Silver Prices & Interest Rates

Silver Prices & Interest Rates by Gary Christenson

From Louise Yamada – technical analyst:

“History shows the only place for interest rates to go from here is higher.”

interest_rates_200_years

Examine the above chart of interest rates for 200 years.

  1. Rates rise and fall in long cycles, 20 to 40 years from a peak to a trough.
  2. Important highs occurred in 1920 and 1981.
  3. Important lows occurred in 1946 and probably 2016.
  4. Current rates are the lowest in 200 years. Some analysts have said the lowest in 5,000 years.

Examine the chart of annual silver prices since 1913 on a log scale.  The upward trend in silver prices is clear and will continue as long as debt is increasing in our fiat currency system.

100_years_silver

INTEREST RATES AND SILVER PRICES

Refer back to the 200 year chart of interest rates and the 100 year chart of silver prices.  Note the correlation between interest rate highs and silver price highs and similar lows (ovals).

Highs:  Interest rates 1920   –        silver 1919

Highs:  Interest rates 1981   –        silver 1980

Lows:  Interest rates 1946    –        silver 1932 and 1941

Lows:  Interest rates 2016    –        silver 2015

Interest rates rose approximately 35 years from 1946 – 1981 and fell for 35 years from 1981 – 2016.  Silver prices could rise for several decades, along with interest rates, as the dollar is devalued further, silver is aggressively used for industrial applications, investment demand increases, and perhaps … the world is forced to return to a monetary system tied more closely to gold or silver.

RISING INTEREST RATES

We also know that interest rates are the “cost of money” and have been steadily pushed lower for 35 years by government and central bank actions.  Further, the bond market rises as interest rates fall (good times for Wall Street) and falls as interest rates rise.  Higher rates mean the $200 trillion or so of debt is more costly to service – we know it will never be paid back in current dollars – but interest to service the debt is more onerous.  Budgets are squeezed, projects are curtailed, weak businesses go bankrupt, stock buy-backs are reduced and all those derivatives that are tied to interest rates —  well, it won’t be good for many of them…

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