Silver prices peaked in 2011. The descent has been long and tedious. Perhaps silver prices made an important low on September 11, 2018, like they did on November 21, 2001 at $4.01. That long-term low was twenty cents below the price on September 11, 2001, the day the twin towers fell at free-fall acceleration, which marked the beginning of the silver bull market that launched prices upward by factor of 12.
The S&P 500 Index has risen for over 9 years, from a low of 666 to a high of 2,940. It sits in late October at about 2,641. Massive debt increases, central bank created low interest rates, fiat currency devaluations, stock buybacks and debt based optimism fueled the rally. A correction is occurring.
Sanity: I know of no metric to measure the absence of sanity in the financial world, but if such a metric existed, it would register HIGH! Consider:
- Official U.S. national debt has increased an average of 8.8% per year since 1971 when President Nixon defaulted on the U.S. promise to exchange dollars for gold. It is not sane to expect the economy to grow a few percent per year while debt grows 8.8% per year. Debt rising faster than economic growth for decades creates dire consequences.
- Finite World: The world and its resources are finite. Yet we demand expansion and more extraction of resources every year. How sane is exponentially increasing use of commodities in a finite world? How sane is creating exponentially larger quantities of fiat currency and debt in a finite world?
- Negative Interest Rates: Several European countries promise, in ten years, to repay a smaller number of devalued euros than the amount borrowed. If you want fewer euros than you loaned, and will wait ten years, and understand the repaid euros in ten years will be worth far less than current euros… step forward. Crazy!
- Nuclear War: Mutually Assured Destruction—MAD. Building bigger and more deadly nuclear bombs at huge expense accomplishes what? Encouraging guaranteed global destruction is not sane.
Year Silver DOW S&P500 Nat. Debt $Bill.
1971 $1.39 900 100 $398
2018 $14.44 24,443 2,641 $21,700
Ratio 10.4 27.1 26.4 54.5
Increase/yr 5.1% 7.3% 7.2% 8.8%
The DOW and the S&P 500 Index have grown much faster than silver since 1971. National debt has exploded higher. This shows the power of printing fiat currencies to fund deficits, levitate stock markets, overstate asset prices and understate risk.
The banking cartel creates debt, boosts stock markets, increases wealth for the political and financial elite and devalues fiat currencies toward their intrinsic value of zero. This is beneficial for the political and financial elite, but few others.
Official national debt has increased 8.8% per year since 1971, doubling every eight to nine years. Assume debt will double every nine years. By the year 2100, debt will have doubled nine times. That places the U.S. official national debt at about $11,000 trillion. Insane! The dollar, if it still exists, will buy next to nothing. Expect a reset.
Conclusion: A reset will occur. Buy silver! Debt will be defaulted or inflated to worthlessness as the banking cartel devalues the dollar. The alternative is that fiscal sanity will return, congress will balance the budget and reduce debt, the Federal Reserve will disband, pigs will fly, and three other impossible things will happen…
Regarding overvalued stock markets…
“So when the herd thunders off the cliff, most participants are trapped in the stampede.” Charles Hugh Smith
Is Silver Undervalued Compared to the S&P 500?
Silver prices are too low when compared to the S&P 500. Expect the ratio to rise for several years. Assume the S&P 500 corrects by 50% and silver rises to about $50. Even at those prices the ratio would remain below the level reached in 2011.
The price of silver could rise far higher than $50 and remain within an expanding trend channel dating back to 2001. A financial reset could devalue dollars, implode debt, and force central bank intervention with tens of trillions of “funny money.” These events would create investor disillusionment with paper assets and might boost silver and gold prices by a factor of ten or more.
Is this a forecast? No, but higher silver prices are inevitable, short of nuclear war.
- Debt and currency in circulation grow exponentially.
- Silver and stock prices grow exponentially.
- Silver prices are low in 2018 compared to stock indexes. Silver prices will rise and stock prices will fall, and then rise again. The long-term trend for both, thanks to created “funny money,” is higher.
- A reset of the financial system, an implosion in the stock and bond markets and falling real estate prices will panic investors, as it did in 2000 and 2008. Silver prices will rise as they always do.
- When? Soon, maybe very soon, but don’t underestimate the manipulative power of central banks to delay the inevitable while they transfer more paper wealth to the elite.
WHAT ABOUT THE GOLD TO SILVER RATIO?
History shows that gold prices rise and fall a smaller percent than silver prices. When the ratio is too high, silver prices have fallen into the basement and will rally.
The gold to silver ratio as of September 2018 has reached a 25 year high. Now (most of 2018) is a buy zone for silver.
- Silver prices are far too low when compared to the S&P 500 Index.
- The S&P 500 Index has risen too far and too fast. Markets that rise too far and too fast always correct, but they can become even more extended before they implode. Remember that the NASDAQ 100 Index fell 84% from high to low after the 2000 peak.
- The gold to silver ratio shows that silver has fallen hard compared to gold. Those times when the ratio is high have been excellent buy zones for silver.
- Debt has increased too far and too fast. A reckoning is coming. The result will be a category 7 financial hurricane. Protect your assets with silver and gold.
This post first appeared on The Deviant Investor.