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How will a declining U.S. Dollar affect the price of silver?

Jeff Berwick, Roger Wiegand, John Embry, Philip Klapwijk
January 6, 2006
Video Transcript

Mike Maroney: We're seeing exponential growth in debt, because once a government starts to spend the one thing that never happens is they don't stop. If they don't stop, what will eventually happen is the value of the paper that they print will become worthless.

Jeff Berwick: Yes, the U.S. government's collapse for the first time in 1933, that's when they devalued the dollar and confiscated gold. That was the first time the U.S. Government really went completely bankrupt. They then built their financial system up to a point. It's all based on debt, so the debt just continues to grow over time. In 1971, they again were basically bankrupt and the only thing they could think to do at that point was to take the gold backing away from the dollar, and that's what President Nixon did, August 15, 1971, and ever since that day, it's been a countdown to the death of the dollar. If anyone that ever looks into monetary theory or anything about monetary history, it's just obvious that this currency will not be around very long and ever since they took gold away from underneath the dollar the amount of debt of the U.S. government has skyrocketed. In 1980, it was .9 trillion, it's now over 15 trillion and that's just the admitted to debt. If you actually take the general accepted accounting principal debt it's over 75 trillion, which works out to almost $250,000 per person in the U.S. So a family of four has over a million dollars in federal government debt and liabilities above it at this point. It's completely unsustainable. It's in the process of collapsing, 2008 was the first wave of that.

Roger Wiegand, PhD: Stabilizing the dollar for the long pull is going to be very difficult. Many people have said over time the last say decade or so that eventually the U.S. dollar would vanish. I had some inclinations along that line early on, but I don't thing so now. I think, what we'll see in the U.S. dollar is we'll see a reduction to my forecast of half of where it is today, but further along the line the valuations of some of these bonds and other types of investments are going to drop catastrophically. Now what does that mean for precious metals? What it means is that those that are invested in the hard assets and have them in their possession are the ones that will be in the driver seat, so to speak, with quite astronomical values. I mentioned 156 on silver, it could easily be 500 or 1000, because nobody can measure the volatility or measure the size of these problems, because this has never happened in the world before.

Mike Maroney: This has all been an experiment for the last 38 plus years; this fiat currency experiment. The interesting thing about this experiment is nobody really knew what the inevitable outcome would be or nobody even knew if it would work, but I think people are starting to realize it's broken. Once it's broken, it's very difficult to fix. Based on the fact that we're trying to fix debt by trying to induce people to increase their debt, it really just doesn't make sense. One of these days, the system is just going to blow up and in that type of scenario, where will you go to protect yourself?

John Embry: The government is going to have to take on more and more debt to keep this game going. So I think deficits that appear to be high now are going materially higher, which again is good for precious metals.

Philip Klapwijk: I do feel that there has to be a sort of hangover after the party. We've seen a situation here where the United States has built up huge debt in its own currency. Where the U.S. dollar has weakened somewhat, but arguably hasn't really paid the full price for the profligacy that has taken place over the last few years. If that continues today, in terms of the size of the current account deficit, foreigners have been persuaded to essentially part with their wealth and return for U.S. I.O.U's, and I'm not at all convinced that can continue for very much longer. I think, what we're beginning to see, probably, that system of funding of U.S. over consumption, be it by government or the private sector, by consumers, ending. I think, we're perhaps now entering the final phase of the dollar's unchallenged primacy.

Mike Maroney: If we are going to have trillion dollar deficits as far as the eye could see, who's going to lend us the money? When you look at the world economy and you think that the world economy is basically somewhere in the neighborhood of $60 trillion or something in that general vicinity and you think that we have to borrow 2, 3 trillion dollars each and every year just to stay afloat with this year's problems. That's 5 to 10% of the world economy that we have to borrow on a yearly basis. The money is not out there, but the money is going to have to be created, and I think the government is making that perfectly clear. We're not going to continue to receive this type of money from the rest of the world. We're going to have to use quantitative easing. We're going to have to continue to print. It's just a matter of time before the rest of the world says, "enough is enough." The masses today seem confident that the problem is really going to be fixed here in the near term. They think the government has everything under control, because that's what that's what they're continuously being told on a regular basis, "Don't worry we'll print more money, we'll use a stimulus package, we'll find a way to fix this problem." Really all we're seeing today is an escalation of the problem that will make the inevitable outcome of where the value of hard assets are headed be at a much, much higher level.

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