So far in this series, we’ve destroyed three myths.
- The myth of “going off the gold standard”.
- The myth that central bank digital currencies will enslave all of humanity forever
- The myth that some other currency will replace the dollar in the End Game.
Today we’ll take on another myth, a bit more cryptic and seemingly less relevant. In the end, we’ll see that it is indeed very relevant, and simple to understand once all the gibberish and jargon is cleared out. Today’s myth is that in 1873, silver was demonetized. It’s not true. Silver is money, right now. In fact, I would argue it is “the” money, an even better money than gold; much more liquid, practical, and useful.
That sounds crazy given how volatile silver is relative to gold but it’s true. Silver’s volatility is actually just an illusion. Silver is, in fact, the world’s most stable, liquid commodity, and that’s why it is the best money. Here’s why.
Back to 1873 and the Cross of Gold
I recall taking a summer course in philosophy in 2005. We were going over different logical fallacies in arguments, one of them being the appeal to emotion. In the appeal to emotion, instead of giving an actual argument, you just blather on in highly charged language to ignite the feelings of your audience without actually telling them anything. The classic example given in that course was William Jennings Bryan’s “Cross of Gold” speech, where he pretends to advocate for a bimetallic standard for the dollar based on both gold and silver, and against a gold standard.
The entire speech from beginning to end is a beautiful rhetorical flourish, dripping with a righteous sense of justice for silver as legal tender, but it is devoid of any actual argument. If, after reading the speech, you were to ask me why the dollar must also be defined as a weight of silver rather than exclusively as a weight of gold, I’d have no idea what to tell you. This is exactly why our professor had us read it. To learn what appeal to emotion is. (Looking back, I suspect Jennings Bryan may have done this on purpose in order to confuse the public about what money is. Call me conspiratorial I guess.)
We are in the same situation today. Gold standard…silver standard…bimetallic standard…it’s all so confounding and weird. What is anyone talking about? Why is silver even important at all? What is the point of this metal in a monetary sense now? Why does it seem so volatile compared to gold, at least in dollar terms? How can the dollar possibly be based on both metals and what does this have anything to do with economic justice?
Let’s answer those questions.
The Bimetallic Silver/Gold Dollar: 1792 – 1873
From 1792 until 1873, the dollar was on a bimetallic standard. Meaning, it was defined as both a weight of silver and a weight of gold simultaneously, at approximately a 15:1 ratio. This presented some problems, because the natural market ratio is never completely static. Supply and demand always fluctuate. That means if silver would fall in value relative to gold, Gresham’s Law would kick in and gold would disappear from circulation and vice versa. Be that as it may (we’ll solve this problem later in this article), if the ratio of 15:1 sounds familiar, it should. It is the peak ratio that markets have returned to three times in the last century. Once in 1919, once in 1968, and once in 1980. It could be called silver’s triple top relative to gold. See the 110-year silver chart below:
Gold / Silver Ratio since 1693
In 1873, the dollar was redefined as a weight of gold exclusively, and silver became “demonetized”, at least statutorily. That simply means dollars were no longer convertible back into silver at a fixed ratio by law. Silver became – or more accurately expressed itself – as a nonmonetary commodity, just merchandise. The effect was a collapse in the price of silver relative to gold. If everyone is now using an exclusively gold derivative as money, then almost all monetary demand for silver gets sucked up by gold. Gold’s purchasing power skyrockets, and silver’s plummets. This is exactly what happened. Here’s silver in dollar terms during that period.
Here’s the gold to silver ratio since 1873. As you can see, it got a lot more volatile after that point, at least seemingly so:
The big question is, if the dollar never returned to a silver standard by statute, meaning it was never again redefined by law as a weight of silver, then why did markets return to the old bimetallic ratio three separate times as if it did? As if the ghost of William Jennings Bryan haunted the Mariner Eccles Building and it was suddenly in charge of monetary policy?
Gravity Still Exists On An Airplane in Freefall
The answer is that trust in the gold standard was evaporating in those years. In 1919 because of the inflation of The Great War, in 1968 because of the inflation of the war in Vietnam, and in 1980 as a climactic aftereffect of the Nixon Shock of 1971. Each time trust in the dollar evaporated as a viable gold derivative, and the public stampeded right back into silver, reestablishing the old monetary ratio.
