The Future Price of
Silver - A Review
of Economic and Behavioral Principles
By Dr. Jeffrey Lewis
the future price of silver from a fundamental perspective, it can make sense to
review the basic principles of economics and behavioral science as they apply to
the silver market.
typically relate to fKw=actors that are driving higher future purchasing power
of silver or factors that are making silver more valuable as a wealth saving
asset. Other key contributing factors to silver’s currently undervalue pricing
tend to block awareness with respect to the true value of silver.
prevailing silver market manipulation by the relative few shorts is eventually
overcome by the common sense of the much larger horde of private investors, the
market for silver will revert back to the fundamental principles that have been
driving the price of silver higher for years.
Driving Silver’s Price Higher
The interplay of
the following economic and behavioral principles is underpinning the silver
market and should eventually push the price of silver higher:
Regardless of price, metallic silver has strategic importance in industrial
and medicinal applications for which it cannot be readily replaced.
Nevertheless, only a small per unit supply is needed per use since tiny
amounts are needed to keep production lines flowing.
The supply of silver does not readily respond to
changes in its price since limitless paper silver can be created to manipulate
the price of the physical metal.
This is the tendency among investors to make
judgments regarding the frequency of an event on the basis of how easily they
can recall related instances. This primarily unconscious strategy helps people
simplify their investment choices by reviewing the examples they already have
ready access to within their memories.
The Pareto Principle
applied to demand, this principle indicates that a market move in silver will be
initiated by only a small number of early players or the hinting of confidence
loss in paper currencies.
to look for complicated solutions when simpler ones are available. This
simplicity principle suggests that the hypothesis that requires the fewest
assumptions should be chosen. It’s no complex conspiracy that banks are allowed
to have access to manipulative positions, where they profit as a result.
factors seem to be blocking awareness of underlying pricing factors like the
true value of silver, the depth of the ongoing financial crisis, and the need
for diversification outside of dollar denominated assets:
bumpy nature of the decline in the economy allows for excuses to be made based
on the normalcy bias, which is a state of mind people often enter when facing a
disaster. This bias causes people to underestimate the possibility of the
disaster and its effects, and it typically results in their inadequate
preparation for the disaster,
truly believe that things cannot really be all that bad or that the economy is
simply undergoing a downturn within a typical business cycle, which will end
soon enough. They also tend to believe that governments cannot go broke and that
printing money can lead to real economic growth.
Insidiousness of inflation
insidious nature of inflation, which is both thievery and a tax on the common
person, tends to allow it to creep up on investors gradually over time, so they
typically do not prepare their portfolios adequately for this hidden cost.
Malthus and the Myth of Progress
Malthus postulated that unchecked population growth would prevent the creation
of a utopian society. The "Malthus was Wrong" fallacy, also known as the “Myth
of Progress" has become the belief that humanity is necessarily on an "upward"
trajectory regardless of how many people are fighting for exponential growth at
the expense of the world's clearly finite resources, and silver is one of those
valuable items in finite supply.
The Key to
perceiving the need to immediately prepare for a coming or worsening economic
crisis comes down to playing the "What happens next?" game.
investors need to remain realistic with respect to the time frames involved.
They also need to
understand that just because they were comfortable yesterday, does not mean they
will be better off tomorrow. Preparing for the worst makes sense so that you
can be pleasantly surprised if the future turns out to be brighter.
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