Hi, this is Jennifer from the Discount Silver Club writing you on a sunny Texas day. We now have 82 subscribers to this newsletter. I would like to thank our newest members M.B. of Pennsylvania, and T.M. of Indiana.
New Lower Shipping!
As you know, your silver is mailed via USPS as they will insure bullion, and other carriers won't. The Post Office has recently introduced "Flat Rate" Priority Mail boxes, slashing the cost of sending larger packages. Now everyone who orders over $400 in silver will save money on shipping, and get their coins sooner! (Please see http://www.discountsilverclub.com/contact.html for more details).
We are also introducing lower rates for TX residents. If you live near DFW, shipping costs are lower. We will pass on the savings to you, just ask us for a quote!
Mexico to Use Libertads as Money?
In December, Mexican silver expert Hugo Salinas Price reported that all 31 Mexican state governors lobbied their House of Representatives in support of remonetizing silver. This is startling, as different regions and political parties rarely form a consensus on any issue. They called for the use of the Libertad silver round as official government money. It's currently used as bullion, with no face value stamped on it. (You can see a good picture here at: http://www.financialcryptography.com/mt/archives/000273.html).
Politicians aren't the only ones who want silver money. Almost 200 journalists published their support of the remonetization initiative in major Mexico City newspapers. TV Azteca, a national network, found that 96% of viewers polled approved the bill. While Americans may find this attitude surprising, many Mexicans have painful memories of the peso crisis of 1994-95. The value of U.S. dollars increased 121.8% in peso terms, which caused high unemployment and 52% annual inflation.
Despite widespread support, silver money faces strong opposition. The Bank of Mexico sent 12 officials to the Mexican National Congress to voice their objections to the bill. The central bank does not want a government sanctioned alternative to their fiat currency, which has no intrinsic value.
Salinas Price believes that the use of silver as money will help protect savings, national pride, and self-determination. Silver protects wealth, as its value can't be inflated away. Silver money reminds a producing country that it contains valuable resources. Mexico is blessed with huge silver deposits, and demand spurred by remonetization would create many mining industry jobs. How much prosperity and prestige could Mexico achieve if silver reached $50 an ounce? How much poverty would be alleviated if Mexico wasn't crushed by fiat debts? If our neighbor turns back to honest money, we may find out.
China and Silver
I've mentioned in previous newsletters the supply deficit in silver, and the rapidly expanding industrial uses for the metal. No country feels this pressure more than China. The rapid pace of Chinese development means an urgent and growing need for silver. In 2004, the Silver Institute's World Survey indicated that China's silver demand had outpaced production. With so many impoverished peasants still waiting for a manufacturing job, the Chinese government can't afford to let the economy falter for lack of raw materials.
China has proved its willingness to secure assets around the globe, from lumber in Brazil, to natural gas in Iran. China Minmetals is currently attempting to purchase Canadian miner Noranda for $5.72 billion. Recently, Chinese leaders have begun to realize that rich resources may lie within their borders. But do they have the expertise to capitalize on them?
In the past, China's development was hampered by the outdated attitudes and technology of the Communist government. In fact, the most promising deposits, the Erbaohuo Silver Mine Belts, were placed in the National Resource Reserve Area (NRRA) and no mining was permitted. In addition, this area of Inner Mongolia is remote and thinly populated, and little infrastructure was built. Ironically, this past prohibition on development will make it easier to extract ore in the future, as prime mine sites were not damaged by antiquated techniques.
Over the past two decades, China's government has made great strides in opening their country to outside investment. Now Chinese mining companies are permitted to initiate joint venture projects with foreign producers. Companies such as Ivanhoe Mines, Minco Silver, and Sino Silver Corp. have decided to partner with Chinese firms to share their expertise. Despite socialist constraints, China has managed to become the world's fourth largest silver producer. With new Western partners, their output should increase dramatically.
However, don't look for lower silver prices any time soon. Most Chinese silver projects are still in the exploration stage. It will take years of study to determine what locations are feasible for a mine. Then, large investments will be necessary to build infrastructure such as roads and leaching tanks. It's unknown whether increased Chinese production will be able to keep up with demand. As long as we have a silver supply deficit, the bull market will continue.