Silver and Gold: Shelter From the Storm
by Gary Christenson, Gold Silver Worlds
What storm? The stock and bond markets in the US are doing great, the media has sold the strong employment story, and all those nasty wars are far, far away.
So the top few percent are doing well and are sheltered from the storm, but what about the rest of us? What storms are pounding us?
- Currencies are based on debt, and those dollars, yen, and euros are created every day to keep various financial bubbles inflated. Global debt is $200 Trillion and cannot be repaid except with deeply devalued currencies. Central banks are creating currencies, monetizing debt, reducing interest rates, and frantically promoting inflation to avoid deflation.
- Inflationary forces are powerful. Huge devaluation of our currencies is occurring. This extends the illusion of exponential growth and diminishes the debt hardship. Most of what we need, such as food, energy, and health care will cost more every year.
- Deflationary forces are also powerful. What happens when a few $Trillion of sovereign debt defaults and triggers many more $Trillion in derivative payouts – that might cause a chain of bankruptcies? Expect deflation in our bubble assets.
What will central bankers and politicians do? Extend and pretend, print currencies, create far more debt, and fabricate stories about how everything is good.
Look at the US national debt for the past 40 years. The exponential trend is clear – up 9% per year on average and about 10% per year since the 2008 recession/depression. It will rise until congress drastically cuts spending (just kidding) or some nasty reset occurs. Exponential increases do not last forever so our current exponential increases in debt, stock prices, welfare, military expenses, and economic stupidity will end someday.
Gold and silver are real money, while dollars, euros, and yen are paper substitutes that circulate as currency in place of money. Look at the graph of the ratio of silver to the national debt for the past 20 years. Note the long term rise in the ratio and especially the increase since 9-11. Yes, there has been huge volatility in silver prices as shown by the ratio, but silver and gold – real money – are demonstrating their true value in the face of escalating debt.
Debt will increase and silver prices will rise more rapidly. Since silver and gold have been crushed during the past four years while stocks and bonds have rallied to new highs, expect those trends to reverse this year. When stocks and bonds decline central banks will accelerate their creation of currencies to reflate them and debt will increase even more rapidly, along with silver and gold prices.