What Happens to Silver when the world undergoes a massive currency reset?
According to Jim Sinclair the downgrading of US debt on Friday is the final lynch-pin that will herald this event, and the new virtual world reserve currency will be at least partially backed by Gold. FOFOA has also argued that Gold, not Silver, is the ultimate safe haven precious metal. Even Max Keiser has quietly started talking the Gold book, despite his SLA/Crash JPM campaign.
When this currency reset happens, what is the fate of Silver? Certainly all paper, digital and other unallocated forms of virtual Silver (and Gold) will become worthless, and physical Gold with skyrocket to the moon. But will physical Silver necessarily go along for the ride?
I ask this because when Rome collapsed roughly 2000 years ago Gold retained its store of value, but Silver disappeared from coinage for most of the next 300 years.
Once the currency reset happens, the economic system as we know it will have collapsed. Trillions and trillions of $$$ in paper and digital wealth will simply vanish. That said, all arguments for the industrial uses of Silver will be greatly weakened because the demand for physical Silver for electronics and industry will literally go off a cliff.
Any thoughts out there?
I think a lot depends on which of the two basic camps you subscribe to
the inflationistas or the deflationers
despite silver being an industrial metal I believe it will always be worth something, even if you have to barter it.
I think silver simply turned into something else besides coinage. Again unlike gold, silver is consumed. In modern technological society silvers uses have increased so I don't buy that its demand will drop off a cliff, it will simply be put into other uses.
Newer and higher costs mines will go offline as they cannot turn a profit and the magic of the market will happen.
In the case of global deflation, while waiting for the fiat "price" to return to levels where you can either cash out and retain your buying power or in a best case scenario turn a profit you can always enjoy its fine looks and beauty. I personally keep a small bar in each of the kitty's water bowls. Nothing but the best for the putty tats in my house !
but seriously turn it into solar panel... or some silverware or a tea set.
I am hoping it drops in price so I can buy some more but won't complain if it moves back above 42.
Just another uninformed opinion here, so please don't make financial decisions based on it. It's mine (silver theory) and I'm playing it, but not to exclusion of gold or even dollars. I hold all three, among other hard assets (art, collectibles, etc) that all tend to hold value and increase in nominal price (excluding USD) during economic turmoil. I also remain very flexible in the brain and nimble in strategy and manipulate my diversification percentages as events and global themes advance or change direction.
I think it's fair to say that we have NO IDEA what the true price of silver is to the actual wholesale users - industry. We do know it's valuable, so much so that even a tenfold increase in nominal price in the last 10 yrs hasn't diminished industrial demand. That demand continues to increase. Whether or not silver will return to being used as a common medium of retail exchange is a separate matter. I think that could go either way and have read and could make solid arguments in both directions. Being a contrarian, I'm not betting on it happening. I am betting that in a financial crisis of epic worldwide proportions (which has been delayed since at least 1971 and probably since 1918) it will tend to hold value and likely increase in nominal price as inflation occurs. Furthermore, in a general deflation event or period I can see the bullion banks and Wall St speculators (JPM, HSBC, et al) re-focusing on other aspects of their "book" to stay in business and generate profits. Should they ever divert their attention away from silver or even take the long side to great extent, true price discovery can/will occur. What's that top number in dollars? Go back to the first sentence of this paragraph...only industry knows what they can pay for silver and still make a profit. And I would wager even they don't know for sure because there are so many gov't subsidies out there both encouraging and discouraging various industrial endeavors, many of which would impact the demand and thus nominal price of silver positively and negatively.
If you remove the short-selling hand of the bullion banks and Wall St speculators, and remove industrial subsidies and legislation...then we can begin to find out what silver is really worth...in dollars...in yen...in euros. And let's pray that if silver is commonly used in retail commerce again, that it's not pegged to the dollar and does not carry a stamped fixed "value" like ASEs currently do. That's suppression too.
Inflation vs. Deflation depends on what definition of money is used. Paper/digital money is being created by the $$$ trillions and the world is becoming ever more awash in it, yet people are becoming ever more impoverished as the cost of food and others goods and services continue to rise in terms of that kind of "money".
