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Suddenly, the global inflation monster, long considered dead and buried, has returned with gale force … and silver, one of the most sensitive to inflation, has just surged close to 31-year highs.
Just consider the depth, breadth — and sheer power — of the forces driving silver through the roof …
Force #1 is the primary theme of nearly everything we’ve been writing for the past two years — Mr. Bernanke’s wild money printing.
One year ago, for example, we showed you exactly what the Fed chief is doing in “Bernanke’s Running Amuck,” and pointed to the obvious result — a flood of dollars and surging precious metals.
Then, this past November, we warned you still again in “Fed money printing getting even wilder!”
Look. In the 219 years since the U.S. dollar was born, the United States has suffered through one massive flu pandemic, two great depressions, 11 major wars, and 44 recessions. But despite all those disasters, the U.S. government never abused its money-printing power … until, that is, Bernanke came along.
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Like a mad counterfeiter cranking out mountains of $100 bills to feed America’s outrageous debt addiction, the Fed chief is literally running amuck.
Sound familiar? Perhaps to a student of the German hyperinflation of the 1920s. But nothing like this has ever happened in the United States — even in response to other recent threats to the economy.
Back in 1999, for example, when the Fed feared the Y2K computer bug would sink the banking system, Chairman Greenspan pumped in what experts thought was a huge amount of money.
Two years later, after the 9/11 terrorist attacks, the Fed AGAIN pumped in what experts said was a huge amount of money.
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But now look! Fed Chairman Bernanke’s new money printing makes those prior money-printing episodes look like a speck of dust by comparison. In fact, what you are witnessing today is the world’s largest money-printing binge since the Weimar Republic in Germany, when it took 3 trillion marks to buy one dollar!
Hard to believe? Then consider the facts: From September 10, 2008 through the end of 2010, Bernanke increased the nation’s monetary base from $851 billion to $2.03 trillion. That’s an irresponsible, irrational, absolutely insane increase of 138.6% in just 27 months!
And now, even as commodities continue to surge on world markets, Bernanke is printing still more, flooding the economy with another $600 billion in funny money. Worse, there’s serious talk that he’ll announce another round of money printing as soon as the $600 billion runs out.
Force #2 driving silver higher is the natural, inevitable consequence of the Fed’s money printing — inflation and inflation fears, especially in a world where the most populous countries continue to grow rapidly.
Are some folks still trying to persuade you that inflation is “tame”? If so, tell ’em to take a hike!
Sean Brodrick, Weiss Research’s “Indiana Jones” of natural resources, reminds us that …
- The FAO’s Food Price Index reached an ALL-TIME high in December. Then, that record was smashed once in January … and yet again here in February!
- The current food price surge alone has already pushed an additional 44 million people into extreme poverty, bringing the number of chronically hungry people to 1 billion — not exactly a comforting thought for sitting governments of the world, whether dictatorships or democracies.
- French President Nicolas Sarkozy is so alarmed by rising food and commodity prices, he’s just warned the G20 countries of worldwide huger riots looming ahead.
John Williams of www.shadowstats.com puts it this way:
“The Federal Reserve’s ongoing efforts at debasing the U.S. dollar have placed direct downside pressure on the exchange-rate value of the U.S. dollar and upside pressure on commodities priced in same. At work here not only is the impact of higher prices in dollar-denominated commodities such as oil and food, but also the spreading of those cost pressures into the broad economy.”
Force #3 is the turmoil sweeping the Middle East and North Africa.
It prompts wealthy investors in the region to rush to precious metals in a big way.
It poses a major new threat to the world’s energy supplies.
It creates a vicious cycle like none other:
- Surging costs for food and other commodities …
- Social upheavals in response to higher prices, and then …
- Still greater price surges as those very upheavals disrupt supplies!
And it’s spreading rapidly …
In Egypt and Tunisia, where the governments have already been overthrown, labor unrest and further political turmoil is inevitable.
Libya, Yemen and Bahrain are being torn by violent confrontations between pro- and anti-government forces, while Lebanon and Iran have recent histories of violence that make this year’s outbreaks seem small by comparison. And needless to say, Gaza, the West Bank and Israel itself remain locked in struggles that would only be exacerbated by this new turmoil swirling around them.
Meanwhile, street protests have spread to Algeria, Jordan and even Iraq — all in rebellions spurred by inflation, joblessness, and government corruption.
Most frightening of all, we see similar vulnerabilities to political and social upheavals in virtually every other major nation of the North Africa and the Middle East, including the world’s largest oil-producing nations such as Saudi Arabia, Kuwait, the United Arab Emirates and Qatar.
I have been closely following the events in nearly every one of these countries ever since I first studied the Middle East at New York University in 1969. I have Internet pen pals of all ages and walks of life writing to me regularly from the region. And I can tell you flatly:
The only country in the region that has a good chance of escaping this crisis is the Sultanate of Oman on the Southeast coast of the Arabian Peninsula. But, unfortunately, Oman has less than a half percent of the world’s oil reserves, according to the CIA’s most recent World Factbook!
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In contrast, Saudi Arabia, the one country where the ruling family and elite are among the most vulnerable to revolt in the region, controls the most oil reserves on the planet — 264 billion barrels, or nearly 20% of the world’s reserves.
What are the total oil reserves held by counties that are currently suffering — or vulnerable to — game-changing political unrest?
More than 867 billion barrels or 63.8 percent of the world’s reserves.
For the evidence, see the table above. And to get a glimpse of the potential consequences, just check the price of gasoline in your area. Even if the price of West crude quoted widely in the U.S. is not yet surging, the fact remains that Brent crude (the standard metric for most of the world’s oil) is trading at $103 per barrel and helping to drive fuel costs higher nearly everywhere.
End result: More inflation and a groundswell of investors rushing to the safety of precious metals like silver and gold.
Which one has the greater potential? Sean likes gold, but favors silver.
Reason: It’s outperforming gold by a wide margin. And yet, while gold is already above its all-time highs (before inflation), silver is still far below. This gives silver far greater upside potential.
His recommendation: Don’t chase the market in silver bullion. Instead, buy silver on the cheap with the world’s most promising silver mining shares.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
