$100 Silver... Currency Collapse Next?
Having a balanced approach in crazy times
Silver’s current price of $100 per ounce raises the fundamental question: is silver’s value increasing, or is the value of the US dollar declining?
Paper currency is quite a silly thing. It used to be a promise to pay you silver. Then the government broke their promise. Now we just trade this paper back and forth - paper that represents a broken promise. With the rise of silver above $100/oz and gold touching $5000/oz, the question is whether people are starting to realize the paper represents a broken promise.
Since the government severed its link to precious metals in the 1960s and 1970s, gold and silver have surged sharply on three occasions. In the first two episodes, confidence in paper money was eventually restored. This time may be different.
Through firing a Fed governor, putting the Fed chair under criminal investigation, and continually critiquing how high interest rates are, the Trump administration is giving the people more and more reason to distrust the paper. Unless trust is restored as it was in 1980 or 2011, this is not a normal market mania: this is the death of a currency.
In my post here, I wrote about why it is important for silver stackers to have a exit plan if they are investing to make profit. While we may be seeing the death of the US dollar, we also may not be. The bullish fundamentals may be already priced into the silver market, and its possible that silver could crash from here like it did in 1980 and 2011. The safest bet in my view is to consider relative asset valuations and have a plan to scale a portion of your silver holdings into other assets but keep a core holding of precious metals for a possible currency collapse. Here is an extremely simple example. NOT FINANCIAL ADVICE, just an example:
If the gold/silver ratio hits 45/1, redeploy 1/5 of your holdings
If the gold/silver ratio hits 30/1, redeploy 1/4 of your remaining holdings
If the gold/silver ratio hits 15/1, redeploy 1/3 of your remaining holdings
If we’re headed toward a currency collapse, I would anticipate the gold/silver ratio would fall below 15/1. In 1980, it hit 16/1, an that wasn’t a full blown collapse. If the gold/silver ratio fell below 15/1, then you’d still have 2/5 of your original metal holdings as insurance against a total economic catastrophe.
In these crazy times, have a balanced approach, and be prepared for anything.