Jeff Berwick

We buy gold and silver as a way to protect ourselves from the TEOMSAWKI (The End Of The Monetary System As We Know It) to come.

We live in a literal financial house of cards. It is all paper. That house of cards has been in the process of collapsing since 2008. Astute market participants realize this and are buying bullion, one of the only financial assets with no counterparty risk, as a way to protect themselves from the coming storm.

Silver has more than doubled since Ben Bernanke began his high level terrorist attacks against the US dollar with “Quantitative Easing II,” announced in August of last year. Silver jumped from $18 to nearly $50.

The rise in gold and silver was likely making Bernanke feel a bit uncomfortable about his “there is no inflation” story and a phone call was likely put into the COMEX. Five margin increases in rapid succession later, and the COMEX had increased initial margin requirements by a substantial 84%.

Therefore, anyone who had purchased silver futures using leverage was forced to pony up a lot more cash to maintain the position…or sell out. Since many participants lacked the necessary cash, they were forced to immediately sell their silver futures. The result was a drop in silver futures prices from near $49 to below $34 in a matter of days.

This volatile rise and fall in silver has most of the world saying that silver was in a bubble and now that bubble has popped. Those who say this don’t know what a bubble is.

If you look at the silver price in US dollar terms, its recent spike does look quite parabolic, or bubble-like. However, in the context of a longer-term timeframe, silver’s recent run-up doesn’t seem bubble-like at all.

Check out the chart below, which details the price increase of various items since 1980. Can you spot which one of these items is in a bubble? Hint: It is not silver!

Nominal Price Change of Various Assets, 1980-210

In nominal dollar terms, silver’s recent rally looks parabolic and unsustainable. But when compared to other assets over the last thirty years, silver has been in a very long bear market and has done relatively nothing compared to any other assets.

And compared to the growth in US Federal Government debt, silver has underperformed by a factor of five. One bubble is about to pop… and it isn’t silver.

Regards,

Jeff Berwick,
for The Daily Reckoning

You May Also Like:


Speaking Silver’s Language

Richard Daughty

Everybody knows that I can always be counted on to go ballistic about silver being such a Screaming Freaking Bargain (SFB) because of (according to the most recent Official Mogambo Count (OMC)) more than a dozen very good reasons, which is a lot of reasons, and that at $17-and-change per ounce, silver is loudly saying, […]

Jeff Berwick

Jeff Berwick, a self-described financial freedom fighter, is the founder of Canada's largest financial website, Stockhouse.com.  He now writes the libertarian, Austrian-economics based newsletter, The Dollar Vigilante and is a regular speaker at many of the world's most important investment, resource and freedom-focused conferences where he is known as the most dangerous man in finance.

Recent Articles

The Next Car You Buy Will Be an Electric Car

Stephen Petranek

Electric cars are proving to be far cheaper to operate than anyone could have guessed. In fact, many people are now just getting the equivalent of thousands of mpg to their electric cars. And that's presenting a unique profit opportunity. Stephen Petranek explains...


A Treasure Chest of “Secret” Buy Signals

Paul Mampilly

The world's most successful investors almost always think differently. That's nowhere more apparent than when you're trying to invest in health care. Today, Paul Mampilly - one of the world's top biotech analysts - reveals one "secret" for making money from a predictable cycle in the industry. Read on...


Natural Gas: How to Stay Warm (and Profit) This Winter Season

Greg Guenthner

Right now, the city of Buffalo, NY is covered in five feet of snow. And while that may be bad news for those poor folks, it could be good news for you. Because now that another harsh winter is upon us... you have a massive opportunity for quick double-digit gains. Greg Guenthner explains...


Tip of the Day
3 “Dirty” (and Sexy) Ways to Boost Your Health Tonight

Chris Campbell

Warning: The following article is not for the puritanical. Today, Chris Campbell shows you three "dirty" health boosters you can use tonight to raise your immune system... improve your outlook on life... and make your partner a happy camper. Read on...


The Shock Doctrine: When Order Trumps Personal Freedom

James Rickards

When some event - be it a terror attack, financial panic or natural disaster - upsets the status quo, people are more willing to relinquish their freedom in favor of a greater sense of security. And that's when ambitious political leaders make their move... And as Jim Rickards explains, another such event could be right around the corner. Read on...