In Jim Cook's Archive


A friend said to me that a worldwide recession would shrink the industrial demand for silver. I agreed, but suggested solar was offsetting some of that. Also the supply of silver would fall off if demand fell for copper, lead and zinc because over half the silver is produced as a byproduct to this base metal mining. Far more important will be investment demand for silver that is picking up currently as we see the frightening dimensions of an approaching financial storm.

The world economy has never faced a lineup of worrisome events like those of today. A contraction in China leads the list. When a credit expansion like China has experienced slows down a boom then turns into a bust. Deflation follows. The Chinese currency faces a potential devaluation that would enable them to sell everything cheaper. Their competitors must follow and therefore earnings would bet punished. If China collapses, they will go down doing everything in their power to undermine the dollar. Deflation threatens in America. The dollar could crumble, especially since our economy appears to be falling into recession and we could get more QE.

World stock markets are signaling a spreading economic turmoil. European banks appear to be in crisis. The oil price collapse endangers the petroleum industry and threatens to wreak havoc in the corporate bond market. Emerging market economies are failing and important economies like Brazil are fighting off a depression. Another spate of money printing in America would chronicle the failure of Keynesian economics and throw Wall Street into a tizzy. However, further tightening would prove ruinous to the economy. The Fed and other central banks are between a rock and a hard place. The U.S. stock market is a high wire act that threatens to crash further at any moment as nasty facts and worsening economic statistics undermine confidence.

We’ve had asset inflation and now it looks like we are going to see asset deflation. Every asset could lose value except for silver and gold which are already cheap. These assets go up when everything else is going down and investors are frightened. Precious metals are an asset that can protect you from great loss. By having 20% of your net worth in silver, you would hope to see healthy gains that offset your losses elsewhere. According to silver analyst Theodore Butler enormous gains in silver are coming whether the world economy blows up or not. From my perspective, we’re selling the only thing that can save you.

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