Last week a reader question prompted us to look into the impact of war on gold and silver prices. We stumbled across this excellent article today which looks specifically at silver and war cycles. We wrote mainly about gold and war, so this is an excellent follow on.
Interestingly their overall conclusion on the impact of war on silver was similar to ours on gold:
“Wars are usually financed with debt – borrowed currency. The extra currency in circulation creates price inflation. Silver prices, along with most other commodities, rise due to currency devaluation. Silver is used in war materials and war production, so demand rises, which also causes prices to rise.”
However they have gone one step further and looked at the time cycles in terms of wars and silver prices – which we haven’t seen before. Highly recommended reading…
Silver Cycles and War Cycles
First published at GoldStockBull
Why Silver Cycles and War Cycles?
Because silver prices and wars are connected, and because cycles have predictive value when viewed over the long term. Look at silver prices since the year 1900. Yes, silver has not freely traded for a long time, but there is value in the study.
Six important silver lows have been identified with green ovals. Two other lows in 1931 and 1971 are ignored. The six lows identified approximately match these wars:
Low Date War
1 1914 World War I
2 1939 World War II
3 1963 Vietnam War
4 1990 Gulf War
5 2001 War on Terror
6 2017 Beginning of the XXX war
Wars are usually financed with debt – borrowed currency. The extra currency in circulation creates price inflation. Silver prices, along with most other commodities, rise due to currency devaluation. Silver is used in war materials and war production, so demand rises, which also causes prices to rise.
Conclusion: We expect silver prices to rise at the beginning of new wars or the escalation of major and costly wars. There is little doubt that both World Wars and the Vietnam War were costly and important to the U.S. economy.
The Gulf War and the War on Terror were expensive. National debt at the end of 1990 was $3.3 trillion. Today it is $20 trillion. Much of that debt resulted from the Gulf War, Iraq War 2.0, the war in Afghanistan, War on Terror, and other military actions. The War on Terror caused a spike in silver prices and national debt.
Date Silver Appx. Price National Debt
Sept. 2001 $4.20 $5.8 trillion
April 2011 $48.00 $14.3 trillion
August 2017 $17.00 $20 trillion
Observe that following each green oval – the beginning or escalation of a war – the price of silver increased considerably.
Date SI Appx. Low SI Appx. High Date of High
1914 $0.50 $1.33 1919
1939 $0.35 $0.86 1946
1963 $1.29 $50.00 1980
1990 $4.12 $7.40 1998
2001 $4.67 $20.94 2008
2017 $16.70 ? ?
A major war occurred about every 26 years. Based on this approximate cycle a costly war is due … about now.
North Korea, Syria, Iran, China, or Russia? Many possibilities exist for expanded wars. Although we do not want war, the supposed benefits of war are:
- A major war distracts the populace from government and central banker mismanagement of the nation and economy.
- A major war pumps huge profits into the military-industrial-media-security-banking complex and benefits many other corporations including Big Pharma, Big Ag, weapons manufacturers, and more.
- Big Oil benefits when crude oil prices rise, as they will.
- Congress and lobbyists get their cut of the swag. There is something for everyone in the political and financial elite.
- A major war justifies a massive increase in debt and a “clean” debt ceiling law. Why bother with a ceiling if we know it isn’t real?
- Central banks want inflation and a big war assures it.
- The nation might unite against a common enemy instead of wasting resources on current nonsense.
- The military tests their new weapons and expands their importance.
- The NSA eavesdrops on everyone claiming national security priorities and the need to ferret out North Korean, Russian, and Chinese spies.
- And the list goes on.
Many vested interests support escalation of existing wars and beginning new wars. It is all about money and power. The Deep State favors more war.
High tech weaponry, missiles, military hardware, fighter jets, helicopters, and computers need silver, lots of silver. A new war will increase demand. Silver prices will rise, as they have following WWI & WWII, the Vietnam War, the Gulf War, and the War on Terror.
The inevitable massive increase in debt – say another $20 trillion in eight years – will devalue the dollar and create silver price rises. Some individuals will protect their savings, investments, and pensions from devastating consumer price inflation with silver purchases, increasing demand. We see the precursor of those silver purchases with the fantastic increases during 2017 in Bitcoin and other cryptocurrencies.
The Stock Market:
Dollar devaluations diminish the buying power of the dollar so the DOW rises. War will increase corporate profitability so the DOW will also be pushed up by earnings, probably after a major correction.
Date Dow Appx Low Dow Appx High Date of High
1914 59 390 1929
1939 140 680 1959
1963 700 1000 1966
1990 2,500 11,750 2000
2001 8,100 14,000 2007
The DOW and S&P 500 are trading at all-time highs in August 2017. A new war might temporarily crash the stock markets, but they are likely to rise after a nasty correction. Massive debt increases, dollar devaluations, and central bank levitation support stock prices.
- Since 1900 silver prices, national debt, and the Dow have increased exponentially – straight line increases on a log scale graph.
- Since 1900 the U.S. has entered a major and costly war about every 26 years, with an extra “War on Terror” in 2001. Given the approximate 26 year cycle, we are due for a major and costly war NOW!
- The U.S. stock market is selling at all-time highs. A new war might crash market prices but we know government and central banks will devalue the dollar, massively increase debt, and push new digital currency units into the stock market, eventually forcing it to new dollar devalued highs.
- Silver prices are still two-thirds below their all-time highs reached in 2011. War materials needed in a new war will increase demand for silver. The massive debt needed to finance the war will devalue the dollar and push silver prices higher. The coming consumer price inflation will encourage individuals to purchase silver (and gold and cryptocurrencies) to protect their savings from central bank and government created consumer price inflation, which means more demand for silver.
- Silver prices will rise in the next several years with no escalation in wars because of supply, demand and devaluation.
- Silver prices will rise spectacularly if the U.S. indulges in another major war.
- We do not look forward to another war or an escalation of existing wars, but history suggests another war is likely. Plan accordingly.
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Article written for Gold Stock Bull by Gary Christenson of The Deviant Investor
About the Author: Gary Christenson
Gary Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of several books, including “Fort Knox Down!” and “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. Many years ago he did graduate work in physics (all but dissertation), so he strongly believes in analysis, objective facts, and rational decisions based on hard data.