Wednesday, February 6, 2019

Excellent Discussion on Silver

The topic of gold and silver often leads to somewhat emotional reactions from those who follow it. The debate often seems to focus on whether or gold and silver are "money" or whether they should be "money" once again. 

These days I feel like that discussion is a bit off base because neither gold or silver are currently used like money for daily medium of exchange and the US removed silver from the monetary system completely in 1965 (except for the last 40% silver based Kennedy half dollars produced until 1970).

There is no indication at all that there is any official movement towards going back to using gold and silver in the official monetary system like they were in the past. Of course anyone can speculate what might happen if the present monetary system were to fail (which we watch for here), but no one can really know what might emerge in that situation. 

Given the above, when I do find an excellent discussion on precious metals (in this case silver) that I think readers might benefit from, I am happy to post it here. There is a lot of good discussion on silver in this recent debate/discussion and for those who are younger there is some worthwhile history presented during the discussion. Below is the interview and then a few added comments.


My added comments: This discussion was interesting for me because I watch the precious metals space as part of the overall monitoring for possible monetary system change. Without question, precious metals (especially gold) can act as a kind of alternative currency whenever confidence in the stability of the present system wanes. And both gold and silver have a long history of being used as money. 

In this digital era, the current younger generation coming up is not familiar with history or the concept of precious metals as money to any significant degree. It is obvious that the rise of cryptocurrencies has been, at least in part, due to an effort to convince a generation raised on cell phones that this "new concept of money" is the wave of the future. 

However, as we have noted here, that is still very much an open question. My take on this is that we have an older (baby boomer) population that still values precious metals and can remember when they functioned in daily use as money alongside younger generations that are more inclined to think of cryptocurrencies as some kind of "new technology money" and don't have much interest in precious metals.

Within this dynamic, we are now seeing efforts to try and marry the two eras by making historic forms of money (gold and silver) function more like digital money. Obviously, the goal is to try and attract users from both eras of time. In addition, I suspect the hope is that younger users will be attracted by the technology aspect and in the process learn something about the history of precious metals as forms of money.

We are kind of in the middle of all this transition and it is hard to tell what will emerge in the future. This is why we try to monitor what official institutions are doing (central banks, IMF, etc) as well as private ventures trying to create viable alternative monetary systems. Here we are talking about ventures like Goldmoney, OneGold, Glint, and the more comprehensive Kinesis alternative monetary system proposal set to launch in May 2019.

Here are the variables I can think of to follow in the months and years ahead:

1- Will the present monetary system remain stable and change gradually?

2- Will a massive new crisis collapse the present monetary system opening the door for more rapid and radical change?

3- Under #1 above, what alternatives to the official monetary system are most likely to gain some market share traction over time?

4- Under #2 above, who will the public blame for any crisis that collapses the present system?

5 - Based on the response of the public in #4 above, what is most likely to replace the present system? 

a) a new global monetary system using a new global reserve currency (perhaps the SDR) administered by the IMF?

b) national or regional monetary systems run either by existing reformed central banks or new similar entities?

c) a private initiative alternative monetary system that capitalizes successfully on the collapse of the present system?

d) Other? You can go all the way down to some kind of barter system here if things got really bad (think of some kind of disaster that wiped out the electric grid like an EMP etc)

Having followed this in much detail now for a decade and having gotten excellent input from some leading experts in the world on this whole topic, I still cannot predict the future and don't even try. 

What I can report is that at the present time the evidence suggests that the present system will change gradually over time unless some kind of major new crisis forces things to change more rapidly. 

In that event, who the public blames for the crisis is likely to determine what the new system looks like and who is trusted to administer it. In a complex system (such as Jim Rickards suggests we have), I don't believe anyone can know what the outcome would be under crisis conditions leading to a new monetary system. We will just follow it and see what actually happens. For now, the pace of change is slow even as all kinds of new technology is being market tested. 

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