Silver Investing in the
of Sentiment and Fiat Currencies
By Dr. Jeffrey Lewis
investors must be wondering why hang on to their metal at this point? Perhaps
the most compelling answer is inflation, since an increase in the money stock
will eventually lead to higher prices.
around the world must keep printing or electronically generating money to meet
the hundreds of trillions of dollars in unfunded liabilities, promises and
obligations. Another factor to consider is the out of control deficit spending
that trumps any revenue collected from taxes.
Then you can take
into account the interest that needs to be paid on the ever-increasing sovereign
debt burden, which has resulted in the largest debt-to-GDP ratios ever seen in
The Race to
Debase on the Road to Financial Repression
Central banks are
currently faced with a progressively desperate need to improve exports as a
growth engine, while at the same time reducing the purchasing power of their
national currency in order to melt away sovereign debt.
dubious method of debt reduction is often called financial repression,
especially when referring to debt liquidation practices in emerging market
financial systems. Nevertheless, the term seems increasingly applicable to the
post-2008 financial crisis debt reduction practices of many developed
engaged in this race to debase their respective fiat currencies have widely
telegraphed their policy objectives well into the future. Some central bankers,
like the Fed’s Bernanke, have even resolutely stated that they are not at all
concerned with inflation.
Why Buy Silver
more than ten year bull market, precious metals — and especially silver — remain
the most under-owned they have ever been in modern times. Furthermore, despite
their intrinsic value, industrial uses, scarcity and beautiful nature, they
remain largely abhorred and ridiculed as an investment by the mainstream
is cheap and is priced well below its historical inflation adjusted high.
Relatively active price management has resulted in an artificial perception of
sufficient physical supply, when it is really paper silver that is being
supplied, not the metal itself.
effective in terms of adjusting market sentiment, paper silver price
manipulation is ultimately a futile exercise, and the physical metal’s supply
will eventually determine the retail price.
and Demand Status
sources of demand are simultaneously competing with each other for a dwindling
real supply of physical silver. First of all, most of the silver produced in the
world has been used up in industrial processes, which require a much higher cost
to recover the silver from that source.
Silver is also a
strategic commodity, with very few above ground stock piles remaining and new
uses being discovered every day. In addition, silver is mined primarily as a
byproduct of other metals — making it exceedingly difficult to predict new
supply coming on the market.
As a result, the
silver users that are responsible for the majority of demand employ just-in-time
delivery to maintain their inventory. This makes them quite vulnerable to market
panics that can quickly send silver prices sharply higher.
and precious metals remain — as they have always been — a safe harbor in a world
where the laws of supply and demand have been violated and subverted to the
point where they have now remained broken for decades.
offers an easy way for individuals to add a universal monetary component to a
disaster kit — which is why silver investors are buying it while they can.
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