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Silver
lease rates have increased dramatically since the credit crises began last
year. A cause is the increased uncertainty with counter-party risk. The crises of trust is reaching
epic proportions.
Counter-party
risk requires the financial ability of the promisee to perform the
promise. Because of the murky accounting rules, OTC derivatives and
horrific fraud holders of capital are unwilling to take on counter-party
risk.
For
example, suppose you watch someone order a hamburger and pay for it at the
first window and then 20 seconds later pull up to the second window only to
be told that the hamburger joint was bankrupt and they would need to get in
the bankruptcy line for their unsecured claim.
No
institution is safe as OTC derivatives directly or indirectly affect almost
every single publicly traded corporation. GE has
been smoothing earnings through the use of OTC derivatives for years.
The credit default swaps are like atomic weapons that vaporize
companies. No one knows who will be next so no one trusts anyone nor
has any reason to. This has caused LIBOR, HIBOR and TED spreads to go
ballistic. The velocity of money is coming to a standstill. The Kondratieff Winter is deepening.
Gold
is the primary monetary metal because of the large above ground
stockpiles. Silver is a quasi-monetary metal. Because of the
industrial demand component to silver it may offer more upside potential than
gold. The current gold/silver ratio is around 83.6. Historically
it is around 16 and has risen lately from a low around 55. In other words, silver when priced
in gold is currently cheap. This means that as gold
continues to reassert its role as money that silver will follow faster.
Retirement
accounts have currently lost about $8.4T of value. If you are going to
trade your life why
get an illusory currency or other financial assets subject to counter-party
risk that can become worthless in the blink of an eye?
Trace Mayer
RuntoGold.com
Trace Mayer,
J.D., holds a degree in Accounting from Brigham Young University, a law
degree from California Western School of Law and studies the Austrian school
of economics. He works as an entrepreneur, investor, journalist and monetary
scientist. He is a strong advocate of the freedom of speech, a member of the
Society of Professional Journalists and the San Diego County Bar Association.
He has appeared on ABC, NBC, BNN, many radio shows and presented at many
investment conferences throughout the world.
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