Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Correct into Bitcoin Happy Thanks Halving - Earnings Season Buying Opps - 4th July 24
24 Hours Until Clown Rishi Sunak is Booted Out of Number 10 - UIK General Election 2024 - 4th July 24
Clown Rishi Delivers Tory Election Bloodbath, Labour 400+ Seat Landslide - 1st July 24
Bitcoin Happy Thanks Halving - Crypto's Exist Strategy - 30th June 24
Is a China-Taiwan Conflict Likely? Watch the Region's Stock Market Indexes - 30th June 24
Gold Mining Stocks Record Quarter - 30th June 24
Could Low PCE Inflation Take Gold to the Moon? - 30th June 24
UK General Election 2024 Result Forecast - 26th June 24
AI Stocks Portfolio Accumulate and Distribute - 26th June 24
Gold Stocks Reloading - 26th June 24
Gold Price Completely Unsurprising Reversal and Next Steps - 26th June 24
Inflation – How It Started And Where We Are Now - 26th June 24
Can Stock Market Bad Breadth Be Good? - 26th June 24
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver, Butter and TANSTAAFL

Commodities / Gold and Silver 2013 Sep 11, 2013 - 08:38 PM GMT

By: DeviantInvestor

Commodities

TANSTAAFL is the acronym for “There ain’t no such thing as a free lunch.” The saying has been used for years, even prior to Robert Heinlein’s use of it in “The Moon Is A Harsh Mistress.” It is another way of saying there is always a price that must be paid.


Regarding butter: “If you subsidize butter, you get more butter.” Substitute whatever you wish in the place of “butter,” such as, welfare, stupidity, food stamps, drugs, student loans, mortgages, political contributions, bad policy, lazy thinking, too-big-to-fail banks, deficit spending, and so forth.

Military spending seems relevant as Congress prepares to vote on an attack on Syria. Casey Research published the following chart of military spending over the past 70 years. Their analysis, based on White House OMB data, is consistent with more detailed data I found from Data360 which lists spending by year. This is “big picture” analysis:

Year Military Spending (in $Billions) Price of Silver (annual average from Kitco.com)
1948 $21 $0.70
1971 $100 $1.39
2010 $1,000 $20.19

The exponential rate of increase for military spending from 1948 to 2010 (62 years) was about 6.4% per year. The rate of increase from 1971 – 2010 (39 years) was about 6.1%. For silver, the annual rate of increase from 1971 to 2010 was about 7.1%.

Military spending increased erratically and exponentially (1948 – 2010) at about 6.4 % per year. Silver prices increased similarly at about 7.1% per year since 1971, the year that Nixon “temporarily closed the gold window.” Both silver and military spending increased very rapidly following 9/11/2001. An analysis of increases in the total money in circulation, as measured by M2, and for the prices of gold and cigarettes produces similar results over long periods. Increases in the money supply, deficit spending, and debt clearly drive increasing consumer prices and increases in gold and silver prices.

If we subsidize butter, we get more butter. Our current system subsidizes many programs, from food stamps (SNAP), welfare programs, congressional importance, military contractors, mortgages, lobbyist compensation, student loans, medical costs, and on and on to eventual insolvency. Congress will soon raise the debt ceiling in another circus of political “horse-trading” that will enrich those who made the largest donations to congress. Military spending is destined to rise along with debt, denials, and prices.

Do you expect any of these massive expenditures or subsidies to stop, or even slow their rate of increase? Of course not!

Unfortunately, there is no free lunch, there are consequences to bad decisions, and the costs of subsidized programs must be paid. These consequences will be life-changing and quite drastic. Consider some thoughtful preparation.

You can buy 30 year bonds (a very LONG commitment) and earn a bit less than 4% per year in a currency virtually guaranteed to decline in value, or you can put your savings into a Certificate of Deposit and earn 1% per year. You could be “Cyprused” with a “bail-in” that converts your deposit in the bank, which is legally a liability of the bank and no longer your money, into equity in a failing bank. We hope such “bail-ins” do not occur but the laws are in place and the precedents have been set.

Alternatively, you can purchase “insurance” in the form of gold and silver and watch it increase erratically in price, along with military spending, the national debt, many other programs, and the money supply.

I strongly discourage an investment in gold and silver if you believe that Congress will balance the budget and reduce the national debt to near zero before the next presidential election.

However, in the real world, “insurance,” in the form of gold and silver, makes good financial sense.

Consider storing your gold and silver outside the banking system and in a country other than where you live.

Read: Back to Basics – Gold, Silver and the Economy Read: Gold, Silver, and the Sins of the Past

GE Christenson aka Deviant Investor

If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2013 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in