Silver at 29 ,Bitcoin at 30. this is no-brainer..

[RationalSpeculator]

The liquidity in silver will dry up very easily, if the crisis hits. Already in 1999 the physical was almost out and 2008 it was in a serious shortage. The key to understanding this is to know that exchanges around the world deal only with about 200 Moz of actual silver, and the coinshops come second. 99% of the world's silver is not in any liquid form and will be unavailable to investors should something happen.

If it is a reasonable thing to secure your share of the world's bitcoins, so is it with silver. I am delighted to see that bitcoin folks generally favor silver second only to bitcoin, and silver (&gold) people are flocking to bitcoins. This is a great synergy

I really disagree with this. In contrast to bitcoin and gold, the silver stock grows at a rate of 6/8% per year. The economy (products/services/assets) only grows by 1/2% per year so logic dictates that the purchasing power of silver will go down over time, as it indeed has done (long term).

The gold stock only grows with 1/2% per year, same growth rate as economy. Bitcoin now grows at 5/10% per year but will not grow at all soon enough, which never happened with previous money, and therefore has the only fundamentals to increase in purchasing power over time.  

 

[RationalSpeculator]

Net worth <$10k = 100% BTC
$10 - $100k = 50% BTC, 50% silver
$100 - $500k = 25% BTC, 50% silver, 25% gold
$500k - $5M = maximum 5-10k BTC, rest split up 50/50 in silver & gold
more = have fun

I wonder why you're suggesting less BTC holdings in absulute terms for high-net-worth people than for the lowest-net-worth category?

I meant 5000-10000 BTC

Because I see not much point in holding more regardless how wealthy you are.

Interesting. Why do you see not much point?

And inversely why do you find it wise for people with few capital to risk it all in bitcoin?

You might be right, I'm conflicted, so curious what your reasoning is.

[rpietila]

The liquidity in silver will dry up very easily, if the crisis hits. Already in 1999 the physical was almost out and 2008 it was in a serious shortage. The key to understanding this is to know that exchanges around the world deal only with about 200 Moz of actual silver, and the coinshops come second. 99% of the world's silver is not in any liquid form and will be unavailable to investors should something happen.

If it is a reasonable thing to secure your share of the world's bitcoins, so is it with silver. I am delighted to see that bitcoin folks generally favor silver second only to bitcoin, and silver (&gold) people are flocking to bitcoins. This is a great synergy

I really disagree with this. In contrast to bitcoin and gold, the silver stock grows at a rate of 6/8% per year. The economy (products/services/assets) only grows by 1/2% per year so logic dictates that the purchasing power of silver will go down over time, as it indeed has done (long term).

The gold stock only grows with 1/2% per year, same growth rate as economy. Bitcoin now grows at 5/10% per year but will not grow at all soon enough, which never happened with previous money, and therefore has the only fundamentals to increase in purchasing power over time.  

Maximum about 400Moz of the mine production stays aboveground. This is 2% of the total stock of 20B. So it is only slightly worse than gold.

[RationalSpeculator]

The liquidity in silver will dry up very easily, if the crisis hits. Already in 1999 the physical was almost out and 2008 it was in a serious shortage. The key to understanding this is to know that exchanges around the world deal only with about 200 Moz of actual silver, and the coinshops come second. 99% of the world's silver is not in any liquid form and will be unavailable to investors should something happen.

If it is a reasonable thing to secure your share of the world's bitcoins, so is it with silver. I am delighted to see that bitcoin folks generally favor silver second only to bitcoin, and silver (&gold) people are flocking to bitcoins. This is a great synergy

I really disagree with this. In contrast to bitcoin and gold, the silver stock grows at a rate of 6/8% per year. The economy (products/services/assets) only grows by 1/2% per year so logic dictates that the purchasing power of silver will go down over time, as it indeed has done (long term).

The gold stock only grows with 1/2% per year, same growth rate as economy. Bitcoin now grows at 5/10% per year but will not grow at all soon enough, which never happened with previous money, and therefore has the only fundamentals to increase in purchasing power over time.  

Maximum about 400Moz of the mine production stays aboveground. This is 2% of the total stock of 20B. So it is only slightly worse than gold.

How can silver disappear back underground?

At worst it ends up on waste bells, but all that is recyclable, and will be recycled if the price goes up enough, giving indeed an 'inflation' rate of 6/8% per year.

