Saturday, 3 September 2011

Silver Investing - The Last Best Opportunity To Buy Silver Bullion

It is my firm opinion that every American should be buying gold and/or silver as insurance against the economic calamity that will bring the United States to its knees. Bullion is the best form of precious metals to buy, as it provides more insurance per dollar of cost than other forms of gold and silver. Long term, I believe silver will provide more economic insurance per dollar of cost than will gold. There are several reasons, which I have written about in this venue and others. Because of a couple of those reasons, the price of silver has been much more volatile than that of gold, or any other investment for that matter. To recognize the last best opportunity to buy silver bullion, macroeconomic factors affecting the United States must be understood.
The United States of America is headed for high inflationary times. Measured as it was measured before 1970, inflation in the United States is running 8% - 9% in mid 2011. This inflation is the result of a huge expansion in the money supply; over 300% on the last three years.
In addition to funding The Affordable Health Insurance legislation (better known as Obamacare), the money supply was expanded to provide funding for government stimulus and bailout programs, and to keep the yield (often referred to as interest) on government treasury bonds low. The U.S. government already spends over 40% of its tax revenue to pay interest on previously issued bonds as they mature. The borrowing needs are so high that there are not enough buyers of U.S. bonds at these low yields. There are not enough buyers at these low yields because the many of the buyers know that the increased money supply has resulted in inflation and devaluation of the U.S. dollar. To keep yields low, so that the government doesn't have to pay significantly more than 40% of tax revenues on interest, the Federal Reserve buys government bonds in the secondary market.
The Federal Reserve has no tax revenue, so it must create dollars (often referred to as printing money) to buy the bonds. The dollars the Federal Reserve creates today will push inflation higher two to three years down the road. The $600 billion of so-called QE2 that ended June 30, 2011 was the most recent example of this death-of the U.S. dollar-- spiral.
Big increases in the money supply results in inflation. To kill inflation, the money supply must be shrunk. To shrink the money supply, the U.S. government must reverse the process. It must spend significantly less than it takes in for many years. And then it must use the surplus to pay down the national debt. But that is not going to happen, because significant reductions will affect significant numbers of voters.
Inflation will push interest rates higher, and higher interest rates will stifle the fragile U.S. economy. The U.S. economy is, by far, the biggest in the world. The second and third largest economies of China and Japan depend heavily upon the U.S. When the U.S. economy goes into a tailspin, those of all other industrialized nations will follow.
Since silver is as much a high-tech industrial metal as it is a precious metal, when worldwide industrial output slows, industrial demand for silver will decrease. As the economy deteriorates, investment demand for physical silver will increase. But it is impossible to predict it this demand will offset the loss of industrial demand. And besides, it is the futures markets, controlled by the speculators that determine the short-term price of silver. On the other side of economic collapse, that will change. But for a period of weeks or months the price of silver may drop significantly. When the price moves up after that period, amidst high inflation in the U.S. and economic disaster everywhere, it will never return to anything near that price, in U.S dollars.
When the economy collapses and the government admits the country enters a depression, industrial demand for silver, and the outlook for industrial demand, will be at its lowest. And whatever investment demand is, it will only increase from that point. That period of time will be the last best chance to convert assets to silver at prices that will never again be seen in our lifetimes.
Learn how to protect yourself against the current (and impending) economic disaster with silver investing. For more information:
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