So, in my quest to figure out how to best buy silver instead of saving in cash, the main argument seems to be whether to have it in physical form or to buy it in paper form. The difference…?
Well, there are those who believe that if you can’t hold it, then you don’t own it. What they mean by that is that many paper silver instruments/derivatives, such as ETFs, even when they say they’re backed by silver, don’t necessarily have the amount of silver to cover their positions. If you don’t know what I’m talking about, don’t worry, I barely understand myself… However, think of it in terms of a run on the bank. A bank will usually lend out ten times the amount of money that it actually has in deposits. So, if you put in £10 into your savings account, the bank is allowed to lend out £100. However, if a bank is perceived to be a financial straits and there’s a run on the bank (remember in 2008 when news channels were showing queues of people in front of Northern Rock branches waiting to collect their savings/deposits in physical cash…? That’s a run on a bank) all hell breaks out. Now, because the bank only has 10% of the amount of money it actually claims as assets, everyone coming to get their money at the same time is… Well, let’s just say not everyone (if anyone) is going to get their money – ‘cos it’s just not physically there anymore! Not all of it – they’ve loaned it out, and then some!
Now, word is, paper silver such as ETFs, that claim to be backed by real physical silver, are selling contracts at a rate of 100 times the amount of physical silver they actually have. OK… so, retail banks tend to borrow out 10x the amount of deposits they have and yet investment banks are selling contracts on 100x the amount of physical silver they actually have…? Yikes! If all the holders of these paper contracts decide they want to redeem their silver in, well, silver, then… The run on Northern Rock will look tame in comparison and we can pretty much say bye-bye to the current financial system. Which means these banks will collapse… or get bailed out by you, the tax payer… and your cash savings will be worth even less either way.
So how do you hold physical silver? There are two ways and the main concern seems to be storage. You can buy and store yourself, or you can buy and let a third-party store if for you. In my research I came across some pretty interesting perspectives. Among the “if you can’t hold it, you don’t hold it” camp are some pretty extreme guys. I’m talking guys who believe that the dollar collapse (and other paper currencies) isn’t just iminent but that it’ll bring about the end of the world as we know it. They’re not just talking a few demonstrations and riots, but the end of civilisation as we know it. They refer to this scenario as TSHTF (the sh!t hits the fan). When/if tshtf, most trade will be done by barter and paper money will be meaningless unless it’s in the form of silver of gold. Their motto could well be summed up as: “buy gold, buy silver, buy guns!” Guns?! Yes, guns. Guns will come in handy for all that gold, silver and stored food and water that you have on your premises. And, as far as they’re concerned, the only way anyone, be it the gubment or the starving, marauding masses, is going to get at it is if they can somehow get by the lead bullets being shot at them from a nickel gun.
Now, I’ve considered acquiring physical silver in the form of bullion coins and rounds (a lot of them are very pretty, but it’s best not to get too attached) but if it gets to the point where storage becomes a major issue and the end of the world as we know it really is nigh… Let’s just say that visions of me wielding a gun and screaming “git offa mah land!” before shooting off my own foot… Enough said.
So that means getting someone else to store it. First thing to note: DON’T store it in a bank vault . Why? Well, if (when?) the financial system collapses, I don’t fancy your chances of getting anything back from any bank. Anywhere. Really. Remember, taking your savings out of paper money and into silver signifies a loss of confidence in banks and the current banking system, which is why you’re taking your paper money out of banks and converting it to silver. So that leaves private vaults, which means storage fees. Which means you can’t afford it, right? Not necessarily. There are companies, such as GoldMoney and BullionVault who will sell you silver and store it for you at a reasonable cost. GoldMoney will charge about 2 ounces of silver (or about £55 at their current rate) to store your silver for a year, more if you’re buying over a certain amount (which I’m unlikely to exceed in this lifetime, but who knows…) and your precious metals are stored in private vaults in London, Hong Kong or Zurich. Real silver. Your silver. You own it. You can sell it whenever you want. You can convert your silver to gold if you want. They don’t lease it out and you can ask for your gold to be delivered to you. Better still, you can actually use it to pay other GoldMoney members and if they issue a debit card, which has been posited by some of its existing members, it seems fair to assume that a time will come, in the not too distant future, when you can just use your GoldMoney holding to pay for goods and services without the need to use the current banking system. Nary a gun in sight.
So, while I like the idea of having a few ounces of silver to have and hold, and many experts tend to agree that having a small amount isn’t a bad idea, actually being able to hold it, touch it, caress it, kiss it and then bury it in the swamp at the bottom of the back yard doesn’t really appeal to me (especially as the only outside space I own is a third floor balcony). Let’s face it – we tend to keep our money in banks and have small amounts at home, right? So why wouldn’t we do the same with silver – have some at home, and most of it in a safe place that allows us to access it when we need it?
So if you really want to preserve your savings and your purchasing power with silver, buy physical and stay away from paper. OK, here are a couple of knowledgeable silver suits, David Morgan and James Turk, who say it better (or at least more professionally).