The amount of silver that is unrecoverable for reasonable price is negligible.

[rpietila]

Interesting. Why do you see not much point?

And inversely why do you find it wise for people with few capital to risk it all in bitcoin?

You might be right, I'm conflicted, so curious what your reasoning is.

A) If you are already rich, you can effortlessly buy BTC5k-BTC10k, no need to sacrifice anything. If you buy much more, then not only do you sacrifice, you become a target as you are among the largest bitcoin holders. If bitcoin takes off, everyone with BTC5k is ultra-rich, there is no practical difference to one with BTC50k.

B) If you believe even 10% of what is written here, you realize that Bitcoin is the best that has happened or could happen to you. A person with only $10k can recuperate it easily by working, so it is not too great a risk to invest it all in bitcoin.

[rpietila]

The amount of silver that is unrecoverable (higher expense than 2x Mining) is negligible.

Ah, in that case all the 45-50 Billion ounces is still aboveground, and the yearly mine production of 0.7B is less than 2%. Where do you get the other figures from?

[RationalSpeculator]

The amount of silver that is unrecoverable (higher expense than 2x Mining) is negligible.

Ah, in that case all the 45-50 Billion ounces is still aboveground, and the yearly mine production of 0.7B is less than 2%. Where do you get the other figures from?

Sorry, I take that estimate of mine back. I have no idea how high recycling costs are vs mining costs.
 

Good point, so either there is an enormous amount of silver available above ground, or the inflation rate is 6/8% per year.

Pick one, it's bad news either way.

[rpietila]

Good point, so either there is an enormous amount of silver available above ground, or the inflation rate is 6/8% per year.

Pick one, it's bad news either way.

Not wanting to sound arrogant, but I have literally written a book about this. About half of the 45-50Boz that is ever mined is still aboveground in recoverable form. A large part of the yearly mining is dissipated, but at least the stock is growing (silver was in structural deficit from 1940s to 2007).

Silver is very volatile, because most of the "holdings" are distributed to households as silver items, which do not react quickly to rise and fall in price. The incredibly small stock in COMEX is many times leveraged. Speculators tend to have inverse demand curve that they always demand more when price goes up. Silver market is a mess because of many factors.

[RationalSpeculator]

Good point, so either there is an enormous amount of silver available above ground, or the inflation rate is 6/8% per year.

Pick one, it's bad news either way.

Not wanting to sound arrogant, but I have literally written a book about this. About half of the 45-50Boz that is ever mined is still aboveground in recoverable form. A large part of the yearly mining is dissipated, but at least the stock is growing (silver was in structural deficit from 1940s to 2007).

Silver is very volatile, because most of the "holdings" are distributed to households as silver items, which do not react quickly to rise and fall in price. The incredibly small stock in COMEX is many times leveraged. Speculators tend to have inverse demand curve that they always demand more when price goes up. Silver market is a mess because of many factors.

Ok, makes sense. So my silver 'inflation' rate estimate of 6/8% is wrong since there is about 20 Billion ounces of silver above ground, so it's likely around 4%. Still higher than economic growth so still will go down in purchasing power based on supply.

But ofcourse it depends even more on demand. Basically if people want to hold more silver, it will go up, if they want to hold less it will go down in value.


What I don't understand is that you still value silver eventhough you understand bitcoin.

As we agree silver already lost most of it's function as money pre bitcoin and became already mainly a commodity the past 100 years used mostly in industrial applications.

A smaller part of the mining supply still served as a store of value however this function will likely also be lost now that bitcoin is here.


I think silver will continue to become more and more a commodity/industrial metal. And commodities only go down in purchasing power long term.

I think now that bitcoin is here, wanting to own part of the above silver will become equally irrational as wanting to own part of the above bronze.


Ie: after this temporary rising commodity cycle, the silver deficit will continue for good reason: we don't need a stash of silver anymore as we don't use it anymore as money, and soon also not anymore as store of value, or inflation play.


Having said all that I think short term, the coming 5/10 years the commodity cycle may continue, or the credit/counterparty crises may become much worse and push gold/silver upwards. But risk/reward is not as good at all compared to bitcoin so a little gold/silver compared to bitcoin makes sense. A lot not.

