Buying Silver in the Age of Transitory Inflation and Other Political Delusions

Spokespeople for the U.S. Federal Reserve have been saying that rising food and energy prices are transitory. They have now been pushing that illusion on the market for ten years, and some traders are still waiting for inflation to fall.

Nevertheless, the fact is that these price rises are not transitory, and they are instead permanent, systemic and intentional. Furthermore, prices are going to keep on getting higher and higher by all rational indications.





Debt Expansion Policy Makes Inflation Inevitable
 
When Ben Bernanke was first appointed Chairman of the Fed by then-President Bush in February of 2006, the U.S. Treasury’s funded debt was ‘only’ $8.183 trillion.

Nevertheless, by last December, when the FOMC announced its latest monetary policy measures, the U.S. Treasury’s debt had more than doubled to hit the even more astronomical 16.376 trillion level.
 
In other words, the Treasury’s funded debt had increased by more than 100% over a period of almost seven years, averaging a rise of roughly 14.6 percent per year during that time frame.  Commodity price rises in U.S. Dollar terms have been relatively subdued in comparison with this remarkably high level of U.S. debt expansion.

Silver as the Financial Solar Plexus

The solar plexus of the human body is where the connection between the body and mind - the organic and the non-organic — come together. Silver is like the solar plexus of the world of economics and finance, acting as both a tradable commodity and a monetary asset.
 
In the silver market, the relatively primitive market laws of supply and demand interact with the higher level market-driving factors of faith, perception and behavior on the part of its human participants to determine a market price.

Although modern market-based finance still largely depends on faith, confidence and human perception, it seems that the silver market’s price discovery mechanism is being increasingly usurped by obsessive technical analysis and computer driven trading that largely amounts to picking up nickels in front of a steam roller.

Fiscal Cliff and the Debt Ceiling Debates Showcase Delusional Politics

The U.S. Fiscal Cliff debacle has made the situation as clear as mud, although just about anyone could dispassionately do the math. It makes little sense to run $1.5 trillion annual deficits when only proposing roughly $600 billion in spending cuts over 10 years.

The irony is that the next delusional political drama —raising the U.S. Debt Ceiling — has been put off, with some even proposing eliminating that mandate altogether. If done, this would remove the very last tenuous thread of confidence holding the U.S. Treasury’s finances together.

Modern politics and economics tend to offer explanations where the cause is not readily apparent as the workings of a lost tradition. For example, apparently “everybody knows" that the way to make a person or a nation "richer" is to create more money. The establishment never openly states that this is actually the case, but they instead just print and distribute a million dollars of un-backed, debt-based currency per person.

The end result is that financial markets are increasingly broken and fair price discovery in the commodity markets is becoming non-existent.  This means that buying physical silver in this day and age is like planting a seed in fertile soil.

Like oil, silver is a scarce — but very useful and densely packed — commodity that fulfills its various industrial and monetary functions well. Fortunately for long term silver investors, silver is much easier to store in its physical form than an equivalent value of oil.

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