Long-term security investments: Silver vs gold vs stocks/bonds
As a measure of wealth, gold has a long 3000-year history. However most people tend to ignore the fact that silver has a similar record. Yet the silver investor, as well, might weigh his or her choice against gold or even stocks and bonds - in times of crisis. So, let’s briefly consider the relative benefits in protecting one’s personal financial security, by investment in gold, silver, or paper securities - to determine which might be most likely to protect your financial future.
For a start, silver has become a critical part of today’s "high-tech economy". From a purely physical point of view, the properties of this metal are essential to the exercise of countless technologies, so much that demand for this element will rise in lockstep with the demands of the world’s mushrooming industries. Emerging economies, such as China, with their ever-expanding industries will - as they have for decades - progressively increase their importation of this precious metal.
Gold, on the other hand, while its industrial utility is extensive, doesn’t begin to match the utilitarian applications of silver. Yet while Gold had been the ultimate “store of value” for over 3000 years, that “formal” function faded dramatically when it, like silver, ceased any longer to be identified as “money” - after the Bretton-Woods Conference of 1944. Nonetheless, if we look to the future, with our unstoppable paper money inflation - banks and governments the world over, for decades, have been squirreling Gold away - for the time when our ingrained inflation will reach its inevitable conclusion. What will that ultimate conclusion be? The same as every other hyper-inflation in history - except that this one will be global. You’ll know it’s truly peaking when bread reaches $10 per loaf - and a week later, $20 - and three days after that, $50.
Then, what happens to your assumed “security” in stocks and bonds - when the world’s industries grind to a halt - for lack of materials and power - all because the world’s “paper” money has been degraded to the level of confetti?
That’s when billions of fine silver coins, which had been squirreled away by forward-looking people, will come leaching out, as the spark that will reignite the world’s economies.
But this is only half the story. It’s the second half that you need to really pay attention to:
History, for those who consider it, notes the worldwide financial catastrophe which had been caused by the most expensive war in human history (World War II). It was this reality which triggered the Bretton-Woods conference of 1944. In that conference, the world’s leadership abandoned the Gold Standard, in favor of a worldwide system of unbacked “paper” money - This decision, in turn, led to a worldwide uninterrupted monetary inflation - an inflation now exceeding 5,000%, since the end of WWII. Readers can confirm this fact for themselves by simply looking back to that time, when a new car was $1800, and a soda pop was a nickel (plus 2 cent deposit on the bottle).
By 1970 that inflation had driven up the price of Silver to where no country on the planet could afford to continue striking Silver “street coin”. Thereafter, the average person would have to contend with coins struck in copper, brass, nickel, or in some countries even aluminum. Before that time, a U.S. $20 Gold piece held about one troy ounce of gold, which could buy $20 in silver coin - which then contained about 16 troy ounces of Silver. In short, not only in the U.S., but in every country of the world, the “buying power” of 16 ounces of silver equaled that of one ounce of Gold. Moreover, that ratio had stood, worldwide, for over 1000 years. The fact is, that it’s sixteen times easier to get Silver out of the ground, then Gold.
Yet this loss of demand for Silver, by the world’s governments, was so devastating to the silver market, that the price of Silver quickly dropped to $3.00 per ounce. Worse still, the silver to gold ratio (in terms of “buying power”) which for 1000 years had been 16:1, suddenly shifted to 70:1 - a ratio which stands to this day.
It now takes 70 ounces of Silver to buy a single ounce of Gold. But what will happen when our runaway inflation turns the world’s paper money to confetti, and a revival of our industries will compel the world’s governments to return to a hard money system? The answer is obvious. Silver street coin will return, and by its physical nature, so will the 16:1 ratio. In other words, the 70 ounces of Silver that it now takes to buy a single ounce of gold, in that future time, will buy more than four ounces of Gold. Or to view the issue from another angle, when the “buying power” of Gold goes through the roof, the buying power of Silver will climb four times higher! With this understanding in mind, which metal is more likely to better secure your future?
To learn more about this and to gain an easy-to-understand history of money, sign up to be notified about my upcoming book “Counterfeit Trust & The Nature Of Money” – Only on Kickstarter.