..by Biz Bluetree
Intelligent economists, analysts, investors and businessmen with names James Turk, Eric Sprott, Robert Fitzwilson, Stephen Leeb and others remind us that history repeats itself and trends don’t lie. Their clear message is if a slippery slope goes ignored by uninformed masses, calamity and chaos ensue.
In fact, read why Stephen Leeb believes Germany, Russia and China are intent on replacing the U.S. dollar as the world’s reserve currency with their own “currencies and gold.”
How can Joe Average stay informed, make the right investment choices and protect his savings?
Certainly an experienced trader has a better chance of achieving gains than does the average investor. For this “average Joe investor” reading as much as possible from the far left to the mainstream middle to the far right, and forming an opinion then taking action, is the best strategy.
In this opinion, for instance, contrary to mainstream mantra, the stock market is over-valued while silver, gold and shares of certain metal mining companies are vastly undervalued. Having said that, opinion here is that a time may come when retirement accounts, bank accounts and brokerage accounts come under the scrutiny of hungry governments. Therefore it has become this writer’s practice to save/invest almost exclusively in physical silver and gold, with greatest focus on silver – held under private lock and key.
Paranoid or realistic? There are solid reasons
Today, as it’s no secret, the formulas used for measuring inflation, unemployment, the consumer price index [CPI] and gross domestic product [GDP] (among other indicators) have all changed. The formulas have been changed, of course, to a method that allows more favorable numbers to be fed by central planners to the mainstream masses via mainstream media to create an illusion that everything is OK, and in fact improving.
There is however a camp of respected professionals who believe, based on their own analysis and experience, that things are in fact OK and improving. Their arguments carry merit and are sometimes close to convincing, but at the end of the day for this average Joe, the only thing improving seems to be the slippery surface of the slope.
See the change in U.S. interest rates over the last few decades. Today’s zero interest rate policy [ZIRP] differs greatly from the calculated high interest rates of Volker’s Fed in 1979 and 1980. Decades ago procedures in Fed policy were put in place to control inflation by controlling the growth rate of the currency supply.
A tapering of QE is currently in place, but as pointed out in a previous article, The Salvation Of Silver And Gold, the Fed will soon realize a negative impact from tapering and reintroduce an even more aggressive stimulus program, including debt purchase and increased currency creation which will prove unsustainable.
Any economist worth his salt knows there is a close relationship between the rate of inflation and the growth rate of the currency supply. And greater the supply of currency, the lower the value of each unit of that currency.
Yet, the other camp argues that the growth rate of the currency supply was actually greater prior to 2003 than it is today and that the Fed’s balance sheet is bloated because the banks are holding greater reserves in collateralizing themselves. And because this currency is not making it into the economy at large, it is in fact not being devalued.
This article suggests, try telling that to China
While this government’s cost of running its show is dependent on short-term debt, what could happen if and when interest rates rise? Could the government’s burden of maintaining itself spiral out of control and destroy its own currency? Could hyperinflation, as is being suggested in some circles, become our reality?
In this opinion, the potential is real and is reason enough to accumulate physical silver and gold for purpose of risk management and wealth protection.
After all, there are many experts on both sides of the argument with conflicting opinions making it difficult for the average Joe to decide for himself what is credible and what is not. Market and economic fundamentals don’t seem to indicate a clear path as they once did when followed correctly. The road today is muddied and unrecognizable.
A recent Casey Research article written by senior precious metals analyst, Jeff Clark suggests those believing the gold peak of $1,921 per ounce in 2011 was equivalent to the high of $850 per ounce in 1980 are employing “flawed logic.”
This furthers our point
Even the U.S. Bureau of Labor Statistics [BLS] suggests $850 gold in 1980 is actually equivalent to $2,320 gold in 2011 dollars, yet that number is derived from a changed calculations formula, too.
