When Silver Prices Finally Challenge Perception

The vocabulary in which modern monetary policy is expressed has created complacency and acceptance. For example, people have learned to accept outrageous financial concepts like $1 trillion, when very few individuals have any sense of how much this actually represents.

Furthermore, people have become accustomed to elegantly expressed monetary concepts like quantitative easing, when all the term really refers to is the printing or creation of more money that dilutes the value of a country’s currency.

In politics, people have also learned to debate fiscal policy without ever effectively addressing the $200 trillion in unfunded liabilities that are now beginning to come due as the huge post-WWII Baby Boomers generation starts to retire in the United States.

Modern Financial Fallacies

Besides the lack of a realistic concept of exactly how much value a trillion dollars represents, the people of the United States are increasingly conditioned to believe financial fallacies like:

· Housing prices go up forever

· The stock market always eventually provides a return

· Operation Twist and Quantitative Easing are not forms of money printing

· Even in the specialist sector, HFT and algorithm trading provide much needed liquidity and remove risk and volatility.

Basically, the perception of the public with respect to financial matters always seems to be ahead of or behind the actual reality. Furthermore, such perception remains vulnerable to a much greater degree of distortion than is commonly recognized.

Perception and the Value of Silver in an Inflationary Environment

Silver is typically perceived to be much less valuable than its underlying demand would imply. Also, the quantity of silver available in the form of above ground investment grade metal is actually less than gold, although the silver to gold pricing ratio is reversed by a considerable margin.

Only a few years back, the prevailing sentiment in the silver market and among the investing public would have one believe that the price of silver at a mere $20.00 per ounce was almost too high to mention in polite company.

How public perception has since changed with regard to silver, which has traded at more than twice that previously largely unthinkable price within the past 18 months. In fact, the all-time high for silver of $49.77 was last seen on April 24^th of 2011.

In all likelihood, the same degree of eventual acceptance will also apply to silver when it eventually reaches $450 per ounce or even more. Such price levels for silver seem increasingly attainable given the cumulative inflation in consumer prices seen over the past four decades.

This relatively high inflationary environment has been a persistent backdrop to the U.S. economy ever since the country removed the precious metal backing from its paper currency in the early 1970’s, and it only makes the future for silver look even brighter.  

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