[rpietila]

Ok, makes sense. So my silver 'inflation' rate estimate of 6/8% is wrong since there is about 20 Billion ounces of silver above ground, so it's likely around 4%. Still higher than economic growth so still will go down in purchasing power based on supply.

I agree with everything else, but still want to correct the logic above.

IF we take the stock of 45B, we can take the flow of 0.7B, so flows:stocks = 1,6%

IF we take the stock of 20B, we have to take the flow of 0.4B, because in this case some of the mining supply is instantly irrevocably dissipated. Therefore flows:stocks = 2,0%.

To conquer silver, and later gold, Bitcoin needs to grow. The rise in market cap is a proof that we are talking seriously about Bitcoin being superior to them. Only after 1 bitcoin equals $300k in today's dollars, can we say that it has challenged gold (unless gold deepens its decline).

[DeathAndTaxes]

Not sure why the economy is growing at 0.5% on average.   Global GDP growth is closer to 3% over any extended period of time (say a decade).   Hell population growth is >1.1% annually so if economic output is growing at 0.5% and population is growing at 1% then productivity per worker is shrinking?  I mean that doesn't even pass the common sense test.

The reason that gold and silver have held purchasing power over large periods of time is because the inflation of the metal (~2% to 3% annually) has been roughly the same as economic growth.

[theonewhowaskazu]

Bitcoin, in my opinion will replace Silver in the long run.

Aside from being a decorative material, Silver was used as a currency that could be more easily managed than gold. It was priced in a manner that made transactions more convenient and since it was in general less hoarded and more liquid, it was safer to put it into banks in return for depository slips, or just for writing checks against. This made it ideal for short-term storage and transactions that couldn't easily be done with physical gold. Gold was a more stable store of value, but due to the amount of it that is hoarded, whenever banks tried to use it without a system like the Federal Reserve in place, there was a series of bank runs. These hardly ever happened with silver, unless a political event served to trigger the bank run.

Bitcoin replaces silver as a more convenient alternative to gold. Like silver, it has less intrinsic value than gold, but its supply more tightly controlled than silver's, adding certainty which is always nice to have in a currency. Bitcoin probably won't become as stable as gold due to fluctuations, but over the long term it won't lose lots of its value as silver has. Also, clearly Bitcoin improves on the transactions front as no bank is required to create depository slips or the like.

Thus IMO gold will continue being the money with the greatest intrinsic value, while Bitcoin will hopefully eventually be used as an easy medium of exchange.

[vokain]

Not sure why the economy is growing at 0.5% on average.   Global GDP growth is closer to 3% over any extended period of time (say a decade).   Hell population growth is >1.1% annually so if economic output is growing at 0.5% and population is growing at 1% then productivity per worker is shrinking?  I mean that doesn't even pass the common sense test.

The reason that gold and silver have held purchasing power over large periods of time is because the inflation of the metal (~2% to 3% annually) has been roughly the same as economic growth.

interesting...

[RationalSpeculator]

Not sure why the economy is growing at 0.5% on average.   Global GDP growth is closer to 3% over any extended period of time (say a decade).   Hell population growth is >1.1% annually so if economic output is growing at 0.5% and population is growing at 1% then productivity per worker is shrinking?  I mean that doesn't even pass the common sense test.

The reason that gold and silver have held purchasing power over large periods of time is because the inflation of the metal (~2% to 3% annually) has been roughly the same as economic growth.

Sorry, with 1/2% I meant between 1% and 2%. I agree with you.

[RationalSpeculator]

Ok, makes sense. So my silver 'inflation' rate estimate of 6/8% is wrong since there is about 20 Billion ounces of silver above ground, so it's likely around 4%. Still higher than economic growth so still will go down in purchasing power based on supply.

I agree with everything else, but still want to correct the logic above.

IF we take the stock of 45B, we can take the flow of 0.7B, so flows:stocks = 1,6%

IF we take the stock of 20B, we have to take the flow of 0.4B, because in this case some of the mining supply is instantly irrevocably dissipated. Therefore flows:stocks = 2,0%.

To conquer silver, and later gold, Bitcoin needs to grow. The rise in market cap is a proof that we are talking seriously about Bitcoin being superior to them. Only after 1 bitcoin equals $300k in today's dollars, can we say that it has challenged gold (unless gold deepens its decline).

