Wild Silver Returns? Gold Zooms Higher on Inflation or Deflation

The WealthCycles Staff
Are you ready for the largest transfer of wealth in the history of the world?

If you are, you already save in silver and gold coin, and have been counting your stacks in terms of ounces. If not, ask yourself: Why not? Do I really want to miss out on something that is both so simple and so absolutely massive?

During periods of inflation, prices of the monetary metals rise with the fall of the purchasing power of each individual dollar. It takes more dollars to buy the same ounce. During deflation, the metals dance, waiting for their moment to burst out of the gate.

The prices of the monetary metals are dancing now, set to spike far higher, if the historical precedent for dollar devaluation set by Roosevelt during the last deflation holds. Deflation destroys the systemically critical institutions from the ground up, and has been halted in the past by printing (re-inflation, see 2008) or by more dramatic and political measures, such as Roosevelt’s 1934 dollar devaluation. In the latter case, gold rose 70%, overnight.

Let’s take a look at the two time periods, courtesy of Gold Eagle’s I. M. Vronsky:

The economic problems causing havoc today:

  • The banking system is collapsing
  • Tidal waves of foreclosures sweep the country
  • Tumbling housing prices
  • A bear market ravages Wall Street stocks
  • Massive unemployment throughout the nation
  • Overall we are in a deflationary spiral
  • Interest rates are abysmally low
  • Consumer confidence is bottomless

And what was causing economic havoc in 1933?

  • The banking system was collapsing
  • Tidal waves of foreclosures swept the country
  • Tumbling housing prices
  • A bear market ravaged Wall Street stocks
  • Massive unemployment throughout the nation
  • Overall we were in a deflationary spiral
  • Interest rates were abysmally low
  • Consumer confidence was bottomless

In DebtCollapse, Mike Maloney reminds us that “there is no time in history that this [deflation] has happened, except the beginning of the great depression. That was the last time the currency [supply] has contracted, was the beginning of the great depression.”

As we have pointed out multiple times since, deflation has maintained pace at $100 billion a month, drawing closer the inevitable response. Some feel we will get a re-inflationary response in the form of QE3, either on September 13, when the Federal Reserve Open Market Committee meets, or shortly after the election, after a market sell-off makes the intervention more politically palatable. We all saw what the attempts at re-inflation (read: printing) have done for gold since 2008. If leaders allow the constant trickle of deflation to continue in the short-term, that may mean a more incendiary proposal such as the gold standard has logical grounds for discussion.

If the recent pledge to consider the gold standard, as some politicians have recently stated, were to be impartial, and finally stick, the monetary metals would be exchanged by the Treasury at a far higher price in order to back the existing currency.

In the case of re-inflation via printing, the year-end median for the price of gold is projected to be $1800, according to a Bloomberg poll of 15 analysts and traders taken at a conference in the south of India on August 25.

If gold were selected to back the U.S. monetary system once again, the dollar would have to be devalued as Roosevelt did. Before the devaluation it took 20 dollars to obtain an ounce of gold; afterwards it took 35 dollars to exchange for one ounce of gold. A similar move applied to today’s prices would equate to gold at $2,850 an ounce. However, $3,200 gold seems more appropriate, according to today’s interview with hedge fund manager Eric Sprott.

Sprott also says that comparing silver ounces to gold ounces, retail demand is 56-to-1; while the supply of silver compared to gold is only 7.5-to-1. This implies that the price action in silver relative to gold shows more than seven times the rate of appreciation.

The reason we are headed for the the biggest wealth transfer in the history of the world is because this will be the first time that the transition away from saving in paper is global in nature. This is the first time we have had the information symmetry that only the internet could provide. The word for bank in China is “Silver House,” illustrating quite well how poor man’s gold has been money in cultures spanning millennia.

We consider Milton Friedman’s quote to accurately describe the present state of the opportunity: “The major monetary metal in history, is silver not gold.” Of course a system of bi-metalism exists in the U.S. as well. The dollar was meant to be an ounce of silver, as in the “silver dollar.” We explain more in The Dollar is Silver - Banknotes are a Bank's Liability.

If one had saved in silver since the early ’60s one would already be some 30 times richer today. This article from the period, courtesy of the AP, explains:

International discussion of the silver situation has been prompted by mounting evidence that the Treasury’s grip on the international silver market has been weakening... If present trends were to continue, the Treasury would lose its long-standing power to dictate the international price of silver... The Treasury puts a ceiling on the price by maintaining a stockpile from which it sells to silver users. Its current selling price is about 91.5 cents an ounce.

Whether by inflation or deflation-prompted devaluation, gold and silver are set to do what they always have done: Maintain purchasing power, extreme turmoil or not. You can put your family on the receiving end of the largest transfer of wealth in the history by simply saving in silver and gold.

How can i buy Silver from the Treasury at 91.5 cents per ounce? I'll take a ton.

Please translate more articles into Chiniese.
I'm from mainland and read your articles everyday.But I have some difficult in reading English.Often I use google to translate...But the translation's quantity is rather bad!!

I hope you can make more articles translate in Chinese,thanks!!

So glad to have you as a reader!!

We just did an article in Korean, and will continue to post Mandarin and other Asian language content at GoldSilver.asia/

Thank you !

So exactly how do we get our hands on some of that 91 cent/oz silver? :)

The $.91 silver is from a statement printed in the early 60's when there were coins made from 90% silver. You can not find it now....30 times that price and should be much, much higher!!

there it is in a nutshell, save in silver and gold.... awesome article

Mike, translation from China for bank.

Ngun - silver
Hong - establishment

Chinese hold gold and silver as real money, not so much today as their grandparents generation, but it is still there.

You will see a cat with an oscillating paw at many asian restaurants, the cats paw is in a raking motion, to rake in the gold/silver.

Every citizen of China just got a cheque for 6000 yuan, you better believe some of that is going into bullion. My partner is picking up her cheque in a few months on a trip to Hong Kong.

You mean the Chinese government is stimulating the economy through the consumers, and not through the banks? What a concept! Wish the USA would do that.

What on earth are you talking about?? Every chinese citizen receiveing 6000 yuan..? For what? Thats 1.3 trillion American dollars...

Very cool !

Thank you for the correction and the info !

absolutely correct(*^_^*)thank you...

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