The readers of this publication are some of the best educated regarding the true nature of money and finance.
The question of inflation is often debated, even among alternative thinkers. First, inflation must come from an increased “money” supply. The word money is quoted because, in today’s world, we are speaking about an electronic blip regarded as a means of exchange. As JP Morgan stated years ago, “Gold is Money, everything else is credit.”
Investors and savers must acknowledge that the money supply can grow and have little effect on prices if and only if that increase is sterilised. This means the money is “held” either in the bond markets, usually sovereign debt, primarily US debt instruments, or sent back to the Federal Reserve to collect interest. In other words, this new currency does NOT enter the general economy. It is as if the cash was put into a large hole and buried. Until it is used, it has no effect.
THE CURRENT SYSTEM IS FAILING
Many of us free market thinkers look at the velocity of money. This means how often a given currency unit is turned over in the marketplace. When people fear their currency will devalue rapidly, the speed increases significantly, and people buy anything of value rather than hold the currency. This is typical of many South American countries.
When the currency supply is restricted because it has not entered the general economy, people tend to save the currency, spend less, save more, and reduce their debt.
The stated inflation rate in the US is said to be around five percent officially. However, if we examine shadowstats.com and the Consumer Price Index based upon the 1980 metrics, the inflation rate is thirteen percent, over double the reported rate. This is verifiable to most people as their food and energy costs are at least thirteen percent in almost all cases.
At this rate, the currency’s value loses half of its purchasing power in about five years. How many have seen their wages double every five years?
What’s Gold got to do with it? Central banks have purchased gold hand over fist at the highest pace in over 50 years. Why? Because Gold is the money of last resort, and all the central money centre banks know this. They also know it is the best asset that can be held and has no counterparty risk.
The problem with a fractional reserve system which is standard worldwide is that such a system is insolvent from the start. You read that correctly! If all depositors went to a given bank and withdrew their deposits, the bank could perhaps return ten cents on the “dollar,” In today’s world, that would be a conservative bank.
The macroeconomic picture is clear. The current system is failing! The top bankers know this and are working to implement the new system. There is one thing that the banking establishment must have, and that is control. This is why so much effort has been taken to mitigate the cryptocurrency world. Ever since the FTX debacle, many people who might have put some of their savings into the cryptocurrency world have decided it is unsafe.
AN ECONOMY BUILT ON CREDIT
What is safe? Well, we have been told by the mainstream financial press that the next system will be centralised, not decentralised, which is essentially how the cryptocurrency was designed to work. The idea that crypto is decentralised is a misnomer because all the exchanges verify their customers before any exchange between current central bank money and crypto is issued. Simply the exchanges act like a centralised organization. There are exceptions, but most are known and can be traced if desired.
This means that the Central Bank Digital Currency will be pushed as the best way for everyone to become part of the new banking system. There are roughly 1.4 billion people that do not have a bank account. The new system aims to put everyone into the new cashless system using a type of identification above and beyond the current government-issued ID. We could most likely be looking at something biometric, perhaps your DNA.
As the system continues to deteriorate, the mainstream will cry about the fault of capitalism. This is false because the interest rate environment has been manipulated for years by bankers under political pressure.
In a free market, the market would determine the price of money, which means the interest rate. If this practice were in effect, there would be much less gambling in the financial markets since loans would often be given for productive use rather than stock buy-back programs, for example.
Since the entire economy depends on credit (debt), everything in the system is controlled because money costs are managed.
The rash of bank failures such as SVB, Credit Suisse, and Signature Bank are simply the initial dominoes falling. Many more will follow, and the US Federal Deposit Insurance Corporation was filmed recently speaking about the coming Bail-Ins and that they know the general public trusts the banking system far more than anyone in the room. So, the elite bankers know that the system is coming down. However, we do not know when and what ‘solution’ will be offered to the public.
Many think the US dollar will be replaced as the reserve world currency, and this is probably correct, but not as soon as many think because the debt markets are vast and mainly made up of US debt. There is no replacement for this part of the financial markets now. Depending upon how the “bad debt” is moved off the books or eliminated somehow when the new system is installed, it remains to be determined if the US dollar will honestly go away.
I recently spoke at the Money Show in Las Vegas on both a panel and in a workshop environment. The workshop was titled- “Is Silver an Asymmetric Trade.” First, the dynamics for silver going forward are incredibly bullish. Based upon the current trends where solar makes up almost 12% of the entire silver market, and this application alone is scheduled to double before the end of the decade, we project that industrial use alone will put significant upward pressure on the price of Silver. The deficit for the silver market last year (2022) was two hundred million ounces. This was far more than projected by the Silver Institute, and current thinking is that we will see silver deficits far into the future.
We have only looked at part of the silver situation. The actual move-in Silver takes place when monetary demand accelerates. What this writer finds most interesting is that a major bank – Citi Group, said in an article published April 19th, 2023, that “Silver is the Best Asset if the Dollar Falls” This is quite the statement, especially coming from the banking sector.
THE GREAT POTENTIAL OF SILVER
The analysts believe the current situation is reminiscent of the second half of 2007 and early 2008. “Precious metals, especially silver, has near perfect conditions for the ongoing bull market,” Citi Group analysts said. Developed economies are showing significant weaknesses, and emerging economies are growing. The paired economic conditions have indicated precious metal bull markets for the last two decades. As a result, Citi believes there could be a rapid price expansion. The analysts pointed to the summer of 2020, when Silver spiked from $19 to $29/oz in three weeks, and prices exploded from $18 to $48/oz between August 2010 to April 2011 as proof of their claim.
Three developing situations lead to Citi’s belief that silver’s run will continue. First, the Dollar will weaken against other currencies. Second, interest rates are going to have long-arching effects throughout the economy. Third, even more investors will realise the gravity of the economic situation over the coming months and turn to precious metals for protection, spiking silver’s demand.
The above statements reaffirm something this writer has written and talked about for a very long time: that Silver can make 90% of its move in ten percent of the time. Citi writes that during this market so far, silver exploded from $18 to $48 in seven months. This fact affirms the idea. To go further in the previous bull market, silver achieved an ALL-TIME HIGH of $6.00 US in January 1979. Few people thought buying at that “high” was a good idea. How wrong they were. Silver exploded from that price to hit an intraday price of $50 per ounce.
Will silver react similarly this time? With five trillion dollars on the sideline currently waiting to move into “safe investments,” we can project if only one percent of that money moves into silver. So we are talking about 50 billion, two years of total silver production and recycling.
So I ask the reader, is silver an asymmetric trade? Limited downside and extreme upside potential. For those with a longer time horizon, say ten years, buying silver at current price levels and holding for a decade could prove prudent. EG