There was no plan to do this. There never is. It was never a conspiracy among the public to “bring back silver”. It is simply what happens naturally when trust in an exclusively gold derivative currency evaporates. The old ratio gets reinstated, proving that silver was never really demonetized. This is impossible. It’s like saying there is no gravity on an airplane in freefall. Of course there is. It’s just being masked by the diving plane because you’re both falling at the same speed.
If, in a dollar crisis, the old bimetallic ratio was reestablished – not once nor twice but three times, then silver must still be money. Its value is only masked by artificial demand for dollars, the proverbial crashing airplane. Take back control of the airplane, and gravity “returns”, even though it was always there.
But what does this have to do with economic justice? And why is silver still important at all? And what is the point of stacking silver today?
The Move to a Gold Standard – A Massive Wealth Transfer from Poor to Rich
Think about 1873. If you’re rich, you own a lot of gold. Your wealth is too great to store it exclusively in silver. But if you’re middle class or poor, you only have silver. There are a lot of middle class and poor, so collectively their purchasing power through the little silver that they have is still much greater than the few rich and their gold. But the few rich are politically connected. A great way for the few rich to steal from the many poor then, is to suck away purchasing power from silver and shove it into gold through politics. By ending a bimetallic standard and moving exclusively to gold currency. It’s nothing but another classic wealth transfer.
But what politics transfers unjustly, will eventually be transferred back. In truth, it already was, three times, for those who were wise and/or lucky enough to buy their wealth back with silver in 1919, 1968, and 1980.
The Crime of 1873
The current injustice of our monetary system can be traced not to 2008, not to 1971, not even to 1933 when Roosevelt stole everyone’s gold or even to 1913 when the Federal Reserve was established, but all the way back to 1873 when the collective purchasing power of America’s poor and middle class silver stackers was stolen with the stroke of a pen and handed to the politically connected rich.
The good news is that even the Crime of 1873 won’t last forever. Silver will return to its natural monetary ratio of around 15:1 with gold. It already has, three times. It will once more, and when it does, it will finally be time for the middle class and the poor to get their wealth back after 150 years of theft.
Trust in the dollar as a viable gold derivative will soon evaporate to nothing. When it does, you won’t be able to go into a store with dollars to buy food for the week. You won’t be able to with gold coins either. A car, a boat, a house, a business, sure. But if you want to buy food, you’ll need silver. And so will everyone else. In that way, silver will be fully remonetized not by statute, but by the market itself. The airplane, in other words, will get out of its tailspin, reestablish a normal flight pattern, and gravity will “return”, even though in reality it was always there.
So yes, in a purely free market where both metals gold and silver freely circulate, silver is much more stable and liquid than gold. However, it is much more convenient to trade money derivatives rather than money itself, because derivatives are much lighter and safer to use, be they paper or digital, provided they are honest derivatives. Unfortunately for humanity, eventually the derivative managers steal by inflating them over the money supply, and the cycle of theft by inflation inevitably starts anew.
To slow that process of theft down for the next cycle, we need maximum competition in currencies, in gold and silver derivatives. Ideally, instead of a gold standard or a silver standard or even a bimetallic standard, what is needed is free market money. Silver currencies and gold currencies that all circulate freely, with the market determining which ones succeed and which fail, as in any industry. Wouldn’t that mean that prices change all the time? Sure. They do anyway. All the time. But free market money would ensure that both metals remain liquid and that the gold to silver ratio only changes due to market forces rather than statutory manipulation that favors one metal over the other. The latter is what creates the illusion of volatility in silver, not the market.
Stack Gold for Post End Game Stability – Stack Silver for the End Game Itself
As for what to do in today’s world, I like to put it this way. I stack gold for after the End Game, and I stack silver for use during the End Game itself. True, in a world of perfectly free markets, silver is naturally more liquid and stable than gold. But we cannot rely on perfectly free markets to be reestablished after the dollar falls, and so gold will likely be more stable after the worst of the End Game passes. But, during the immediate aftermath of a dollar collapse, everyone will need to use silver directly for retail purchases, and that’s why it will return to the old 15:1 ratio, as it already did three times during the 20th century. Once it does, our job will be to acquire as much wealth back as we can while that ratio remains in play, reversing 150 of monetary injustice.
All in all, both metals will be critical to establishing a just post End Game world. It is critical the role each metal plays though in order to determine how much of each metal we would like to stack for our own personal situations.