Silver is Indicator of Inflation

The 10.73% rise in the price of silver sticks out, relative to what is more and more obviously taking place—namely, that inflation is on the rise, big time! Note my IDW below hit another all-time high rising to 191.64 by the end of this week. The point is that everything is rising because the supply of dollars is rising and the trajectory of its future rise is exponential.  An uptick in rates this week in response to rising inflation, not to the Fed’s talk of tapering, is evidenced by the decline in the T-Bond (TLT). Gold and silver have been laggards for one very good reason. Establishment propaganda requires bullion banks to manipulate those prices downward for as long as possible in order to keep people confident in the existing dollar-based system.

But what happens to the Fed’s tapering plans if the economy begins to tank, as the Atlanta Fed suggests is beginning to take place, and the stock market begins to fall in sync with plunging earnings? Back in August, the Atlanta Fed predicted an annual GDP growth of 6%. Its latest prediction has plunged to a mere 0.4%. That compares to a consensus range of between 2.2% to 5.4%. Although that was lower than the consensus, the Atlanta Fed has had an uncanny record in predicting GDP, which of course is in decline largely because of a surging inflation rate. Moreover, the market is suggesting we can expect more in the way of inflation. As Peter Boockvar pointed out on Thursday of this past week, the U.S. inflation breakeven rate on the 5-year Treasury rose by 10 bps to 2.91%, which is the rate above the 5-year U.S. Treasury rate. So with the global economy starting to spiral downward, more than ever gold will be in demand. Bloomberg last week reported how it works. “To fathom the magnitude of Venezuela’s financial collapse, travel southeast from Caracas, past the oilfields and over the Orinoco River, and head deep into the savanna that blankets one of the remotest corners of the country. There, in the barber shops and restaurants and hotels that constitute the main strip of one dusty little outpost after another, you’ll find prices displayed in grams of gold. A one-night stay at a hotel? That’ll be half a gram. Lunch for two at a Chinese restaurant? A quarter of a gram. A haircut? An eighth of a gram, please. Jorge Pena, 20, figured that an eighth came to three small flakes — the equivalent of $5. After getting a trim one recent weekday in the town of Tumeremo, he handed them over to his barber, who, satisfied with Pena’s calculation, quickly pocketed them. ‘You can pay for everything with gold,’ Pena says.

We hope it never comes to this in America. Meanwhile, as the world goes broke, companies that produce money with purchasing power—gold—will become the bankers of the world.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.