Thinking more about it, my remark that silver 'inflation' is higher than economic growth and therefore will lose value is incorrect because if silver would become more wanted by the people we will actually see a faster 'inflation'(growth) of the stock pile, but the value will still go up, and if people want less silver we will see an actual 'deflation' (shrinkage) of the stock pile, as happened the past century, but the purchasing power still went down.

$300k per bitcoin would put market cap around $6,000 billion, about the same market cap of gold. Agreed, a challenge to gold that would definitely be.

I think the value of bitcoin is at the expense of the other monies. So $6 trillion will be coming from fiat but also gold/silver I think. Knowing all fiat is valued around $30 trillion, gold $6 trillion and silver $0.5 trillion, taking an equal cut from each would take about $5 trillion from fiat and $1 trillion from gold/silver that is now in bitcoin, meaning gold/silver lost 20% of their value to bitcoin at that point. Step after that is total defeat...

  

 

[rpietila]

I think the value of bitcoin is at the expense of the other monies. So $6 trillion will be coming from fiat but also gold/silver I think. Knowing all fiat is valued around $30 trillion, gold $6 trillion and silver $0.5 trillion, taking an equal cut from each would take about $5 trillion from fiat and $1 trillion from gold/silver that is now in bitcoin, meaning gold/silver lost 20% of their value to bitcoin at that point. Step after that is total defeat...

Nobody would notice since gold/silver is quoted in fiat.

Totally unrelated note - I get incensed when people talk about the supposed stability of fiat. The only thing that is stable in fiat, are the things that are fixed in terms of fiat, such as labor contracts. Relative to anything else, such as gold or silver or energy or general price index or other fiats, it is not uncommon to see 50% yearly fluctuations, and 10-20% is the norm.

[DeathAndTaxes]

I think the value of bitcoin is at the expense of the other monies. So $6 trillion will be coming from fiat but also gold/silver I think. Knowing all fiat is valued around $30 trillion, gold $6 trillion and silver $0.5 trillion, taking an equal cut from each would take about $5 trillion from fiat and $1 trillion from gold/silver that is now in bitcoin, meaning gold/silver lost 20% of their value to bitcoin at that point. Step after that is total defeat...

Nobody would notice since gold/silver is quoted in fiat.

Totally unrelated note - I get incensed when people talk about the supposed stability of fiat. The only thing that is stable in fiat, are the things that are fixed in terms of fiat, such as labor contracts. Relative to anything else, such as gold or silver or energy or general price index or other fiats, it is not uncommon to see 50% yearly fluctuations, and 10-20% is the norm.

The perception of stability is increased because people look at EUR to USD exchange rate and see little (relatively speaking) volatility.  Of course this is to be expected.  All central banks debase their currency however they are somewhat careful to keep their debasement in line with what other governments are doing.  If the US was debasing the dollar by 30% and Euro central bank debasing the Euro by "only" 20% we would see a massive 20% year over year move on the USD to EUR exchange rate but if both banks are debasing at roughly 10% (or even 30% or 99%) then the exchange rate will appear stable.

Essentially all fiat currencies (all fiat currencies every created, currently operating, and all that will ever be created) are a race to the bottom.   Purchasing power always declines.

Silver or gold may in the short term decline in real purchasing power if production exceeds economy growth however unlike fiat currencies that is hedged by economic factors.   Demand dries up gold/silver correct downward, the margins on the most marginal mines (highest cost of production) collapse and production is reduced.   

[justusranvier]

Essentially all fiat currencies (all fiat currencies every created, currently operating, and all that will ever be created) are a race to the bottom.   Purchasing power always declines.

[rpietila]

I would like there be a all-encompassing historical price index for USDBTC.

I currently think that:
- Since Mt.Gox opened, at least until they started having difficulties last summer, it would be MtGox price.
- After the said difficulties, I don't know (help me!)
- Before the opening, the only datapoint I know is the pizza that was about 0.0025 $/BTC. Does anyone know of others that could be used?

[arklan]

I would like there be a all-encompassing historical price index for USDBTC.

I currently think that:
- Since Mt.Gox opened, at least until they started having difficulties last summer, it would be MtGox price.
- After the said difficulties, I don't know (help me!)
- Before the opening, the only datapoint I know is the pizza that was about 0.0025 $/BTC. Does anyone know of others that could be used?

I have no additional info to add, but I agree this is important.

Perhaps bitstamps price after gox?