The Silver Economy
In a previous commentary I looked at how our economies would function in a world where our paper, fiat currencies had collapsed. Given the unrepayable debts racked-up by most Western economies, and the out-of-control money-printing by our central banks (sanctioned by our governments), this is not merely a plausible scenario, but as many would argue it is a highly likely outcome.
I explained how by merely applying existing laws on “legal tender” currencies and taxation that we should be able to hold gold and silver money to protect ourselves from the collapse in wealth which accompanies the collapse of banker-paper, and be able to spend that money without any adverse taxation consequences. Specifically, there should be no “capital gains” tax on any transactions where we are spending our gold and silver money – irrespective of how much they have appreciated versus the bankers' worthless paper.
I titled that piece “The Gold Economy”, in deference to the superior status which gold enjoys (today) as “money”. However, shortly after that I was enlightened by some historical materials submitted to me by readers. I quickly revised my position on silver versus gold as “money”, and now firmly believe that it is silver rather than gold which is the key, monetary currency – at least on the individual level. Certainly when it comes to “backing” an entire economy, gold's superiority remains obvious.
In a subsequent commentary, I looked at how an economy would function hypothetically if it fully “monetized” silver as the official currency in circulation. I pointed out an obvious fact which has been completely forgotten by the modern charlatans who call themselves economists: that a “strong” (and appreciating) currency is the hallmark of both a stable and prosperous economy. I illustrated the fraudulent trade arguments used by these academic dolts which they have used to trigger a “race to the bottom”: seeing which governments could devalue their (paper) currencies the fastest.
I explained how an economy with “sound money” (in the form of silver currency) would quickly rise above the banker-dominated cesspool of fiat, paper currencies. I referred to the (previous) real-life example of the U.S. economy to provide evidence of how a “high wage” economy with a very strong currency would be more prosperous than competing economies with their paper currencies, rather than less so. However, as my “hypothetical” model for such an economy I used Mexico as my example – saluting the ongoing movement in Mexico today to partially re-monetize silver.
Many silver investors are now quite familiar with the Mexican silver-sage, Hugo Salinas Price. His one-man “crusade” to have silver coins recirculated in the Mexican economy as a “parallel” (but official) currency in Mexico is elegant in its simplicity.
The genius of his proposal was to keep the unit of currency constant (a 1-oz coin), while allowing the nominal quote which assigns these coins their value to float in conjunction with the prevailing “spot” price of silver – subject to some minor, but technical constraints. He also stressed the importance of allowing the government Treasury which mints these coins to incorporate a fair-but-significant seigniorage (or “premium”) on the nominal quote it issued on the coins, in order for it to maintain a reasonable profit-margin on this operation for taxpayers and to ensure there was never a monetary incentive to melt-down the coins for their silver.
