The gold to silver ratio hit a historical high on March 18 of 125, even higher than in 1991 when silver bottomed at $3.51.
The Four Horsemen of the Apocalypse bring pain and reset expectations. They are, according to some sources, pestilence, war, famine, and death.
Pestilence: News stories besiege us about the dangers of COVID-19, the pestilence released upon the world by (take your choice) bats, the United States, China, or a bioweapon lab. This pandemic is creating trauma for everyone. Confidence in governments and health agencies will decline. Trust in central banks will, hopefully, reset to much lower levels. Paper assets and fake money will be unmasked and understood for what they are. Real money will (someday) be appreciated as the only money without counter-party risk. But until that day… the paper derivative exchanges on COMEX “manage” prices.
War: The wars in Afghanistan, Iraq and other countries cost lives and trillions of dollars. What have they accomplished, other than transferring assets from governments to corporations? National debt increased over $23 trillion and prices rose, but the “piper must be paid.” Perpetual wars weaken economies, currencies and governments. Fake money will thrive until it fails. That moment of failure could be close.
Famine: Starvation has been a fact of human life for centuries. Expect central bankers to use their primary tool—printing fiat currency units—to address the consequences of pandemic and famine. Central bank actions cannot create wealth, alleviate a famine nor diminish a pandemic.
Death: Several thousand people have died because of the pandemic. Many more will die in the coming year. Zombie corporations, over-indebted corporations, and small businesses will die by declaring bankruptcy. Real money—gold and silver—will thrive. Paper silver and paper derivatives are fake money.
BUT PAPER SILVER PRICES HAVE FALLEN HARD!
Yes, COMEX prices for silver in fake money—fiat debt-based dollars—fell to $11.77 on March 18. However, prices rose to over $16 on April 14. But each silver eagle remains an ounce of real money that has been valuable for centuries and will stay valuable for many more decades, regardless of how many paper contracts are dumped on the COMEX to lower prices.
The fiat-money silver prices have dropped, as have prices for most stocks and other assets. This bear market will devastate all debt-based assets.
THE FOUR HORSEMEN HATE SILVER.
Pestilence ravages people, countries, and economies. The COVID-19 virus will impact everyone and all countries for months or years. Global economies and monetary systems will reset and a “new normal” will emerge. But an ounce of silver will remain an ounce of silver, valuable and necessary for industry, electronics and thousands of applications. The virus will show the ephemeral nature of fake money. Silver bullion will thrive.
War creates price inflation, wealth transfers, massive debts, and demand for commodities. Silver prices rise as currencies devalue. They show the consequences of excessive spending and unpayable debt. The war horseman hates silver for telling the truth about wars and spending.
Famine occurs when food is unavailable, or the currency has devalued so much that it buys little food. Think Venezuela. The famine horseman hates silver for retaining value and food purchasing power.
Deaths of individuals, businesses, governments and economies show that life is tenuous and easily lost. Enron, Global Crossing, the Ottoman Empire and the U.S.S.R. are gone, but silver remains. The death horseman finalizes with deaths and bankruptcies. It hates silver, a real and lasting asset.
SILVER DURING THE PAST SIXTY YEARS:
Paper silver prices on COMEX are volatile. For this discussion, assume an ounce of silver costs $18.00. Prices could exceed $50 in one year.
(Approximate data from St. Louis Fed and others.)
- First class postage in 1965 was $0.05, or about 0.03 ounces of silver. Today it is $0.55, or about 0.03 ounces of silver.
- Crude oil in 1969 cost $3.25 per barrel, or about 1.8 ounces of silver. A month ago, crude oil cost about $32, or about 1.8 ounces of silver.
- The average wage in 1965 was $2.58/hour, or about 2 ounces of silver. Today the average wage is $23/hour, or about 1.3 ounces of silver. Since the financialization of the economy after 1971, wages have not risen enough for the bottom 90%.
- An average house in 1964 cost $20,000, or about 15,000 ounces of silver. Today an average house costs about $325,000, or 18,000 ounces of silver. House prices are higher in some areas and lower in others, but silver prices are too low when compared to houses.
- The food stamp program (SNAP) cost in 1995 was $24 billion, or about 4.7 billion ounces of silver. In 2020 the program cost about $75 billion, or about 4.2 billion ounces of silver.
- The S&P 500 Index in 1971 was 100, or about 72 ounces of silver. On February 19, 2020, the S&P 500 Index closed at 3,386, or about 188 ounces of silver. The S&P, even after the current correction, remains too high while silver is priced too low. This will change in the coming year.
- Household net worth in 1971 was about $4 trillion, or 2.87 trillion ounces of silver. In 2020 household net worth is about $112 trillion or 6.2 trillion ounces of silver. The bear market in paper assets will destroy many $ trillions in paper net worth while boosting silver prices.
- U.S. government expenditures in 1971 were about $240 billion or about 170 billion ounces of silver. In 2020 government expenditures will exceed $5,000 billion ($5 trillion) or about 270 billion ounces of silver. Government expenditures have risen every year for over a century and will rise in an election year. But silver prices are too low and should rally.
- Non-financial corporate debt in 1971 was $186 billion, or about 133 billion ounces of silver. In 2020 the debt is $10,100 billion (much too high), or about 550 billion ounces of silver. Bankruptcies and defaults will reduce corporate debt while silver prices rise.
- Pestilence—the COVID-19—affects everyone. It will be blamed for a bear market in stocks, recession and/or depression, massive unemployment, social unrest, loss of confidence in government, a credit crunch and other failures.
- Famine caused by failure of the currency is a smaller problem if one stores wealth in silver, not devaluing paper currency units.
- War and price inflation are normal conditions in a world run by debt-based paper currency units. If countries used real money (gold and silver), there would be less debt and fewer wars.
- Death: Many people will die from COVID-19, wars, depression, and economic collapses. Silver bullion will help, but few people know and understand real money.
- The Federal Reserve sees panic in debt and stock markets. They injected trillions of fake money to support markets and government expenditures. Inflate or die! More trillions of newly created fake money are coming. Zero percent interest rates, more debt, and government stimulus programs are inevitable.
- If the Fed distributed a trillion dollars to American workers, each worker would receive about $7,500. However, the Fed chose to support bankers and hedge funds instead of workers. The Fed is part of the problem, not part of the solution.
- The gold to silver ratio shows that silver is hugely undervalued compared to gold, a sign of bottoms in both. The ratio will decrease as silver prices move far higher.
- In February 2020, 650,000 silver eagles were sold. March 2020 sales (through the 12th) were 2.32 million silver eagles during less than half a month. People wanted silver, not paper currency units. Shipping delays will occur because the U.S. Mint ran out of silver eagles.
- Since the 1960s and 1970s, silver prices have risen along with other commodity prices. Financialized assets, such as stock indexes and corporate debt, have risen more rapidly than silver prices. Those over-valued financialized assets will correct lower. That correction began in February.
- The COVID-19 virus will be blamed for the consequences of using fake money, excessive debt, Fed policies, and deficit spending.
- We can ignore fake money, but we can’t ignore the consequences of using fake money.
Buy silver, even though you may wait for delivery of physical silver coins. Miles Franklin will sell silver coins (delayed), junk silver, and gold bullion. Protect your savings and retirement while you can.
The Deviant Investor