Why America’s Debt Problem Will Benefit Silver

by: Ben Tseytlin - on Gold & Bullion

During the 1970s, the United States went through a period of inflation, which became so severe that the billionaire Hunt Brothers invested heavily into silver, causing its price to rise significantly. Today the USA carries even greater debt, and below are some reasons why this will benefit silver investors.

Overview of The Silver Market

The market for silver is small. In total, it is about 1/10th the size compared to gold’s market. This means that it is very sensitive to disruptions resulting from crisis, whether it is national or global, and can explode suddenly in price during times of rampant inflation. Today there are a number of factors which make this scenario very likely in the not too distant future. One of them is the staggering debt the United States carries, which shows no signs of falling anytime soon. The U.S. currently has a national debt of over $22 trillion; an amount that many experts believe cannot be repaid.

Even more poignant are the fiscal policies that the nation is endorsing, which are very similar to those embraced during the 1970s. At the time the U.S. was still using a gold standard where an ounce of gold cost $35 per ounce. However, the continuous deficit spending resulting from the Vietnam War forced the government to print additional dollars, which could not be backed up with gold. This ultimately resulted in Nixon removing the dollar’s gold backing.

As of 2019, the deficit is expected to reach $1.5 trillion due to continual fiscal waste, with some predicting $2 trillion if the USA enters recession. Deficits in the trillion dollar range have been accepted as the new norm, but ultimately the dollar will be debased, resulting in runaway inflation.

Silver Is Arguably The Most Undervalued Commodity In The World

There are few commodities out there which are as undervalued as silver. And due to the government’s fiscal policies, it has all the ingredients for a huge bull market. This bull run will not only benefit those that own physical silver, but it will also reward those that own stocks in silver mining companies. And because silver is such a small market, a single billionaire or other high net worth individual could corner the market quickly, amassing much of the above ground supply and sending prices into the stratosphere.

One of the reasons why the Hunt Brothers chose silver, rather than gold is because during the 1970s gold was still illegal to own in the United States, due to a law passed decades earlier by Franklin D. Roosevelt. However, silver has other advantages over the yellow metal. It is far more affordable, sometimes being referred to as “poor man’s gold,” but when it comes to investment returns in many cases it has actually outperformed gold historically. Investors who choose to stockpile silver should always take physical delivery, as the Hunt Brothers did, as opposed to settling the transaction in cash. For those who are interested in offshore storage for additional protection, there is no better destination than a vault in Switzerland.