Wednesday, July 20, 2011

Silver vs Fiat Currency?

Lately I have been putting as much money as I can into silver. Simply put, I don't trust the US gov't to make good on their debts or keep their fiat dollar valuable. I believe the only way to make it out of this nightmarish depression on the horizon is to invest in scarce resources like gold, silver, crude, ect. just to have some holdings that can't be devalued by the printing press. Historically we have seen real resources like those as benchmarks for trade, currency by its definition must be scarce in order to be valuable.

[Silver price and ratio for last 600 years]



Here is an interesting chart featuring silver's value over a 600 year period, as well as the silver/gold price ratio throughout that time.  If you notice the first few hundred years this ratio hovered around 15:1, yet now the ratio seems to completely unpredictable and is actually at about 38:1 at the moment.  Going back to the chart, it is easy to see that these fluctuations began in the early 1900's when States around the world began to outlaw precious metals as currency in favor of their fiat money.

So could we see silver pull back down to a ratio closer to 15:1? If so, the price per oz. of silver could easily rise to $100+ and that is at current inflationary levels.  If QE3, 4, 5 comes down the pipes we could easily see $300 silver as some other blogs and websites have reported.

Why not gold?
Obviously silver will see some rises, but why not just stick with gold? Well, as you saw above the ratio seems to be off for arbitrary reasons, meaning the market should correct silver to it's proper ratio with gold.  This means that silver is more undervalued than an Apple stock in 1980.  But the biggest thing for me is that, seeing as I am a 19 year old college student, I don't have much money.  Yet with my shit job and expensive habits I was still able to put enough aside to acquire nearly 19oz of fine silver.  I bought this when spot was hovering at $38, so perhaps I will make enough to buy a pony. You guys tell me.

25 comments:

  1. lol,thanks for the post,im sure it will come in handy.

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  2. Now all I need is some half decent money to invest in silver!! haha maybe make some posts and tips for people with limited budget :P

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  3. I don't invest per se in anything like silver or gold, but I have an antique/rare coin collection that is worth quite a lot. The way I see it the coins' value will only go up

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  4. That whole business is way too dangerous to me :/

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  5. Not usually my thing but this was an interesting read, wonder about the future.

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  6. Money advice always worth following :)

    what besides silver would you suggest investing in?

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  7. I don't really know much about investing, AIS. To me silver isn't really an investment. It's more of a hedge against the U.S. dollar and other fiat paper currencies, just in case the excessive printing creates hyperinflation.

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  8. nice and creative blog, i'll be following

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  9. i would invest in gold if i actually thought congress would let us default, but wall street would not let their own government (which they do own) melt the economy to boiling shit

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  10. never think silver would fall that much

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  11. silver is very underrated as you said my parents already bought some!

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  12. I wish I had extra money to invest lol.

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  13. Good read, ive been wanting to do this for a while now

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  14. Shrewd, I like it and may join this particular bandwagon.

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  15. I like it. Making money so young. I prefer stocks, though. The rapid up and downs of the price is exciting. ^^ Followed!

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  16. ow damn, surprise that silver is falling
    +following mate

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  17. How is it that the curves differentiate so much over time? Are there still new silver- and gold sources accessible? Nice Blog. I'll follow you!

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  18. In México the use of the silver currency was denied i-don't-know-why... Fuck government!

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  19. I wish I had money to invest!

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  20. if i would have money maybe i would follow your advice
    but for now, i'll just follow your blog ;D
    +1

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  21. I don't think that ivnesting in gold or silver will repay in future...
    followed+

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  22. Very interesting how they are different from eachother. I like it, more interesting like this.

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  23. Now most of my friends would say it's useless for me to know this, but I say a price of info is only useless until you find a use for it...

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