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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Buying Silver in the Age of Transitory Inflation and Other Political Delusions

Commodities / Gold and Silver 2013 Jan 04, 2013 - 10:38 AM GMT

By: Dr_Jeff_Lewis

Commodities

Spokespeople for the U.S. Federal Reserve have been saying that rising food and energy prices are transitory. They have now been pushing that illusion on the market for ten years, and some traders are still waiting for inflation to fall.

Nevertheless, the fact is that these price rises are not transitory, and they are instead permanent, systemic and intentional. Furthermore, prices are going to keep on getting higher and higher by all rational indications.


Debt Expansion Policy Makes Inflation Inevitable
 
When Ben Bernanke was first appointed Chairman of the Fed by then-President Bush in February of 2006, the U.S. Treasury’s funded debt was ‘only’ $8.183 trillion.

Nevertheless, by last December, when the FOMC announced its latest monetary policy measures, the U.S. Treasury’s debt had more than doubled to hit the even more astronomical 16.376 trillion level.
 
In other words, the Treasury’s funded debt had increased by more than 100% over a period of almost seven years, averaging a rise of roughly 14.6 percent per year during that time frame.  Commodity price rises in U.S. Dollar terms have been relatively subdued in comparison with this remarkably high level of U.S. debt expansion.

Silver as the Financial Solar Plexus

The solar plexus of the human body is where the connection between the body and mind - the organic and the non-organic — come together. Silver is like the solar plexus of the world of economics and finance, acting as both a tradable commodity and a monetary asset.
 
In the silver market, the relatively primitive market laws of supply and demand interact with the higher level market-driving factors of faith, perception and behavior on the part of its human participants to determine a market price.

Although modern market-based finance still largely depends on faith, confidence and human perception, it seems that the silver market’s price discovery mechanism is being increasingly usurped by obsessive technical analysis and computer driven trading that largely amounts to picking up nickels in front of a steam roller.

Fiscal Cliff and the Debt Ceiling Debates Showcase Delusional Politics

The U.S. Fiscal Cliff debacle has made the situation as clear as mud, although just about anyone could dispassionately do the math. It makes little sense to run $1.5 trillion annual deficits when only proposing roughly $600 billion in spending cuts over 10 years.

The irony is that the next delusional political drama —raising the U.S. Debt Ceiling — has been put off, with some even proposing eliminating that mandate altogether. If done, this would remove the very last tenuous thread of confidence holding the U.S. Treasury’s finances together.

Modern politics and economics tend to offer explanations where the cause is not readily apparent as the workings of a lost tradition. For example, apparently “everybody knows" that the way to make a person or a nation "richer" is to create more money. The establishment never openly states that this is actually the case, but they instead just print and distribute a million dollars of un-backed, debt-based currency per person.

The end result is that financial markets are increasingly broken and fair price discovery in the commodity markets is becoming non-existent.  This means that buying physical silver in this day and age is like planting a seed in fertile soil.

Like oil, silver is a scarce — but very useful and densely packed — commodity that fulfills its various industrial and monetary functions well. Fortunately for long term silver investors, silver is much easier to store in its physical form than an equivalent value of oil.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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