Our financial systems create exponential increases in:
- Debt
- Prices for stocks
- Prices for commodities
- Currency in circulation
- Prices for gold and silver
Why? Fractional reserve banking, central banks creating more currency, and
politicians who spend governments deeper into debt each year… but this
article isn’t about why.
Student loan debt in the U.S. is about $1.4 trillion, auto debt is about
$1 trillion, official national debt is nearly $20 trillion, corporate debt is
huge and the list goes on. Much of it will never be paid in current dollars.
Default will occur via repudiation or hyperinflation. Look at the official
national debt below:
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-001.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
Official national debt has increased exponentially since
1913 and somewhat more rapidly since 2001. Project out another ten years and
we see the following:
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-002.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
Increasing debt at about the same rate as the past 30 years projects north
of $40 trillion in 10 years, BEFORE the massive increase in
debt that will accompany new wars, more social programs, out of control
Medicare spending, and 100 other items on the “out of control” list.
Read Karl Denninger: The Certain Destruction
of Our Nation
Exponential increases in total debt are also seen in the increases in the
net deficits. The following shows the net increase in debt every eight years.
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-003.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
But along with exponential increases in debt and deficits
we also see similar increases in the S&P and Silver.
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-004.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-005.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
The S&P has increased from about 200 to over 2,000 in 30 years, with a
number of significant crashes during that time. Silver has increased from an
annual average of about $4 to a peak over $48 since 1990.
Our financial systems exponentially increase the quantity of currency in
circulation and consequently the prices for practically everything increase.
Think college tuition, medical care, beer, cigarettes, food, gold, silver,
postage and more. A few prices have come down or increased more slowly, such
as televisions and computers, thanks to technological innovations.
But on average prices for almost everything, including stocks, have
increased since 1913 and will continue to increase until our economy is
crushed with a major financial and economic reset. Until then, expect
erratically higher prices, UNLESS:
- Congress balances the budget
- Central banks stop creating currencies
- Governments reduce total employees, expenses and taxes
- Militaries are reduced in size and expense
- Medicare expenses are capped or reduced
Clearly none of the above will happen in our current world.
What can we expect for silver prices?
In the long term, silver prices increase exponentially, along with other
prices. Examine the following chart of the ratio of silver prices (times
100) to the S&P 500 Index using the annual average of monthly
prices.
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-006.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
Conclusion: Silver prices are currently low
compared to the S&P 500 Index based on 30+ years of prices. Central
banks have levitated stock prices and “discouraged” silver prices since 2011
so this low ratio makes sense. What if the S&P continues its exponential
increases and the ratio reverts back toward the high end of its range?
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-007.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-008.jpg)
![](../style/all/img/bouton/Zoom_in_6.png)
In ten years, given the exponential increases shown above, and assuming,
more or less, current economic craziness continues without a massive “reset”
then the S&P could be approximately 4,000, the silver to S&P ratio
could be around 3.0, and the annual average price for silver could be roughly
$100 – $150, with potential price spikes several times higher.
Can we expect the exponential increases from the past 100 years to
continue?
- Of course not! All exponentially
growing systems eventually crash. When is difficult to estimate.
- Nuclear war would change circumstances for most people,
countries, and commodity prices. Nuclear war could happen accidentally
or intentionally to cover and distract attention from criminal behavior,
massive fraud, crashing economies, and policy failures. I trust other
options will be used and we will be spared the devastation of nuclear
war… but it is possible.
- The next U.S. president is likely to increase borrowing
and spending. Much “free stuff” has been promised and “fiscal stimulus”
will prevail. Perhaps he or she will push systems into
hyper-inflationary mode, either accidentally or intentionally. In that
case prices will be much higher. Reminder: Argentina has devalued its
peso, compared to the US dollar, by 10 trillion to one since the 1950s.
It can happen anywhere.
CONCLUSIONS:
- Silver and other prices increase exponentially.
- Silver prices are currently, relative to the S&P,
quite low.
- A “reset” is coming sometime … It seems likely
that silver will be reset much higher in both price and purchasing
power.
- Hyperinflation is an insane response but may be used by
the financial and political elite for their purposes. The same is true
for nuclear war.
Silver flies, paper dies!
![](http://www.24hgold.com/24hpmdata/articles/img/Sprott%20Money-Silver%20Prices%20in%20an%20Exponential%20Financial%20System%20-%20Gary%20Christenson-2016-10-26-009.jpg)
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GE Christenson is the owner and writer for the
popular and contrarian investment site Deviant Investor and the author of the book, “Gold
Value and Gold Prices 1971 - 2021.” He is a retired accountant and business
manager with 30 years of experience studying markets, investing, and
trading. He writes about investing, gold, silver, the economy, and central
banking. His articles are published on Deviant Investor as well as other
popular sites.
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The author is not affiliated with, endorsed or sponsored by Sprott Money
Ltd. The views and opinions expressed in this material are those of the
author or guest speaker, are subject to change and may not necessarily
reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the
accuracy, completeness, timeliness and reliability of the information or any
results from its use.