Monday, April 18, 2011

The REAL Silver High

April 15th, 2011
There is much ballyhoo about recent rise in silver’s Nominal price, but the REAL high is far, far away. Silver is closing in on the Silver Thursday high of $48.70 set in 1980. The REAL high is still miles away, so don’t start worrying about reaching the top.
We all know that $48.70 in 2011 does not buy you anywhere near what it did in 1980. If we factor that record 1980 price in silver using the governments rigged inflation numbers, that would mean that the REAL inflation adjusted high of silver is $132.07. This means that we are still 68% below the REAL high in silver. If we use that same inflation calculator for gold, we would see that the REAL high for gold, is $2,305. This means we are still 38% below that record. (Notice how that all things being equal, you still have a much better opportunity investing in silver than you do in gold.)
I believe that the real, REAL high is actually much, much higher for many reasons. First, the government is lying to you about about the real rate of inflation. A recent article on CNBS shows how the government is lying to you, even today, about the real rate of inflation. They do this so they can steal from you, plain and simple. Every dollar they print is a direct tax on your wages and savings. They need to keep your expectations low so you go not panic while they are gutting you. The government hides this inflation of the currency through four major tricks that I cover in detail in my article on inflation. Click Here. The four tricks are hedonic adjustments, substitution, weighting and subtraction. This allows the government to post benign inflation of 2.4% when the real rate is over 10%. So if the REAL rate of inflation is 4x higher than the official CPI number of silver and gold, that would put the REAL high of silver at $528 and gold $9,220.
This number is much more realistic because the money supply in the United States has been vastly increased since 1980. Using the broad money component of M2, there is approximately 10 times as much money in the economy. So silver at $48 in 1980 times 10x more dollars in circulation is $487 for silver and $8,500 for gold. With that in mind, we are miles away from hitting any real record in silver or gold.
That is just one factor in the price of silver. When you realize that there is a lot less silver in the world since 1980, $500 silver is too low. When you realize that there are 50% more people in the world since 1980, $500 silver is too low. When you realize that only about 15% of the world’s population participated in the bull run of the 70′s, $500 silver is too low. When you realize that there are a lot more Euros, Yen, Yuan, and other currencies in the world since 1980, $500 silver is too low. When you realize that there is going to world wide collapse of all fiat currencies and all paper assets like stocks, bonds, and real estate… silver is priceless.

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