Gold News

Money: Getting Back to Basics with Gold and Silver

Is the Dollar destined to become another failed monetary technology...?

ALTHOUGH most people don't look at it this way, money is a technology, writes Byron King for Bill Bonner's Daily Reckoning.

Think about it. Money is not a "natural" thing. Money is a human abstraction. Money is an idea that's harnessed to certain standards. For example, archaeologists tell us that primitive societies used colored stones, seashells or pieces of bone as money.

Then for much of human history (including now, depending where you are), mankind used gold, silver and copper as money. In the 13th century, Kublai Khan introduced what some consider the first paper currency (the "Chao") throughout China — an idea that Marco Polo brought back to Europe.

The point is that across the ages, money is a construct — an invented tool — whether it's seashells, gold, paper currency or even digital ones and zeros on a mobile device app.

Another way of viewing it is that money is an agreed-upon standard. Money is like time zones, where it's the same time to the east, west, north and south. Money is like a standard unit of measurement, where a pound of steel weighs the same as a pound of feathers. Or money is like the width of railway gauge, so that rail cars from one railroad can run on the tracks of another railroad.

Thus, money is, at root, technology as much as any other basic machine like the wedge, lever or wheel. And along with other basic machines, the idea of money has evolved over many thousands of years of human history.

Today, Kublai Khan's Chinese "Chao" have evolved into modern US Federal Reserve notes, as well as the multitude of other world currencies, from pounds to Euros to Yuan and much more.

Now, I'd like you to consider what happens when a system of money — a system of technology — doesn't work, or just breaks down. It brings to mind an old expression from the Soviet Union, that "They pretend to pay us, and we pretend to work."

In other words, the Soviet Union was a society with a centrally planned command economy. The system of account, exchange and value was geared for the good of the state, but not much geared for the overall good of the people.

Over time, the currency — the Soviet Ruble — ceased being much good for anything. Indeed, the Ruble was a dodgy unit of account, a poor medium of exchange and a problematic store of value. Basically, there was little to buy in the Soviet command economy, and the Soviet people behaved accordingly. Their "money" (such as it was) shaped their attitudes.

The Soviets may have had good technology when it came to things like building tanks, rockets and nuclear bombs. But the Soviet economy failed to deliver for the good of the people. Eventually, the Soviet Ruble was an economic technology that failed — along with the national construct known as the Soviet Union.

Looking ahead, I'm concerned with the trajectory of US governance and the future of the economy. But I don't anticipate that the US federal system will somehow collapse, like what happened with the Soviet Union — although I'm willing to have that talk at another time and place.

Still, for the life of me, I cannot envision how the US will avoid more inflation. Federal spending is out of control, and the economy is struggling to gain traction.

I don't see how US "monetary technology" — the Dollar — can hold its value over the long haul. Next to moving out of the country to Singapore (like Jim Rogers, for instance), my fallback position is to keep building a precious metal portfolio based on physical metal and investing in well-run miners.

Along with gold, every portfolio should have exposure to silver.

I've been saying that for a number of years, since silver was selling at $10 per ounce. Don't dwell over the near-term ups and downs. Silver is your safety fund for if (or when) the wheels come off the economic bus.

The recent silver selloff is due to turn around — silver is currently selling in the range of $27 per ounce. That's far above the historical lows of $5-10 per ounce from the early 1980s, 1990s and early 2000s. But it's also far down from the high over $45 last year.

Silver has a long, steadfast history as money, going back to ancient times. Yet it's also a substance with a promising future, thanks to its critical role as an industrial-technological metal. Aside from the traditional uses as money, silver has innumerable uses in electronics, medicine and other metallurgical applications.

In the past several years, Silver Prices have moved due to demand driven by investors. Silver appeals, along with gold, as a safe (at least, safer) haven as an investment in times of economic uncertainty. Like now.

Money is technology. Many modern currencies are a failing technology. It's time to get back to basics, and that means silver.

Buy Gold and Silver Bullion at the lowest possible price on BullionVault...

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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