Doc- I saw an article about DRescapes discussing leaving the US for the Dominican Republic. It might actually sound good, but here is the question. My stack of phyzz is a little over 12,000 ounces WITH AN AVERAGE cost of $30.93. So it is currently worth about$415,000. Lets say silver goes to $150 per ounce in 2015. My stack then would be worth about $1.8 million- but that would be in 2012 dollars.
They say silver holds your purchasing power. So wouldn’t it still have the purchasing power of $415,000 in today’s terms? If the Dominican Republic does not inflate their currency like the US wouldn’t the silver be worth over there the same as it is here now? Even if I stay in the US wont my purchasing power in 2015 still be the same as it is now no matter what the dollar value is 3 years from now?
I seem to be very confused. Help. Thanks again in advance. B.
To answer your question in a word- No.
Yes, silver preserves purchasing power- this simply means that central banks cannot inflate its value away by printing it into existence.
Even in a free and naturally trading market however, all commodities and currencies ebb and flow in value over time-becoming overvalued and then undervalued based on basic supply and demand funamentals- nothing is ever fixed and frozen in value continually. This is why there were problems with the bi-metallic gold and silver standard that the US was on for over 200 years. The dollar value as well as the ratio of silver to gold was fixed by the government- causing distortions and hoarding as the metal currently overvalued by the official fixed ratio was converted into the undervalued metal at the artificially high official exchange rate.
For an example of this, just look at the silver/gold ratio. It never remains fixed, it is constantly fluctuating (it narrowed to as much as 30/1 in April 2011, and recently hit a high near 60/1 at the end of the recent correction). While both metals will preserve purchasing power, I personally believe that while more volatile, silver has the greater upside potential vs. gold and other tangible assets.
It is highly likely that silver will at least return to it’s historical 16/1 ratio vs gold, if not it’s current mine ratio of 9/1- and not even taking into account the fact that markets typically overshoot the mean during a massive bull market- meaning it is quite possible that silver could temporarily even near a 5/1 or tighter ratio vs gold.
Currently, silver’s value is suppressed historically speaking. Throughout most of history a day’s wages for hard labor/ soldier ranged somewhere between a single silver dime (1/10th oz) to 1oz of silver. In our opinion, silver is extremely undervalued vs both fiat currencies as well as other tangible assets and will greatly increase in value relative to other tangible physical assets over the next 3-7 years (gold, farmland, real estate, etc) as well as obviously vs. fiat currency notes.
Hope this explanation helps your understanding.