Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Strong Long-term Bull Market, But Short-term Volatility

Commodities / Gold and Silver 2010 Feb 03, 2010 - 01:13 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticlePerhaps you may have heard mentions recently of the Austrian School of Economics versus the Keynesian branch. Maybe you saw televised interviews with Congressman Ron Paul (R-Texas.) He is the Congressman who has been trying for decades to pass a bill that would give Congress the power to audit the Federal Reserve Bank. What was once a ridiculed, marginal proposal recently passed the House and will soon be considered by the Senate.


Congressman Paul blames the country’s economic woes on a long-dead economist by the name of John Maynard Keynes, whose present-day adherents, he says, are the ones bringing the country’s economy to the cliff’s edge. 

Keynesian economics gained dominance after World War II and it was President Richard Nixon who proclaimed in 1971: “We are all Keynesians now.” It was about the same time that Nixon “temporarily” severed the link between the dollar and gold, thus laying the framework for the currency’s debasement. Congressman Paul is an adherent of the Austrian school of Economics.

Peter Schiff, president of Euro Pacific Capital, is another follower of the Austrian School of Economics.

But there is something else that Paul and Schiff have in common, other than their economic philosophy. Both foretold the housing bubble and the near collapse of our financial system several years before they happened.

Here is what Paul told the House Financial Services Committee in September, 2003, almost five years to the day before the collapse of Lehman Brothers:

“The special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital that they could not attract under pure market conditions. Like all artificial bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulties as their equity is wiped out. Furthermore, the holders of mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over investment in housing.”

Almost no one on the committee, or anywhere for that matter, listened to Paul’s warnings. Instead, Paul was mocked and accused of insensitivity towards the poor.

Here is what Peter Schiff had to say in an August 2006 television interview: "The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship... I see a real financial crisis coming for the United States."

Six months later in a televised debate, Schiff forecast that "what's going to happen in 2007" is that "real estate prices are going to come crashing back down to Earth". As Schiff was sounding the alarm, mainstream pundits were laughing in his face on national TV.

A famous YouTube video with almost 1.5 million views titled, “Peter Schiff Was Right,” catapulted him into the spotlight and finally vindicated him after years of marginalization and ridicule.
So what is this Austrian School of Economics and why is it being mentioned now? How is it different from the Keynesian school of economics?

The Austrian School is an outgrowth of classical liberalism. Its main proponents were Ludwig von Mises, Nobel Prize winner Friedrich von Hayek and Murray N. Rothbard.

Austrian free-market economists use common sense principles like the idea that you can’t spend your way out of a recession. They view entrepreneurship as the driving force in economic development and see private property as essential to the efficient use of resources. They see government interference as counter-productive-- you can’t regulate the economy and expect it to grow. If you tax people and businesses to death don’t expect them to keep producing. You cannot create an abundance of paper money out of thin air without making it worthless. The government cannot cure unemployment by just hiring people or keeping them on the dole forever. The bottom line is that you cannot indefinitely live beyond your means—the economy must actually produce something others are willing to buy.

The Keynesians, on the other hand, advocate a mixed economy predominantly private sector, but with a large government role. According to them, private sector decisions can lead to inefficient outcomes and therefore they advocate active government involvement, including monetary policy actions by the central bank.

Governments should solve problems in the short run rather than wait for market forces to do it in the long run, because "in the long run, we are all dead." 

The global financial crisis made Keynesian economics even more popular and provided the theoretical framework for the rescue plans of President Obama, British Prime Minister Gordon Brown and other global leaders.

The Austrian school advocates the opposite. The bust – as painful as it is, should be left to run its course. Society must swallow the medicine, bitter as it is. Any attempt on the part of government to forestall, will only make the inevitable day of reckoning all the more painful. |Here is what Paul wrote a few months ago in a Forbes Magazine column:

Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate… Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollar.

“The party is over,” said Schiff about U.S. consumption in a recent television interview. Schiff says the U.S. must transition from borrowing and spending, to saving and producing. The government's efforts to "ease the pain" with economic stimulus packages and bailouts will only make things worse in the long run and could result in hyperinflation if the government continues to "replace legitimate savings with a printing press."

Generally, we agree that the free market is the most efficient mechanism, when applied to the vast majority of economic issues, but let's not forget that there are several mechanisms, where it does not work perfectly - for instance in the case of the tragedy of commons phenomenon. The above does not change the big picture and our libertarian views, but we simply don't like providing you with just one side of a coin.

Going back to the previous analysis - what does Schiff say about gold?

He is among those who believe it will go up to $5,000 even before Barack Obama leaves the White House. If he’s been right about so many things during the past few years as far as the fundamental picture is concerned, maybe he’s also right about the yellow metal.

Moving on to the technical part of this essay, we would like to provide you with our thoughts on the silver market.

Silver moved below the rising support level, to the $15.5 - $16.5 area, and the Stochastic indicator moved below the 20 level. The latter often meant that a bottom is in or is about to emerge.

The short-term chart reveals that silver is very close to a strong support level - we've marked it on the above chart with a blue horizontal line. Please note that the RSI indicator is also right at the blue horizontal line, which in the past meant that we are at a particularly favorable buying opportunity.

One of the messages that we've received in the past week (I regret that I'm not able to reply directly, but I'm thankful for each of them) included a question about the volume in the SLV ETF.

In the last 5 trading days there have been 4 down days accompanied with very heavy volume. The only up day show approximately half the volume of the down days. During that 5-day period the price dropped about 2.00. Could you address this activity and what I perceive as weakness, in the upcoming weekly update?

Please take a look at the above chart - we've marked the situation in volume with blue and red arrows. The volume clearly confirms the direction, in which the price was going recently - down. This is one of the things that makes us say that this is not yet a "crystal clear buying point". Naturally, there is no such thing as a perfect entry point, but based on the risk/reward ratio it seems that speculators may want to wait for additional signals especially with regard to the declining main stock indices. Silver is historically more correlated with the general stock market than gold, so there is a risk that when stocks plunge, silver may follow at least on a short-term basis.

Summing up, based on the analysis of the silver chart alone, the metal appears to be bottoming, however given the relatively high level of correlation between silver and the general stock market one may want to wait for additional signals before opening a sizable long position in silver. Detailed analysis (4x bigger than this essay with many important charts) of the situation on the general stock market is available to our Subscribers. Naturally, we are still bullish on the white metal in the long run.

To make sure that you are notified once the new features (like the newly introduced Free Charts section) are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in