The next time you find yourself contemplating, worrying, or wondering with anxiety whether it’s too simple to be true; it is not simple - it’s exceedingly complicated.
Not because the fundamentals are all that hard to understand. And not because in principle it is sound personal action in any time period.
But it is complicated because we’ve spent so many years off the rails of sound economic principles that we don’t recognize them when we see them.
And the inertia to change is very intense on an unspoken level. Each step we take to make it right--to do what is wise-- is met with a startling resistance. Almost an unconscious, collective river moving against progress.
We are obsessed with what appears around us as success — its all superficial. We know it, but it’s difficult to resist feelings surrounding it.
The following are a few questions that I fielded from a subscriber. They struck me as questions from a sophisticated outsider, a new investor who also happens to be a financial professional.
Once you’ve been at this for a while it’s hard not to focus on the sentiment. And it’s easy to forget that there will be a new wave of investment demand and a natural re-kindling of the buy low, sell high strategy - even though I don’t frame silver as a typical ‘trade’ or ‘investment’. I conceptualize it as a ‘life option’ first.
Before we get to a few of the questions, I felt I needed to ask a few myself…
From where does your interest in silver arise?
What was the series of logic that led you to this point?
What have you come to except about the current financial environment that brought you to this point and these questions?
Why silver among all the other potential assets available to you?
1. The reader’s first question was actually a statement.
“While I have a strong interest in accumulating silver bullion in some form (upcoming currency crises, 3-5 years off.)”
My response was: Where did you come up with that timeline? How can anyone know when? All of the conditions that could trigger the end game exist. The risk brought about by debt overhang, margin leverage, and sheer money/credit creation that has yet to be unleashed truly makes it a matter of time. But no one has a microscope strong enough to find the snowflake that will ultimately trigger the end.
2. The next question is a common a frustrating dilemma that I think, in part, comes from the stark and lonely reality that comes from exiting (symbolically or literally) the mainstream system.
"I just can’t envision HOW some of that silver will be effectively used in the future."
How is any store of value or wealth used currently if you held any financial instrument, asset, artwork, or artifact? How have they been used in the past?
3. Another statement that often comes from the resistance to imagining that ‘it could happen here’:
"Since the modern era has never been in a severe currency crisis (that some are predicting), there’s little experience in such an environment.
Are you referring to isolated currency events? Like Zimbabwe or Argentina or, more recently, Iran? Or are you referring to a dollar crisis? Are you referring to a collapse of a world reserve currency or hyperinflation?
While it is true that we don't have the modern experience of a collapse in a world reserve currency, we have well documented narratives surrounding events in Argentina and Zimbabwe.
Silver and gold were used in black (or semi-regulated grey) markets in addition to barter. Bottom line, silver could be used or spent like any valuable commodity or asset through channels that range from formal to informal or emergency.
It could be used a collateral, for trade, or to sell in exchange whatever currency remains or evolves from the crisis.
4. Another statement - more of a presumption and an unfortunate misconception about dealers.
"Dealers currently selling precious metals certainly gain immediately by transaction costs."
Do you mean they profit from selling precious metals? Why else would they do it? Dealers are not all created equal. And not all have your interests at heart. But local dealers in particular are the gatekeepers. And for the investment grade options - i.e. bullion - there is very little in terms of profit.
5. Here is the next question:
"How do I convince myself that “investors” can indeed maintain or grow the value of their investment when it comes time to “spending” some of it later?"
Not sure what you really mean by “Investors”. Are you referring to “others” or clients?
Here is where the issues become personal. Everyone is different. While some amount of silver as a strict emergency hedge could be rationalized for all investors, beyond that it depends on the individual.
Convincing yourself of ‘growth’ should be easy enough. You have access to all the fundamentals.
The trading data for the most important exchange in the world by volume and recognition proves that current price has nothing to do with physical market reality. It’s right out there in the open for all to see.
The hardest will be to hold it through the ongoing volatility and to remain focused on the gaping disconnect between the physical fundamentals and the current (fiat) price as determined by paper derivatives.
Silver is a gift. A brief moment of opportunity.
At some point it will be valued like gold is now, out of reach for most of us - but always recognized for what it is and always had been.
It does require a paradigm shift. We are accustomed to spending dollars and valuing everything against the dollar - as the reference point.
As you know from basic math and history, the dollar, like all fiat currencies before it (reserve or no), rests on a very fragile foundation. To live through this transition will not be easy. Gradually, but then all at once, we will be shaken from the stability and what many of us take for granted.
Is it possible that silver could return to its equilibrium price without a concurrent collapse in the world financial system or hyperinflation? Perhaps. But no one can say for sure.
6. Finally, another comment.
“I can certainly imagine some unethical people trying to acquire others’ precious metal by theft, etc. And so the lowest of profiles for those in physical possession would be required.”
The irony reality--no need to imagine--is that unethical people have been stealing the wealth from the masses (including you and me) right out in the open for generations.