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Silver and the popping of the debt bubble

Commentaries & Views

We have now moved into an era of rising interest rates that is similar to a period that started  in the early 1940s.

At the start of this period, the Government Debt to GDP ratio was also around 120%, close to where it eventually topped/popped.

Despite high relative debt levels and a rising interest rate environment, the US was in a good position due to the US dollar being the premier world currency as a result of the 1944 Bretton Woods agreement.

Instead, the US is currently facing a similarly massive debt liability and a rising interest rates environment, while the nations are actually about (and already beginning) to abandon the US dollar over the coming years.

During this rising interest rate environment, silver experienced a massive bull market, going from about 35c in 1941 to about $50 in 1980.

Understand that interest rates are an indication of the value the market places on debt (or bonds). If interest rates are low, then the market places a high value on debt, and if the interest rates are high, then a low value is placed on debt.

However, when it comes to silver it is basically the opposite. When interest rates are low then the market places a relative low value on silver and vice versa.

So, given that the interest rates have been declining to an all-time low in 2020, one can consider the 2020 bottom in silver to be a very significant one.

The current rising interest rate era is likely to dethrone the US dollar as the reserve currency of the world, and this will likely be an added boost to silver when compared to the rising interest rates era of the 40s to the early 80s (when silver went from 35c to $50).

Below, is a long-term chart of Interest Rates:

More analysis of this chart, as well as the silver and gold long-term cycle chart can be found here on my blog.

The 1941 bottom in silver (point 3) came at about the same time as the bottom in interest rates. This was the start of the rising interest rates era that topped in the early 80s.

The 2020 bottom in silver (point 4) came at about the same time as the bottom in interest rates. This is where the new rising interest rates era started.

Silver will again rise like it did from about 35c in the early 1940s to about $50 in 1980. However, this time it is while the monetary system is collapsing, so there will be nothing orderly about this reprice (or revalue if you like) of silver.

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I also have a Premium Service as well as a Silver Long-term Fractal Analysis Report that provides more insight regarding the gold and silver markets.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.