National Debt Too High, Silver Price Too Low

Silver currently sells around $16, which would be sensible if the U.S. national debt was much less than its current $20 trillion.

Given the massive national debt and 100 years of experience, silver prices could easily be double or triple their current prices, and far higher in a panic.

WHY?

Examine over a century of official national debt data graphed on a log scale. Official debt in 1913 was $3 billion. Since then it has risen 8% to 9% every year to reach $20 trillion or $20,000 billion. Debt will continue rising as long as politicians spend and bankers lend.

Proof: Name the Senators, Representatives, Presidents, military contractors, pharmaceutical companies, and Medicare recipients who wish to see the government reduce expenses.

Silver prices have increased, but more slowly than national debt, as dollars have been devalued for over a century.

Silver prices, after the 1980 bubble and crash, have increased erratically since their low in 1993 at $3.51. The exponential trend line, as drawn, indicates that silver prices in mid-2017 are well below their long-term trend. Daily silver prices exceeded $48 in April 2011 before crashing back to $13.60 in late 2015.

Silver prices are, in the big picture, too low and will rise above their exponential trend.

 

CONSIDER RATIOS:

 

Multiply average annual silver prices by one trillion and divide by the ever-increasing national debt. For the past 30 years the ratio has ranged between 0.7 and 2.9. The ratio is currently very low at about 0.8. Someday silver prices will rally substantially and force the ratio toward 3 and higher. For comparison the ratio, using average annual silver prices, reached 26 in 1980, and surpassed 50 using the daily prices for silver.

SUMMARY:

 

  • Politicians spend and bankers lend. Debt increases, total dollars in circulation increase and dollars purchase less. Prices for stocks, commodities, food, energy, gold, silver, beer and many others rise.
  • Silver prices have risen erratically but inevitably, along with debt and most consumer prices, for decades. As of July 2017 silver prices, compared to the national debt, are too low and will rise.
  • The next rally in silver should be huge based on the prospects for expanded war, financial chaos, and central bank “printing” that will devalue all currencies.

Silver will sell for $100 per ounce! Impossible? Look at price increases for Amazon ($6 to $1,000 in 16 years), Bitcoin, and many others. Yes, $100 silver (and higher) seems likely within a few years.

Gary Christenson

The Deviant Investor

6 thoughts on “National Debt Too High, Silver Price Too Low

  1. I agree that silver will go much higher. The amount of above-ground silver is way less than that of gold. Not in my lifetime, but I would expect that, at some point, landfills will be “mined” looking for all the silver that was discarded in consumer electronics.
    Keep stacking, one day you’ll be happy you did.
    _aleph_





    • 12 years ago silver sold for $6- $7. It is up 2.5 to 3 times since then. The Fed has added $4 trillion and levitated the bond and stock markets. National debt has more than doubled. Pension plans are deeply underfunded, student loans, car loans etc etc etc. What could go wrong? Most of the debt based euphoria could collapse and drive capital into gold and silver, which is real and not someone’s liability. If silver only triples in 12 years I’ll be deeply surprised. How about $100 to $200 by mid next decade?
      The Deviant Investor


      • Agreed.

        Mr. Mackenzie can’t see the forrest for the trees:
        1. Silver is a physical commodity that is substantially indexed to inflation.
        2. National Debt over the long term is substantially indexed to growth of the money supply, to wit; inflation.

        The thing about log plots is that they do make it easier to visualize an exponential function and identify deviation from the norm linearly, but one does need to pay more attention to the scale.

        Mathematically, the limit for this exponential function (price of silver, money supply, etc.) is infinity. It appears from the chart, mean value for this period of time within the mathematical function should be silver at about $25. The exponential function at applies is: P=PoE^KT where P = future price, Po is present price, K is the rate of growth, and T= time. If the log plots you showed for silver price were extended a few more years into the future, your point would be easier to visualize graphically. For example, Silver price compound rate last 30 years is 7.8%, and national debt compound rate is 8.6%. These numbers are within the same order of magnitude (fairly closely correlated). If we extrapolate based on the debt chart, that is defined out to 2033, we find that silver should be expected to cost about 164T/20T*25=$205/oz in 2033.

        The huge unknown factor with our situation is confidence. Our money today is nothing more than a standardized bank note, and negotiability of these notes is predicated on a solvent issuing bank, in this case, the Federal Reserve Bank. I would argue that the Fed is already insolvent and that the snake has begun to digest it’s own tail. Today they are in between a rock and a hard place. If they don’t raise rates above real inflation as they did in the late 70’s early 80’s, inflation is soon going to get out of control. This means the compound rate for debt and price of silver will also increase and we see $205 silver MUCH SOONER than 2033. If they do raise rates, it will force many more individuals, and subsequently, banks, into insolvency. This time around will, in fact, be different than 2008. It will be an insolvency chain of events that eventually reaches the Fed, and the coming banking crisis will morph into a monetary crisis.

        We will see $200 silver long before the approximate date of 2033 predicted by the model according to K=8+-1%. Check out the cover of the January 1988 issue of The Economist. If TPTB are on schedule, and based on what I see, I think they are close, we could see $100 to $200 silver by the middle of next year.

        By assuming rate of compound growth does not also increase exponentially, your analysis is very conservative with respect to price and time. Thanks for a great and informative article.


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