However, if you consider PMs as money we actually have Deflation since virtually all things have fallen in price against Gold and Silver in the last 10+ years.
I agree that Silver will continue to hold some value in the event of a currency reset. Holding physical means having ownership of something real, as opposed to holding a paper Treasury note that can suddenly be replaced with a "new and improved" virtual currency (SDR?). In that sense it will be possible to convert Silver coins in more SDRs than you'd otherwise received for converting discontinued Treasury toilet paper.
But when the reset goes down TPTB are smart enough to realize that the new virtual currency will require something "real" to back it up with - even if only partly. Hence the probability that Gold will be factored into this new equation.
While this bodes well for Gold, to some degree Silver will become orphaned from the new definition of money as a result. I am not convinced that Silver can serve the role of coinage in the future since A) there's not enough physical supply remaining globally to serve this role and B) the fact that Silver is consumed by industry means that this supply will progressively decline over time. This is hardly the basis for sound coinage.
All the gold that has ever been mined throughout human history, on the other hand, is mostly still around - even if it has been reused many times over thousands of years. I'm always curious as to how much Gold from the ancient Aztecs and Romans can be found in today's Eagles.
So physical Gold supply seems to be fairly stable and slowly growing overall in size, while Silver is more of a variable.
Perhaps it will be a case of (physical) Gold money going to the moon; paper money smoldering as burnt ashes (or recycled first as TP); and (physical) Silver finding its level somewhere between the two.
A couple of points:
1. I'm always amazed when I hold a gold eagle in the palm of my hand... ok it's heavy and quite beautiful but that little 'nugget' is not exactly rare and it's worth over 1600 clams! Amazing. On the other hand a silver eagle in comparison is so much less expensive and quite frankly equally (or less so depending on your metrics) rare. It's so much easier to pull the trigger when buying. When TSHTF and joe public gets involved this fact will be huge. People won't be thinking about the pros and cons of silver as a form of money, world supply, etc. They will be thinking how the hell can I feed my family? What can I trade? And silver will be a great form of money in that scenario, even if it is rare and hard to get hold of.
2. Yes there's lots of gold, but where is all this gold today? The big banks have most of it. Not sure how that will play out, but I think that's a negative for gold in the long run.
to her historical average about 20 - 1 with AU. That is after a mOOn shot to past 1-1 ;o) the devils metal wiLL continue to be crazy. the 3rd leg is the boTTom of the 6th iNNing. time to blow out the starter get into the bulpen . sluGGers comin up!
Gmenbanksters hold the GOLD. the people hold the silver. GOLD wiLL get a piece of the new WSR @ many multiples of its cuRRent price. we must refuse to pay or use a new cuRRency forced upon us in great economic crisis but always kEEp true to this average of 20-1. if/when markets coLLapse into hyperinflation and aLL fiat worthleSS. i know there is the deflationist camp, but tOO much faith is lost, CC's are aLL maxed out. dont think they get oFF the hOOk here. China is piSSed. this is going to not end quietly dOOdz.
it wiLL be our duty as patriots to stand up to tyraNNy, take back what has bEEn stolen, right the wrongs of hypocritical bureaucracy BS. enough. they got to fOOk this one up gOOd. our turn.
friends, feLLow tf band
this is the begiNNing of the new phase. trust and honor backed by the silver doLLar. we wiLL previal.
through my research i have concluded the above ground investable metal available is roughly 1-100. AG to AU. now micro this to me. 1 oz of AG is like 100 oz of AU. 20 oz of AG gets you 2000 oz of AU. my purchasing of 100 oz of AG = 10000 oz of AU in weight to the global suPPly scheme. very interesting.
i do not know about you but 1oK oz AU or 17 miLLion is not in the cards 4 me, but 100 oz AG....
of course this is my opinion and backed by nothing but my belief.
Thinking practically, the US Dollar is in it's death throes, albeit long drawn out ones. I can see a period of time, perhaps long, where 90% US Silver Coinage, a.k.a. 'junk' replaces US paper fiat in the interim between the dollar and whatever the banksters hoist upon us next. In fact, it could stick.
What's not to like? Previously real US money, small denominations excellent for day to day staples and easily recognized.