In order to compare the inflation adjusted numbers more accurately, Jeff Clark asked John Williams of Government Shadow Statistics [Shadow Stats] to use the very method of calculation employed by the US government in 1980 to determine what today’s number should be. Here’s how it added up:
“Using the 1980 formula, the monthly average price of gold for January 1980 would be the equivalent of $8,598.80 today. The actual [one day] top of $850 on January 21, 1980 would equate to a whopping $10,823.70 today.
[...] the current [BLS] CPI formula grossly dilutes just how much inflation has occurred over the past 34 years. It’s so misleading that investment decisions based on it — like whether to buy or sell gold — could wreak havoc on a portfolio.”
This is another reason our article champions the accumulation of physical precious metals to preserve wealth and to survive financially in a volatile, ever-changing economic climate.
Consider the signs that through-out history have spelled financial collapse: a declining workforce, high real unemployment, rising inflation, unsustainable levels of world debt, unfunded domestic liabilities, devaluing of currency and foreign wars. All of this, coupled with never ending government intervention and regulations, has this contributor reading a recipe for disaster.
Physical silver and gold are nobody’s liability
For investors interested in accumulating precious metals assets, there is no time like the present. The price is right. Though it is no secret current bargain prices for silver and gold are the result of rigged-markets including price manipulation and propaganda, this cannot go on forever. It is only a matter of time before the huddled masses yearning catch wind as to what is really happening. At some point metal prices will soar and supply shortages will be realized. In other words, as according to Eric Sprott, there “won’t be anything left to buy” for whomever arrives late to the party.
Perhaps a normalcy bias has you comfortable this scenario could never play out in the U.S. Please try to imagine for a moment that it can… Imagine banks accepting gold and silver on deposit and issuing alternative currencies or crypto-currencies. Still too far fetched? JP Morgan (JPM) doesn’t think so. JP Morgan not only holds a sizable physical silver hoard against its short position, it has also applied for a crypto-currency patent.
Click here to view the JP Morgan patent application.
Convinced what may be sobering for some will be categorically dismissed by others as unsubstantiated or alarmist theory, Robert Fitzwilson of the Portola Group shares this insight:
“At some point there will be an implosion of the monetary system. Common sense tells us that it is inevitable, as do arithmetic and history. Investors in gold and silver should not be attempting to predict the timing of the event, nor specific magnitude. It is about wealth preservation, pure and simple.
Gold, silver, and precious metals mining companies are the only absurdly undervalued assets on the planet [right now] and should continue to be considered [by] those wishing to survive the financial maelstrom ahead.”
Increasing numbers of experts share this opinion and feel it’s just a matter of time before we experience an uncomfortable end game. If their assertions are to be given credence, our opinion supporting physical silver and gold makes perfect sense.
James Turk makes a good observation and point after reviewing 63 commodities priced from 1980 to the present as chronicled on the World Bank‘s web site. Included in that list of all higher priced commodities is silver whose current price is only 51 percent of its price 34 years ago.
“How is it possible that silver can be so cheap given its use in so many new applications and the continuing drawdown of its above-ground stock? We all of course know the answer to that question because silver is part of the central planners’ scheme to keep the price of the precious metals as low as they can. Yet gold is 192 percent of its price at the end of January 1980. So why hasn’t the silver price risen at the same rate?
Some people will answer that question in a variety of ways, but to me there is only one answer. The price of silver is much easier to control than the price of gold because silver is a much smaller market, so paper derivatives can have a much bigger impact on silver. [...] imagine what a group of governments and their bullion bank agents can do with their combined resources if they are intent on manipulating silver.
But regardless of the ongoing manipulation of the silver price, one obvious fact stands out from my comparison of commodity prices — silver is very, very cheap. Silver is by far the cheapest of the 63 commodities I compared. That makes silver a tremendously undervalued asset and therefore one of the best buys on the planet today.”
For wealth preservation and risk management, good advice remains to buy and hold physical silver and gold. There will come a time when the price you paid for it does not matter. And the only thing that will matter is you own it rather than do not.