I heard a rumor that the price of silver is going to skyrocket over the next year, is this true?

Okay, where the heck is franky getting the notion there is no precious metals shortage? For the better part of a decade from the late 90's till early 2000's, gold demand was outstripping supply by 2000-2500 metric tons per year. In 2001, the U.S. Strategic Stockpile released it's last 16 million oz. of silver for minting purposes, thus the U.S. has (at least at that point) no more silver reserves. And there are a ton of mines out there? When silver and gold prices dropped to $4 and $250/oz. respectively, the mining firms couldn't operate at a profit, so many mines were shuttered. We'll now that prices are rising again, you don't just go open the mine and start mining again. The mine has to be check to see if it's still safe, you have to find the vein again. It takes time.

If the metals are such a bad investment, why did they take off like a bat out of heck last year? Metals are a hedge against inflation and what have the world Central Banks been doing recently? Raising rates. Why? Because inflationary pressures are a major concern and many of them are warning of inflation growing at record setting paces.

Price inflation is a direct function of monetary inflation and the world is floating in a sea of liquidity, thus driving inflation, that's why central banks have been going on a rate hiking campaign.

What the majority of posters are failing to realize is that what you're hearing about is silver and golds real (inflation adjusted prices). For example in 1980, gold topped out at $850/oz. and silver at almost $50oz. Three years later, gold was trading for almost 50% below it's all time high and silver for 78% below it's all time high. Now, we know that prices of goods back in 1983 are well below what they are now. I can remember in the early 80's, my mom buying a car for $5000. Today, you're going to pay $25,000. In 1983 the median home price in the U.S. was $75,000; today it's $250,000 almost 4 times more. So, if we take an average, we could safely say that prices of goods today are 4 times what they were in 1983, thus a factor of 4. Silver is now trading at $13.60/oz. and gold is $655/oz. Silver is only $2 higher now than it was over 20 years ago. So if we adjust the 1983 prices of gold and silver ($450/oz and $11/oz respectively) for inflation using the cofactor of 4, that means, silver should be trading at $44/oz and gold at $1800/oz. to adjust for inflation. If you adjust the 1980 all time highs of gold and silver, that means, gold would have to reach $3400/oz. and silver $200/oz. to match their 1980 all time highs adjusting for inflation. Franky is making the mistake that the majority of people make, he's basing his analysis on nominal (non-inflation adjusted) prices instead of real (inflation adjusted) prices. You can't do that because that doesn't mean anything. For example, in mid/late 60's, if you were making $10,000 a year, you were in fat city. Today, in the D.C. are, you need to be making a minimum of $60,000 to survive. Now, imagine if you could travel back to the 1960's and you told people back then that you're making $60k a year. They'd freak out - you'd be wealthy. BUT, that's not true because what $10,000 bought back then wouldn't even beginning to cover expenses today. That's why you need to adjust for inflation and franky is basing his argument purely on nominal statistics.

Now, let's look at this. On Dec. 15, 2006, the Treasury dept. released it's report on the financial position of the U.S. based on the congressional mandated GAAP rules instead of the cash basis rules they've been using. That event wasn't covered in the mainstream media. Know why? Because based on the cash basis method the treasury was using before congress made told them to us GAAP a year before - the nations debt is $8 trillion. Which is only current debt. But based on GAAP, which takes into account current, longer term debt and unfunded liabilities, the true national debt is - ready for this ----------- $53 TRILLION!!! And mind you, that's only federal debt. If you take into consideration all gov't debt (fed, state, local), corporate and private household debt, the U.S. is upwards of $80 TRILLION in debt. The GDP is only $11 trillion, which means, the total nations debt is 627% of GDP - AND GROWING. The U.S. borrows $2.4 billion PER DAY to function. And one last thing, that $53 trillion is net present value, meaning that if we were going to pay it off, we'd need $53 trillion in the bank on 12/15. Not only is interest accruing on the debt, but we're borrowing more.

Let me ask you this, at these levels and growing, how long before the U.S. can no longer pay it's bills. On March 23, 2006, the Fed did something very interesting - it stopped publishing M3 money supply data. M3 is the broadest measure of money and we have no idea of how much the money supply is growing. M3 is the one that can be "grown" the quickest as it's composed of money that can be created electronically or through bookkeeping entries. Now, take into consideration this - when a country can no longer pay it's bills, it has 1 of three options:

1) Default - I doubt the U.S. will do that.
2) Raise taxes - there are 68 million Americans not filing returns now as it is, how much more can you raise taxes before people stop paying them all together. What can they do, throw 150 million people in jail?

3) Monetize - print money. This is the route governments usually take. But, monetization is inflationary. Do a google search on the hyperinflation of post WW1 Wiemar Republic Germany, when they're money printing activites to make war reparations hyperinflated their economy. A little hint, a sandwich at a restaurant during the era was 550,000 marks.

So, Paulson has activited the Working Group that was authorized by Reagan under Executive Order 12631(?) with mandatory meetings every 6 weeks and ordering his people to examine the effects on the economy in the case of a collapse in the derivatives and hedge fund markets, the Fed stop printing M3 numbers and the Treasury saying "Hey, the federal gov't is actually in debt by 6 times more than we've been telling everyone". This smells like a rat to me.

Remember, inflation is a major concern right now and precious metals do well during inflationary times. Plus, when times get tough, people horde precious metals. Think about it, in the last 4 years, gold is up 160% and silver is up 200%. Why? What is this kind of price appreciation telling us? Remember, silver, adjusting for inflation, should be trading at $44/oz right now, $30 higher than it currently is and that even after a 200% increase in the last 4 years. Also, the precious metals just came off of a 22 year secular bear market; we are only 4 years into a bull market with silver trading 226% below what it should be. And remember, adjusting for inflation, silver would have to reach $200/oz. to match it's 1980 all time high. Do you think silver has a way to run considering the financial predicament the U.S. is in - a collapsing housing market, the dollar on the verge of collapse, huge current account, trade and budget deficits, debts that can never be repaid, excessive monetary liquidity fueling inflationary pressure, the yield curve inverted - I believe Taranto stated that if the yield on the 5 year note is below the yield on the 3 month bill, like it is now, there has always been a recession within 3 to 5 quarters. As of today - 2/1/2007 - the yields on the 3 month T-bill and 5 year T-note are 5.13% and 4.84% respectively. Do you think the U.S. is going to avoid a "financial day of reckoning"? And when the dam finally breaks, people are going to be hordeing precious metals like you wouldn't believe and $100/oz. for silver will be cheap. It seems franky may have bought gold and silver buillion, but he doesn't understand the fundamentals behind what's going on. Again, I ask you, what has caused gold and silver to rise so rapidly in the past few years? Price moves in precious metals of those kinds of magnitude should be cause people to perk up and take notice. What are gold and silver trying to tell us? We should be listening.

P.S. - Please forgive any typo's or grammatical errors.