Feb

13

Silver, from Anatoly Veltman

February 13, 2025 |

I paused Asindu-posted link at time-stamp 1.33.30, to turn your attention to 150 years ago - when Silver first got demonetized:

The Money Masters - The Rise Of The Bankers

Below is where we are this decade, at the 90:1 Gold/Silver ounce/ounce price ratio (click to expand):

Silver has a special place in my conscience, since I lost my first million on April 28th, 1987 - having misjudged the magnitude potential of COMMODITY EXCHANGE floor shenanigans, which cost me that much in mere minutes (of failed calendar spread execution) between the Limit-up lock and the Limit-Down lock in the May contract. I then managed to recoup, and by the end of 1989 achieved my goal of heading a COMEX member firm. Memoirs aside: the above Bullish-projecting chart is nailing the fate of Silver - as one of industrial metals of today. Take the above as note of importance to listers in the commodities space.

Stefan Jovanovich gets into the history:

Silver was not demonetized in 1873. Coin continued to be minted in record volumes and used for the China trade. Grant ended the wonderful arbitrage that had made the Treasury everyone's bitch by limiting the amount of metal that the Mint had to accept for exchange. So, no more bringing silver and asking for gold when the market had taken silver lower than the ratio set by the Coinage Act and no more bringing gold and selling it to the Mint to buy China dollars when the ratio was the opposite. The ability of the Congress to issue money was voided by ending all presumption that Federal debt could be legal tender. Greenbacks had to be exchanged for coin whenever presented to the Treasury.

Those remained the rules until 1914 when the Treasury and the Federal Reserve agreed that European central bank IOUs dud not have to be cleared in coin or specie.

Peter Penha writes:

My favorite metal Silver (at these prices) and relative to Gold both for the Gold/Silver ratio long term and in Ag's natural occurring parts per million of ore in mining vs Au. Stefan’s comment about changing les règles du jeu is a reminder that it will happen again as it always does to try to hold things together.

The US Government is adding to our debt at $1 trillion every 90 days. Gold mined annually ~3000 tonnes (~1.9% of above ground reserves) * 31500 ounces * $3000 = $ 283 billion dollars worth - I trust that more than 1/2 of that gold that is mined cannot ever come to market as taken directly by the Chinese government & other central banks directly now to offset that very US treasury printing press. The silver market is 25000 tonnes a pittance in terms of nominal value of $24 billion at $30 an ounce - this is added to our national debt every 2 1/2 days.

I understand the debasement of our national currency is the upside drift in markets this list teaches as the key thing to take advantage of long term via the s&p 500 and equities, but things do sometimes get out of line on a relative value basis.

The world’s 3rd largest producer of Silver is Peru (after Mexico and China) and iI read somewhere as part of a let’s move off the USD for trading commodities, that Peru as part of the construction of the giant deep water port north of Lima built by China/COSCO (with it's potential dual military/commercial use) has agreed to send all its physical silver output to China for processing.

Stefan Jovanovich comments:

I am not qualified to assess the usefulness of The Money Masters documentary to traders. Its description of the 19th century assumes that there was a continuing debate after the Civil War over the rules for "moneyness" - the quality that gives a paper and coin its status as legal final payment - and how much the government would supply. No. On those questions Grant as President won an unconditional victory: the government would have no control over the supply other than the Bureau of Engraving being responsible for printing the notes for each United States Bank. (Grant lost that argument with Senator Sherman; he wanted each bank to have the ability to order its notes directly from the printer because he knew how the Treasury monopoly over printing would reply in a crisis.)

"Gold" would not be the only form of coined money, but the dealers would no longer have the opportunity to engage in serial arbitrage in foreign exchange. The limits on the amount of silver that the Mint would exchange were not a restriction on the domestic money supply (I look to Peter to confirm this based on the amounts of silver dollars that survive to this day). The Panic of 1893 can largely be explained by the market's fear that Congress signalling was about to return the U.S. to bimetallism for foreign exchange - at the very time when the British were ending direct currency exchanges between India (on the silver standard) and the United Kingdom whose banks cleared everything in sovereigns.


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