Addressing the Silver Shortage: The Carrot or the Stick?
Some people who have been following commodities prices recently have noticed that gold and silver prices have shot up. As far as silver is concerned, this has happened despite the COMEX's having significantly raised margin requirements, which normally would cause a sell-off.
Because silver is primarily an industrial commodity, widely used in electronics and solar panels (but also considered to be a safe-haven asset by many people), the demand is exploding , while the supply is limited and cannot be quickly increased. Even the U.S. government has noticed the incredible demand and physical shortage, and may try to manage the situation. There are two ways this could play out. It could either:
- Use the stick (government force) as it did under FDR in 1933 (which stole value from those who turned in their gold), and require all Americans to turn in their silver holdings under threat of fines and jail time for failure to comply, OR
- Use the carrot, and remove the punitive 28% collectibles tax, taxing such gains at 0%, thereby encouraging citizens to sell their silver at market prices.
This latter approach allows those who have had foresight to profit from their thrift and patience while bringing badly needed supply to the market. While neither approach will prevent the laws of supply and demand from finding a market price, the carrot is surely better for U.S. silver holders than the stick.
Robert F. Sennholz