January 3, 2017
Silver prices nearly reached $50.00 in April of 2011. They crashed to a low under $14 in December of 2015 and currently (December 2016) sit at about $16.
Silver prices, in our increasingly unreal debt based fiat currency
world, streak higher and subsequently crash to unbelievable lows.
Option One: Silver prices are near the end of their
correction and will rally substantially higher. Why? Exponential
increases in debt and total currency in circulation lift the prices for
nearly everything, including college tuition, cigarettes, the S&P,
housing, health care, silver and gold. We have heard this before and we
see the consequences of using our “fake money” every day.
Option Two: Silver prices reached a generational
high in 2011 and will collapse even further in coming years. Why?
Supposedly the crushing deflation will rule the world for several years
and prices for stocks, bonds, real estate, gold and silver will crash to
unbelievable lows. We have heard this before. Some prices will probably
crash, but silver and gold should rise because they are real money and
(surging) counter-party risk.
The Silver to S&P 500 Ratio: This ratio shows the relative valuation of silver compared to stocks in the U.S. See the chart below for the ratio since 1990.
Silver is currently too low compared to the S&P 500 Index.
We live in an exponential world – exponentially increasing debt, banker
profits, silver prices, monetary nonsense and more. Examine the
increase in U.S. national debt and the – more or less – parallel
increase in silver prices – both on log scales.
Silver prices increase exponentially along with debt, currency in
circulation, and consumer prices. However, if the world had cast aside
economic delusions and returned to a world without central banks, fiat
money, fractional reserve lending, unpayable debts … but I digress.
Assume that debt will continue to increase (it will as long as politicians and the Fed are “on the job”) and that the last 17 years of silver prices tell the story…
This chart uses a log scale and shows exponentially increasing
prices. A green line connects highs since 2001 and another green line
connects lows since 2001. The purple line is the geometric mean between
the high and low boundary lines.
Prices are propelled higher above the purple line and then crash
lower. Assume the purple line is an equilibrium line which suggests we
will see the next multi-year move surge above the purple line.
Examine the deviation of the monthly price of silver as a percentage
above or below the purple equilibrium line. Silver prices oscillate
around the equilibrium line of zero on the following chart.
Silver is far below the equilibrium line and too low
compared to its own exponential price history as well as compared to the
S&P. The next major move should be UP!
Ted Butler: (Subscription service and here.)
“The big theme, as I see it, is
JPMorgan becoming more aggressive in acquiring physical silver and gold
while at the same time reducing its COMEX short position in each almost
as aggressively. It’s hard to imagine a more bullish backdrop for
Bill Holter: (Subscription service)
“I believe deflation will destroy
financial assets and not stop until fiat currencies (including and
specifically the dollar) themselves are destroyed. The coming credit
event will wipe out currencies … and what is the result of grossly lower
or worthless currencies? Hyperinflation.”
Currencies are created by increasing debt and are backed by nothing
but hope, faith and confidence. Exponentially increasing debt is not
sustainable. How long before the dollar, pound, yen and euro begin to
resemble the Venezuelan and Argentinian currencies?
It is more sensible to own physical silver, knowing it is
grossly undervalued compared to the S&P, national debt, total
sovereign debt, and more.
THE RUSSIAN CONNECTION:
In accordance with the current blame-game promoted by the “fake news”
diversions: We can blame Russia for HRC losing the election, releasing
scandalous emails that the Democratic National Committee desperately
wishes had remained private, the election of Trump, NSA spying on
everyone, global terrorism, excess debt in the western world, the
failure of hope and change, Federal Reserve monetary policy,
unemployment, weak silver prices, strong stock markets, global bond
market correction, the coming recession, derivatives disasters, slowing
retail sales, Italian banking, cold weather, one brutally assassinated
reindeer no longer able to pull Santa’s sleigh and a tardy delivery of
goodies from the Easter Bunny next year…
Well … maybe Russia should not be blamed for all the above …
||GE Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 - 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites.
The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.