In Jim Cook's Archive


After the financial bloodletting of the past two months the old inflation versus deflation argument has re-emerged. Major assets are certainly deflating. The short term outlook does appear to be deflationary. However, once the de-leveraging winds down and the demand for dollars abates we could be in for a monster dose of inflation. My friend, money manager Ken Gerbino had this to say, “The greatest mistake one can make is to think a deflation is coming because houses and stock prices have collapsed. We are entering one of the greatest inflationary periods in our history.”

Author and TV personality Jim Rogers claims, “America is bankrupt…. America is in debt for over $13 trillion and adds over $1 trillion debt each year… The fact that the dollar is gaining rapidly is only temporary…. within a year you have to get rid of the dollar.” Newsletter editor, Lawrence Roulston puts it this way. “The massive give-aways to prop up Wall Street are going to add further downward pressure to a currency that was already in a free fall.”

Newsletter guru Richard Russell adds, “There’s a major difference between now and the 1930s. During the ‘30s nobody had dollars. Dollars were scarce as frog’s teeth. If you did have dollars in the ‘30s, nobody doubted their value. Today I doubt the viability of Federal Reserve Notes (dollars). I wonder what they’ll be worth a few years from now. Fiat currency is ‘fool’s money.’” Another well known newsletter personality, Jim Sinclair, is suggesting runaway inflation. He writes, “All these bailouts and Federal guarantees on credit items constitute a whitewash on a falling economic structure going out of control and soon.”

Gold expert, Bob Moriarity, tells us, “I think the U.S. is going to default entirely within the next nine to 10 months. Here’s the situation. The U.S. is bankrupt. As anybody who looks at our debts and obligations should be aware, sooner or later we’re going to have to declare bankruptcy.” Newsletter author, Greg McCoach, doesn’t mince words, “The U.S. Dollar, which now seems to be defying gravity, will eventually crater to its intrinsic value (which is zero) before all this is over.”

Author Graham Summers writes, “It’s now getting to the point that the Fed has no other option than hyperinflation.” According to newsletter editor Jim Willie, “The U.S. economy faces a risk of not so much recession, as disintegration…. In the next couple months all value will be called into question on the paper side.” Editor David Skarica adds, “Anytime they print this much money anywhere, it always led to inflation…. We’re on a pure fiat currency right now. There’s no gold standard; there’s nothing.”

Analysts Eric Sprott and Sasha Solunac warn, “We believe the next leg of the crisis will see people become fearful of cash and bonds.” Christopher Galakoutis points out, “A country with no domestic savings from which to draw, angry foreign creditors and with a collapsing tax base, has few options. U.S. debts will have to be paid back with printed money. Money printing will cause a severe inflationary depression…”

Economist Enrico Orlandini says, “Nothing Washington has done works and yet they keep doing the same stupid things…. That’s where we are today, with problems so big that no decent alternatives are at our disposal.” Newsletter editor Dr. Aubie Battin writes,”….for the time being the renewed almighty dollar will survive because at the moment there is no other currency to take its place, but it too will eventually succumb to hyperinflation.”

Greg McCoach sums it up, “The Fed cannot print enough money to paper over the $531.2 trillion in derivatives and credit swaps, the trillions in the overbuilt commercial real estate market ready to collapse, the multi-trillions in leveraged buyouts going bust, and other exotic financial instruments that have turned toxic….the continual Fed action to flood the markets with money will lead to an era of hyperinflation, the likes of which no living American has ever seen.”

All of these analysts advocate gold. It’s their first choice for protection against currency debasement. For them, silver is a secondary line of defense. I agree with them about the risks of inflation, but part company when they put gold before silver. Don’t get me wrong, I love gold, but silver will likely be much stronger going forward.

You get the same protection against inflation, economic turmoil and a falling dollar with silver because it’s outside the system, can’t go broke and has no counterparty risk. Both gold and silver evolved as money over time. Centuries ago the market decided they were the best medium of exchange and store of value. I don’t doubt that some day in the future (after a hyperinflation), gold will have some sort of monetary role once again. Silver never will. There just isn’t enough silver.

Industry has used up an enormous quantity of the silver that was once above ground. Industrial demand will continue to consume silver at an accelerating pace. New uses and breakthroughs in silver applications insure that. Silver has been so cheap so long that nobody has experimented much with substitutes. There may be periodic reductions in demand, but the same can be said for supply as recycling and base metal mining diminish. In it’s many uses as a vital industrial metal silver stacks up favorably with oil. They are a lot alike.

With silver, you get the best attributes of gold and oil. It’s a two-fer, a two for one. It’s what you should be buying. At this critical time a better case can be made for silver than virtually any other asset. If you don’t have ten percent of your net worth in silver, you should rethink your strategy. Current events have proven that nobody’s too big to fail, and the worlds most trusted financial entities can leave you destitute. This is a time to have assets that can’t fail. I’m talking about actual physical paid for physical silver. The paper capers in precious metals have been blowing up in people’s faces and it’s going to get worse. Get silver bars and coins now while you still can.

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