Something quite interesting happened as the Federal Reserve increased its
balance sheet from 2003 to 2012. As the Fed’s balance sheet increased
from $738 billion to $2.8 trillion by 2012, the price of silver increased to
a record $35 that year. However, as the Fed continued to increase its
balance sheet by printing money and acquiring worthless assets, the price of
silver changed direction and headed lower over the next three years.
According to information and Chart #26 published in THE
SILVER CHART REPORT:
The Fed’s balance sheet was $738 billion in 2003, but grew to $2.8
trillion by 2012, thanks to Quantitative Easing 1 – QE1 (adding $800 billion
in bank debt, including U.S. Treasuries and mortgaged-backed-securities –source) and QE2 (adding $600 billion in U.S. Treasuries –source).
The Fed basically printed money out of thin air to purchase these
financial instruments, which it placed on its balance sheet. As the market
realized the Fed’s QE policies were quite inflationary, silver investment surged,
pushing the price of silver to a record annual price of $35.12 in 2011.
However, something interesting took place when the Fed announced QE3 in
September 2012.
The QE3 policy allowed the Fed to purchase $40 billion a month of
mortgaged-backed securities and $45 billion of U.S. Treasuries. From the end
of 2012 until 2015, the Fed’s balance sheet increased another $1.7 trillion,
to $4.5 trillion. The market began anticipating QE3 after then-Fed Chairman
Ben Bernanke stated that more easing might be necessary in a press conference
held on June 20, 2012 (source).
Investors started buying silver in early July 2012 at the low
price of $26 and by the time QE3 was announced on Sept 12, the price
skyrocketed to $35. Unfortunately, the price of silver did not
continue to rise with the Fed’s balance sheet as it did before, but rather
started a long bear market decline, to a low of $15 in 2015. Instead of the
QE3 liquidity heading into the precious metals or commodities, the majority
went into the broader stock and bond markets.
Again, that came from THE
SILVER CHART REPORT. As we can see, the price of silver is
now close to $14. The Fed is in a real corner. While some
individuals believe the Central Banks will control the paper prices of gold
and silver indefinitely, this is one hell of a lousy assumption.
At some point, the Fed and Central Banks will lose control of the market
and things will get out of hand rapidly. The idea that the
paper price of gold and silver will head toward zero as monetary printing and
debt skyrocket towards the heavens… just goes to show how serious the BRAIN
DAMAGE has become in a good percentage of Americans.
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If you haven’t checked out THE
SILVER CHART REPORT, there’s a great deal of information on
the Silver Industry & Market not found in any single publication on the
internet. There is one chart in this report (Chart #19) that I
can guarantee that 99.9% of precious metal investors haven’t seen before.
I use this bird’s-eye approach when I create my easy to understand
charts. The Silver Chart Report is a collection of my
top silver charts from articles published over the past six years, and
includes in-depth, never-before-seen charts and content that indicate that
silver is on the rise. There are 48 charts in the report, broken down in five
sections.
