Silver, Warfare and Welfare

US policies that promote warfare and welfare have produced massively increased debt, much higher consumer prices, larger government, and more central bank intrusion into the markets.  And yes, higher silver and gold prices also resulted from these policies.

Fifty years ago we were bombing North Vietnam “back into the stone age” while also declaring a “war on poverty.”  The consequences of both “wars” have not been encouraging.  Since then we have created considerable indebtedness by promoting such questionable ideas as a war on Iraq, a war on drugs and a war on terrorism.  Future uses of national income and more debt could include a war on ebola, war on ISIS, and many other “wars.”

Official national debt has increased from roughly one-third of a $ Trillion in 1964 to nearly $18 Trillion today.  The price of a barrel of crude oil has increased from about $1.50 to about $90 over the past 50 years.  A pack of cigarettes has increased from a quarter to nearly $6.  There are 1,001 more examples of increasing prices, often not matched by increases in personal incomes.

Consumer prices have broadly increased with some price rises far exceeding others – college tuition and healthcare come to mind.  Also bonuses on Wall Street have been outstanding.

Examine the following graph of silver divided by crude oil.  They increase together on average, but silver currently looks inexpensive compared to crude oil.  Expect silver to rise in price more rapidly than crude oil.

Silver Divided By Crude Oil - 29 Years

Silver Divided By Crude Oil – 29 Years

Examine the graph of (100 times) silver divided by the S&P 500 Index.  The attractiveness of financial assets (S&P) varies widely compared to the need for hard assets such as silver and gold.  Note that the ratio has dropped from over 3 to less than 1 in the past 3 years.  Expect silver to rally substantially compared to the S&P.

Silver Divided by S&P 500  Index

Silver Divided by S&P 500 Index

Do you expect the emphasis upon warfare and welfare to change?  Do you expect fewer dollars to be created?  Do you expect central banks will self-destruct by allowing interest rates to rise and/or deflationary forces to overwhelm the economy?

An accident where the financial elite are hurt more than the masses could happen but it seems like an unlikely scenario.  Hence, as with the past 50 years, expect more currency in circulation, much more debt, higher consumer prices, more warfare, and more welfare.

Further, expect the prices for silver and gold to increase relative to the S&P, and expect silver prices to increase more rapidly than the price of crude oil.

Inevitable?  Certainly not, but the best overall predictor of future prices, future policies, and future wars seems to be the long term trends shown by past prices, policies, and wars.

Unless (until) something unlikely and world changing occurs, we should expect:

  • More warfare
  • More welfare
  • Increasing consumer prices
  • More debt
  • More government statistics proving everything is wonderful in election years
  • More volatility, anxiety, worry, and concern over markets, ebola, war, the NSA, which insider will purchase the presidency etc.
  • More gold and silver coins sold to Americans and Europeans who increasingly distrust paper assets.
  • More gold and silver purchases by Asian individuals and governments who increasingly distrust paper assets.
  • More talk-talk on financial TV about the great stock buying opportunities available in 2014, 2015, 2016, and through 2030.

Silver is currently inexpensive compared to the S&P 500 Index, crude oil, the size and rate of increase of the national debt, and especially the future price for silver after markets have reset, paper assets have devalued, and hard assets have jumped much higher in price.

Examine the following graph of weekly silver prices since 1994.  Based on the stochastic index and the disparity index (and many more such indicators that are not shown) silver prices are ready to rally.  The black vertical lines are spaced 5.75 years apart and they show significant lows in silver prices in 1997, 2003, 2008, and about now.  Guarantee?  No!  Probability?  Yes!


Silver Prices - Weekly - 20 Years

Silver Prices – Weekly – 20 Years

Gary Christenson

The Deviant Investor



PS:  It looks like a buy signal in gold, silver, and related stocks.  For Technical Analysis go to:

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7 thoughts on “Silver, Warfare and Welfare

  1. Try dividing the world economy by the above ground supply of .999 fine trade-able silver bullion and without including paper silver and silver that is in consumer products ,common coinage, jewelry/ silverware, ETFs and lent out silver that can not be recovered which is probably all of it.

  2. As the second chart shows, the price of silver has fallen precipitously relative to the S&P-500 since 2011.

    Did we have less warfare during this period? No. We had more of it.
    Did we have less welfare during this period? No. We had more of it.
    Did the Fed print less money during this period? No. It printed more of it.

    I could go on and on.

    Does that mean that silver will not rally relative to the S&P-500 in the future, as the warfare, welfare and money printing will, undoubtedly, continue? No. It just means that your fundamental arguments are total bullshit.

    Fundamentals don’t matter. All that matters is the psychology of the traders. Fundamentals “matter” only when the traders are psychologically inclined to believe that they do. Can the whole PM sector (not just silver) rally from here? Certainly, in fact, it seems rather likely. But it will do so not for the fundamental reasons you state. It will do so (if it does so) because the 3-year bear market has exhausted itself and will switch to bull mode. If it doesn’t do so, it won’t mean that there will be less warfare, welfare and money printing – it would just mean that the bearishness of the traders hasn’t exhausted itself completely yet.

      • Why not useful, the gentleman expressed a point of view worthy of examination. I happen to disagree however, it’s useful to look in all directions prior to pulling the trigger.

        • What I considered “not useful” was the observation that silver had fallen since 2011 while welfare and warfare had not decreased. It makes little sense to criticize a long term chart – nearly 3 decades – with an observation based on 3 years. In the long term, silver prices, along with welfare and warfare seem destined to increase.
          The Deviant Investor

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