Rock-Paper-Scissors in the Financial Twilight Zone

Miles Franklin sponsored this article.

An old game is Rock-Paper-Scissors. Rock breaks (wins against) scissors, scissors cuts (wins against) paper, paper covers (wins against) rock. The game is balanced with wins, losses, and draws. An enhanced “Big Bang” version is described (short video) here

In a better world the game is Rock-Paper-SILVER. It has different rules.

• “Rock” represents real assets such as gold, wheat, sugar, iron ore, and crude oil.

• “Paper” represents paper assets such as fiat currencies, sovereign debt, gold futures paper contracts, interest rate derivative contracts, digital stocks held in a brokerage account, and paper gold certificates.

• “Silver” represents real silver bars and coins.

In our financial Twilight Zone (central bank controlled economic craziness) the rules are:

• Paper always wins, rock and silver always lose. Life is good for bankers and politicians. The rich get richer, the poor get poorer, and the governments of the world exercise more control.

The Rules in a Better World – when central banks, deficit spending, and unbacked paper currencies have reset to something more sensible – are:

• Silver wins against rock and paper.

• Rock wins against paper.

• Paper sometimes wins against other paper, but never against Rock or Silver.

• Silver is a real asset that has been money for several millennia. Those 1,000-year-old pieces of silver are still valuable. The currencies from hundreds of bankrupt central banks are now worthless paper. Silver “won” against those pieces of paper and will “win” against euros, yen, pounds, rubles, and dollars.

• “Rock” wins against “Paper” because paper currencies are devalued and printed into worthlessness. Wheat, sugar and crude oil will remain valuable. Paper futures contracts can distort market prices but people NEED wheat, sugar and crude oil. They USE paper dollars and euros to get what they NEED.

THE FINANCIAL TWILIGHT ZONE:

Bankers and politicians control debt-based fiat currencies in the financial Twilight Zone for their own gain. They encourage sovereign debts, paper derivatives, digital bank accounts and devaluing fiat currencies.

But bankers and politicians are stressing the paper game in the Twilight Zone.

• US National debt exceeds $21 Trillion and is climbing rapidly. The debt will not be repaid, reduced, or controlled. It can’t increase forever. US National Debt has entered the Twilight Zone.

• Trillions in European sovereign debt have “negative yield” out many years and have entered the Twilight Zone.

• Mexico and Argentina issued 100 year bonds. Only in a financial Twilight Zone does it make sense to lend to credit risks for 100 years.

• High-Frequency-Traders in New York and Chicago trade for a whole year (or more) and do not experience a single day of net losses. This is Twilight Zone craziness.

Why Will Silver Win?

• Industrial demand is increasing and uses silver in 1,000s of applications.

• Even if a global recession reduces industrial demand, rising investment demand will compensate as people reach for something tangible as a store of value.

• People will distrust paper assets as we dive deeper into the financial Twilight Zone. Silver and gold prices will rise to compensate for devalued fiat currencies and diminished trust in those currencies.

• Read Bill Holter.

Consider the following graph of silver – log scale over 20 years.

• During 1995 – 2001 when paper assets were dominant, investment demand for silver was small. The US government was selling its hoard of accumulated silver. Prices fell too low.

• Military expenses and debt increased after 2001. Stocks had crashed, and the last of the US silver had been sold. Silver prices zoomed from under $9 to over $48—too far and too fast—from late 2008 to April 2011.

• Silver corrected downward from its April 2011 high over several years. A green line approximates the center of the trend that balances highs and lows. The trend line price for 2020 reaches $45.A spike higher is likely.

Prices should rally past $30 – $40 and higher as the world descends into Twilight Zone craziness, escalating wars, increasing debt and deteriorating political stability. Investment demand for silver will rise as confidence in fiat currencies declines. Much higher silver prices are all but guaranteed within several years.

Miles Franklin (1-800-822-8080) does business in the real world. They accept Twilight Zone fiat dollars and will exchange them for real silver and gold.

There is a time to exit other investments and buy silver. One good time to buy silver was 2001. Another good time is 2017-2018—NOW!

Gary Christenson