Trust. When you lose trust, you’ve lost everything.
Consider this: At the present time the U.S. dollar is the most trusted “asset” in the world. I put quotes around asset because the U.S. dollar is actually a liability.
As trust in traditional investments like real estate, stocks, and bonds falters, the run to the dollar will inevitably take place, and soon after, the run to gold. You can already see the roots of this movement build. The dollar is not showing a great deal of strength at present, which leads me to believe that what comes next will be bifurcation: a fork in the road that dethrones the dollar as a safe haven, making gold the only true safe haven.
I might be getting ahead of myself. We’re not there yet. But it’s hard to ignore the fact that big money, smart money, is starting to move away from the dollar.
A testament to this is my personal experience with the March stock market washout. Investors with millions of dollars, who had never bought gold before in their lives, were eager to take action and move away from the bank and into gold.
This isn’t to say that the U.S. dollar value will go to absolute zero. It will not become absolutely worthless, but the fear of it reaching that point will take enough of the public’s consciousness on a global basis. The resulting run to gold will be so grand; it’ll go down in the history books.
The Banker’s Last Vestige of Hope
Cash has been considered sacrosanct, and most people don’t understand the gold market and how it functions. As a result, people tend to trust their local currency the most. Some countries more than others, and all trust the U.S. dollar as the most trustworthy.
However, when this belief system gets questioned as gold’s value increases in global currencies and surpasses all-time highs, some may recognize too late that the fiat systems are failing, and even the U.S. dollar is not worth holding.
Gold continues to move higher, but nothing about gold has changed. An ounce of gold is an ounce of gold. What is changing is the acceleration in the trust in currencies – all currencies.
These currencies will go up and down against each other. This is what I refer to as ‘the banker’s last vestige of hope’: when they try to convince people that one currency is stronger than others when, in reality, it isn’t. The perceived strength of a currency is simply a function of which country is printing money the fastest and who has got the most psychological cognitive control to make you think that your currency is stronger against another country’s currency.
The Restless Metal in a High-Tech Society
Professor Roy W. Jastram, author of Silver: The Restless Metal, concludes in his book that if there is an increase in the monetary base, it is silver, not gold, that is the best place to be. In other words: monetary inflation. He did not speak about the velocity of money and this is an important factor. However, I agree with Professor Jastram when the public gets the idea inflation is destroying their purchasing power, their savings, their future, many will seek safety. And there is nothing safer in a financial panic than the precious metals.
However, the problem with silver on a global basis is it is not easy to obtain in many foreign countries. While the U.S. has a good base to buy physical silver, countries in Europe and Asia impose a value-added tax and make it difficult to purchase. Gold, on the other hand, is far more accessible and easier to purchase overseas. If that were the case with silver, there would be many more people holding silver than there is now.
More than gold, silver is vulnerable to supply shortages due to its crucial role in our high-tech society. Consider the emerging technology of 5G phones. Most phones on the market today are not equipped to handle 5G technology, but as the global trend shifts towards integrating 5G infrastructures, it will not be long before new phones are produced to accommodate.
And these new phones will need silver: approximately 88 Million ounces of it. Do not underestimate the demand for silver just because its supply now appears to be plentiful.
As much as we hear the gold story, it truly is silver that keeps the economy running. Oil may be far more important than silver, but that does not negate the fact that we need silver to continue to operate in today’s world. The banking system cannot run without computers and there is silver in their computers, and we cannot communicate without the silver as it is required in all communications landline or wireless.
Silver is more critical than most people ever consider because it is ubiquitous. It is everywhere, in a very small amount. Every day, we handle little silver fragments, and we never even think about it—food for thought.
I discussed these topics in more detail earlier this week in an interview with FX Strategies. You can watch the full interview below.