Also, the structural deficit between fabrication demand and conventional supply (mine production and recycled scrap) continues to grow. These are all facts that I cannot dispute. In the end it will be the consumer that will decide if investing in Silver Eagles or silver bullion makes good common sense for them. I hope these facts, however, will now shed some new light on the subject.
Sources:
Sinclair, James E. and Parker, Robert. The Strategic Metals War, 1983 ISBN 0-517-54826, page 122.
DiRienzo, Mike, U.S. National Defense Silver Stockpile Eliminated - November 27, 2000, The Silver Institute, 1200 G Street, N.W., Suite 800, Washington, D.C. 20005 www.silverinstitute.org
Defense National Stockpile Center www.globalsecurity.org
My answer: Britain decided to dump its Gold reserves in 2000 at the low of the market 250.00-255.00 and watched it latter go to 1000.00
I think we can all agree, that what the governments do are not always the most wise.
139.5 million ounces of silver, at market value is only a few billion dollars today, and even at the peak 30 years ago was a relatively insignificant portion of the nation's assets. Individuals can collect or hoard silver because it's a relatively compact, liquid, and untraceable asset (gold, too). But these qualities diminish relative to other forms of wealth storage as your net worth increases. Imagine if Bill Gates decided to buy a few billion dollars of gold or silver to stash in his Uncle Scrooge vault.