Silver - Monetary or Industrial Metal?

Hi Eric,

I have enjoyed your insights while reading Jim Sinclair website. He often says silver is a game but that it may rise a higher percentage than gold. With deflation and inflation (hyperinflation) occurring possibly at the same time, what do you think will happen to the prices of silver coins (example: Morgan silver dollars) in a failing economy? Will prices of rare coins rise with the price of silver, or will it fall in relative value since not many can afford it? I would appreciate your thoughts since Jim always recommends an exit strategy. Thanks,

CIGA Ralph

Ralph,

Silver best described as a “game.” It is a game that entails both monetary and industrial characteristics. Silver has become increasing scare for industrial usage and sought for protection against devaluation. What Jim and I have discussed is that silver has the potential to display surprising monetary demand from a public unable to buy and/or afford gold. The potential for unexpected demand with tight supplies can only describe a trend with explosive potential energy.

We are seeing debt deflation that would normally cause monetary deflation under a fixed gold standard. 1930’s style deflation (increasing demand for money), however, is unlikely under the fiat system and the predictable reaction of governments for self-preservation. I know this is a hot debate, but honestly, many of the debaters do not understand the mechanics of money well enough to discuss them correctly.

In a failing economy, it will be the response from centralize control the affects the price of silver. Fear about holding silver (and gold) are based on the assumption that a failing economy would illicit no centralized response. Self-preservation and maintenance of the status quo is and will continue to be the basis of policy formation for years to come.

There will be a time to sell silver, but that time is not now. Reintegration of silver into the monetary system, while possible, is not likely. This makes silver a game relative to gold. The exit strategies will be implemented at much higher prices within the context of huge public mania.

Regards,

Eric