We hear a lot of dogmatic talk on the Internet regarding the historical role of silver as money. In the end, everyone seems to be hammering on two points:

First, silver price will go up because it has to. Silver is scarce, it’s useful, and we don’t recycle it.

Second, silver has always been money, therefore silver will return to its role of being money sometime very, very soon.

I’d like to address these points.

First, if you pull up the historical chart of silver starting in the mid-80′s, you will see that silver spot price fluctuated in the corridor between $5 and $7 through 1990. I am disregarding the brief spike to $11 because you had to time it perfectly in order to profit from it. If you can time the markets that well, you could probably do much better trading volatility indexes. This means that for a period of 5 years, silver did nothing.

Fast forward another 5 years — same story. We’ve hit a low of around $3.60 in 1993, but overall we hung around the $5 mark. Basically, silver traded in the same corridor for 10 years. If during this time you were a 40 year old stacker, you’d celebrate your 50′s birthday continuing to think “this time it’s different, it’s going to go way up” and “surely cataclysmic events like the fall of the USSR will send the price of silver skyrocketing”.

Another five years, and the price of silver hovers around $5. It took until 2004 for silver to break $6 and take off. Remember, if you started stacking at 40, you’d now be 55 years of age, and you still haven’t seen a single penny of profit unless you timed those few dips and rallies and actually sold your physical silver.

So what was happening during the time between 1985 and 2000?

- Our Debt-to-GDP ratio was actually CLIMBING, starting at around 45% in 1980 and rising to over 80% in the late 90′s. Surely all silver bugs were watching this, thinking “any day now”.

- The “Shop Till You Drop” mentality was born. The rich and famous flaunted their wealth while the rest hopelessly attempted to imitate by getting into debt, leading to the entire decade of the 80′s being famously called “The Decade of Greed”.

- The rate of inflation was in the double digits. If nothing else, rising inflation should have been a boon to silver bugs.

- M2 doubled in the 80′s and 90′s, from $2T to $4T. This should have been another clear sign that too much money was going to chase a shrinking amount of silver, yet it took system shocks like Y2K and 911 to send the price higher.

And I am not even covering the AIDS epidemic, unemployment, trickle-down economics, Medicare, and wars.

I think by now you see that even drastic events like the collapse of the USSR, inflation, and unemployment are NOT guarantees that silver will go higher in nominal terms.

The second point I hear made a lot is that silver has always been money. I agree wholeheartedly that it’s the case, I am just not the one to predict any kind of a return to silver any time soon. I think it will take years, if not decades, for generations of Americans to comprehend what sound money is.

I think that the US has the capability, the political will, and the muscle to continue exporting inflation to the rest of the world. If the Fed creates another 10 trillion dollars, the inflationary effect would amount to about $1,500 for every person living on this planet. While this is a lot for those who continue to live on less than $2 a day, it’s pennies in the grand scheme of things.

The bottom line is, no one can really predict anything. Peter Schiff and Marc Faber have been right before, but they also have been screaming about hyperinflation for years. I am convinced that because of the unique situation the US finds itself today, almost no amount of money printing will cause an average person’s life to be disrupted a-la Argentina in the 1990′s. For as long as everyone needs the dollar, it will take a paradigm shift in collective thinking. It may take an unexpected, massive in scale event to change the status quo, something along the lines of a nuke going off, or a global war.

I continue to buy silver on the dips, but I am not ever saying that money creation automatically leads to immediate and serious inflation. I am from Ukraine, a country where people stacked dollars for several generations. I almost can’t imagine the cataclysm it would take to change their thinking. Not saying it will never happen. I’m saying no one can call it.

In my post from December 2009, I recommended loading up on silver and gold.  Silver was around $16 per ounce, gold was pushing $1,200.  The Dow Jones was around 10,000.  Now silver is over $30, gold is approaching $1,700, and the Dow is over 12,000.

Oh how I wish I bought more … silver doubled, gold added 50%, and the Dow posted a measly 20% increase.

Both then and now, people still turn on CNN Money and MSNBC and follow the ridiculous advice of the talking heads to buy equities, municipal bonds, and money market funds.  They don’t realize that we’re in a phase of the cycle, during which commodities is king.  This doesn’t mean they will never be overvalued.  It just means that they have not been overvalued in the 2000′s, and they are certainly not overvalued now.

Here’s the good news — people still view precious metals and to some degree equities investing as a lunatic survivalist-hoarder fringe game.  People still don’t hold anything real in their retirement accounts.  People still have no idea how and why to buy physical gold and silver.  This means that there’s still time to jump in and get your hands on some Eagles, Maple Leaves, or, if you are lucky, Koalas, and Kookaburras.

I just placed an order for a couple of rolls of Canadian Mint Maple Leaves because that’s literally the only thing that’s available.  Everyone is out of the Eagles, and I don’t like private mint rounds.  While I can’t predict the future, I know I’ve been right every time I recommended to buy on a dip, so I am sticking to my guns and continuing to invest in precious metals.

How will I know when to sell?  When precious metals investing becomes common knowledge.  When Edward Jones offers IRA silver bullion inside their retirement accounts.  When MSNBC talking heads tell everyone to buy gold and silver.

So I have to be honest … I have no credit cards. I don’t even have an emergency one. My wife and I made a firm decision several years ago to close all of our cards, take our licks on the credit reports, and just move on paying cash for everything. Well, paying with our debit card for everything.

Recently, though, I needed to quickly get a card to move some money from an old student loan that somehow started to accumulate interest. I guess it’s the beauty of not staying on top of the paperwork, or having spam filters enabled, or whatever the hell happened. They just decided to jack up my rate after “contacting me several times”, and I have no time to fight them.

So first I checked out Jon on My Money Blog. He frequently posts about great credit card and balance transfer deals. Then I went to Compare The Market in order to compare credit cards and credit card offers they have available.

Compare The Market allows you to do some pretty nifty comparisons of pretty much anything … from 0% balance transfer offers to home insurance.  The site is clean, fast, and laid out well.  Give them a click!