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How to Hedge Against the U.S. Dollar with Silver

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Do you ever wonder if the U.S. dollar will soon inflate so high that it becomes basically worthless; leaving all of your hard work in the dust with nothing to show for your life’s work of efforts? With the DJIA soaring above $16,000 and the nations debt flying out of control, I am sensing that it will soon become a reality. The only question is, when is soon? To be honest, nobody knows. Even the experts can’t say for certain when you should start getting rid of your paper dollars and hoarding water and food in your basement.

I am by no means a doom and gloom, create a bunker and settle in for a complete world meltdown kind of guy, but I do foresee financial difficulties coming in the future for the United States of America, and the world financial difficulties will soon follow. The question I ask myself is, “Am I ready if the dollar starts to become worthless at an alarming rate?” At this very moment, my answer is no. But, I am quickly learning how to hedge my net worth and investments with more tangible goods.

The History of the U.S. Currency

Before I get too deep into the theory of the valuation of silver, I want to first make sure that everyone understands why investing in silver might be a good idea. Back when civilization first began, there really wasn’t a go-to currency that everyone used. Instead, people bartered and traded one good for another. Since this didn’t always work so cleanly (after all, getting paid in chickens all the time might get a little old… I can only handle so many chickens! ;)), the country based their currency on precious metals – mainly gold and silver. You could take your silver into a bank, and they would provide greenbacks in the amount of the silver that you handed over to the bank. This was obviously much easier to carry around than heavy gold and silver.

This method worked great. The banks held onto the gold silver and handed out the paper currencies to the citizens for their use. Today, the banking system doesn’t quite work that way. For the past 5 or 6 years, the U.S. has been printing money at an alarming rate and has no gold or silver to back up their printing increase. This decreases the value of each dollar that we hold, which is why we experience more and more inflation each year, which of course purchases less and less over the years.

What Good Does Silver Do?

So this leads us to our next question, “What good does silver do?” If I have $10,000 worth of silver and my neighbor has $10,000 in cash, who will be better off in 10 years? Based on history, the one who holds onto the silver will win, due to the forever increase in inflation in the U.S. dollar. Plus, if the U.S. government is continually devalued as a reputable debt re-payer, the dollar will only continue to inflate, making it more an more worthless each day. By owning silver (which is a finite commodity (unlike paper money), you are creating a hedge against that inflation.

When Is the Right Time to Buy Silver?

The next question people often ask is, “When is the right time to buy silver? Should I buy silver now even though the price seems high?” At this current moment, silver is quite far from it’s all time high (which is a good thing), but also remember that you aren’t buying this silver to try and beat the market and receive outlandish returns. No, it’s simply a hedge against the inflating dollar and should only be a small portion of your overall investments. Therefore, since it is used as a hedge, the “right time to buy” is truly not a concern. If we end up in another recession, your silver will be far more valuable in the future than it is today, so don’t you worry.

Where Should You Buy Silver?

As I have become more and more interested in silver, this is where I was getting hung up. I was told a while ago that one of the best (and cheapest) ways to get my hands on silver was through junk coins. In other words, coins that were minted prior to 1965 when they were made out of 90% silver. Get your hands on a bunch of these coins and there’s your silver. But, where can you get these coins from?

1) Pawn shop – The absolute best place to find silver without paying more than what it is truly worth is at your local pawn shop. There are no shipping costs for them to get it to you since you are in their store, and their markup is often very tiny. If you want to buy silver, this is the first place you should look.

2) Reputable Silver Website – I have searched many sites while writing this article, but since I have not made a purchase, I will not make a recommendation here. Just remember that you are paying a premium on this silver since (1) the company needs to make a profit, and (2) they are going to charge you to ship it. Also, be aware that the currency market shows the price of silver in troy ounces (which is not the same identical to actual ounces).

3) eBay – This is very similar to finding a reputable website, and is often slightly cheaper. But, there is more inherent risk because you are often dealing with another individual rather than a company that has to worry about their reputation. Plus, there is more time involved if you are constantly watching the bidding of the silver.

I hope you have learned something from this post. I know I have learned a ton while writing it! Just don’t over-complicate things when you decide to make a purchase. Find the value of one troy ounce of silver, find a converter site to know the price of actual ounces and then head to your local pawn shop and let them do the rest.

Do you think you will purchase silver in the future?

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AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

8 Comments

  1. We focus more on gold, it’s got a bigger value on the same weight. Since you’ll need to actually store it somewhere, it makes sense to get something more valuable. Anyway .. the inflation in my opinion is more of a ‘when’ than an ‘if’, so we should be prepared.

    • I was initially attracted to silver because you can simply buy old coins in order to invest. Super simple!

      • We buy coins. They’re not silver 😉

        But .. anyway .. silver has also started looking better each year and it’s clearly a good investment at the end of the day.

        • Silver is definitely looking good. The hard part will be finding those that want to sell it! But, there’s always somebody out there. 🙂

  2. It’s great to be prepared for anything. I am big into buying silver and gold coins. It’s half hobby and half a hedge against inflation. I like to buy coins in bulk because you can get them cheaper than buying them individually.

    • I agree Levi. Buying in bulk is often much cheaper than buying solitary coins. Have you purchased any silver lately? I’m finding that it’s incredibly hard to find! I don’t see any on Craigslist and my local pawn shop has none!

    • Absolutely. Save some money and then go with a bigger ‘chunk’ to purchase. You can get some excellent deals and even 5-10 percent matter a lot.


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