It's almost a week after the U.S. elections, and the country is settling back to its normal routine. Fortunately, this year we didn't have to wait weeks to know the outcome. However you may feel about President Bush personally, his re-election means that nothing fundamental has changed. The President announced that his win indicates that a majority of Americans approve of his policies. In his victory speech, Bush promised to reform Social Security and the tax code, improve public schools, continue aid to Iraq and Afghanistan, and combat terrorism. There were no big surprises, as these are all issues he addressed in his first term. He didn't mention balancing the budget, which voters listed as a priority second only to improving security in Iraq.

Unfortunately, the President's policies are likely to put America further in debt. Bush's education initiative, the No Child Left Behind Act of 2001, is expected to cost $1.9 billion by 2008. This number is dwarfed by the cost of the wars in the Middle East. The President has asked for $215 billion to date to fight terrorism and rebuild Afghanistan and Iraq, and projects costs of $75 billion next year. Social Security and Medicare definitely need reform, as the system has $51 trillion in unfunded liabilities. Congress spends all the money collected through payroll deductions, so privatizing the system without offsetting spending cuts would leave a huge funding gap. Continuing the Bush Administration's tax cuts, while potentially spurring the economy, would widen the budget deficit further.

The U.S. economy is dependent on foreigners purchasing our debt. However, many overseas investors are not very confident in American policies. As Jim Sinclair says, the dollar is the "common stock of USA Inc." and its "shares" are being dumped by currency traders and central banks alike. Interest rates will have to increase to entice investors to buy American bonds, and mortgages will become too expensive for some middle class workers to afford. As the dollar loses value, imports such as oil will become more expensive, eroding consumer purchasing power. Even today, most people's wages aren't keeping up with inflation.

During times of high deficits and price inflation, silver outperforms other assets. Silver is up over 50% since November 2003. Despite this impressive increase, it's still very cheap by historical standards. Unlike the 1970s, today we have a silver supply deficit, with COMEX warehouse stocks dwindling again to 103 million ounces. Silver is a small, but vital component in electronics, weapons, and medical supplies, and demand is growing. Very few mines can operate at a profit at $7.50 silver, so the shortage will continue to worsen. If the price rose to $10 an ounce, it would take years for new mines to start producing, so there's no quick fix.

Did you ever wish you bought Microsoft stock in 1982? Well, this is your chance to buy before the investing herd wakes up to the silver fundamentals, and bids up the price.