Chapter 71 - Silver and Gold

Throughout the history of civilization, copper, silver and gold have been regularly used as money. It is the potential use of gold as money that gives gold its value. Silver has fallen in value as it is considered an unlikely candidate for use as money. Silver should be considered as a candidate for money as it will make an excellent alternative currency and will maintain value when there is a collapse of the bank credit system. Silver is less easy than gold for the affluent to hoard and manipulate which makes it an important candidate to protect the citizens in the event of a collapse of the bank credit system.

There are four items that I have identified, that enabled us to move out of our hunter-gather past to our very short period of civilisation:

We learnt the food would come to us rather than us going to the food.

We created a set of rules which were tied up with spirituality and the rule makers were called religious people.

We learnt that: if we tied one man to one woman, we harnessed the energy of the male for the benefit of society and the males stopped being a roaming problem for the females.

We invented tokens that overcame the inefficiency of barter.

None of the above came naturally to humans and we still struggle with these items five thousand years later. (I say five thousand for simplicity, but it might be eight thousand or more. However, it is a very short part of the existence of humans.)

We struggle with land ownership and degradation.

We struggle with rule systems that have migrated from religion to nation states. Religions tell us that we go to heaven if we behave and hell if we don't. With the troublesome invention of nation states, we have no positive encouragement, only the negative of having our fingers chopped off or thrown in a jail to be abused.

We struggle to keep families together as we encourage free thought and individual rights forgetting that the family unit was essential to the creation of civilisation. The breakdown of the family unit is the breakdown of civilisation.

We struggle with the use and abuse of money.

None of the above came naturally to mankind. We invented them and refined them as best we could. Societies that got the formula correct survived and continued and those that got the formula incorrect were bred out of existence and died out. This is a form of Darwinian selection on whole societies.

We are not like the ants and the bees. We do not naturally organize for civilisation. We have to make a conscious effort to organize and create practices, habits and procedures which we often call tradition, culture and morals and these practical sets of rules were handed down from generation to generation and backed up with guidebooks in the form of biblical texts called bibles. When one watches a young mother talking to a child, one can witness the process in action. The invention of nation states has allowed individual rights to breakdown the traditional practices and morals.

Society is held together by maintaining each of the items above. The various biblical texts were the guidebooks that carried the civilisation formula. They have been worked, out over centuries, as guide books to operate a civilisation. In my life time we did not enhance the guidebooks, we threw them out. As we stray away from these guide books, you can see society becoming unsustainable. Courts are used for gain rather than justice. Moral training comes from 'Sex in the City' and 'Two and a Half Men'. As we pick up New York morals, situations are manipulated for personal benefit rather than the benefit of those around us. 'No fault Divorce is a disaster for women and society as males quietly avoid marriage on these terms. Encouragement of promiscuity in our youth is making it difficult to create lasting relationships. The strong family unit is one of the building blocks on which humans created civilisation.

We are not like ants and bees with our duties embedded into our DNA. Our societies were created using brain power and inventiveness rather than Darwinian evolution. We were inventive, manipulative and devious to live as hunter-gatherers and we do not naturally conform to society's traditional procedures. Take a visit to the zoo and you will see some of our characteristics in the monkey cage. Listen to the orangutan keeper talk and you will learn more. In human society, traditions and methods that have been developed over millennia are passed from generation to generation, mostly by mothers teaching, become the heart of a society and to change them has the potential to destroy any society. Small-scale migration of humans helps the transfer of knowledge, but large-scale migration creates conflict and upset to the traditions and culture that held a society together through centuries. Land ownership procedures have been skewed toward those with money rather than those with force or need. Religion has lost traction with the invention of the nation-state and its laws. There is the new power of the media which has the ability to modify the thoughts of the young. I usually give 'Sex in the City', Two and a Half Men' and 'Friends' as examples of destructive influence. We willingly send our young to fight against any nation deemed to be 'the bad guys' by a media system that gets its reports from an invite-only rich-mans think-tank called the Council on Foreign Relations, that in the US that also funds and gives 'helpful' advice to politicians. Never forget that if you were to create an evil organisation, you would not call it 'Evil Organisation'. We struggle to keep man and woman in a family unit for the benefit of the young. The traditional ways of binding man and woman have been eroded. I word marriage support as: "Nothing must be done to break this union apart. Everything must be done to keep this union together". Our legal systems and media have every invented a remarkable array of methods to break this union apart and little to keep it together. And finally, we have put incredible effort in getting money to do other than what it was intended to do. Whole industries have arisen with the sole purpose of creating more money from money, whilst creating no real wealth or benefit for the society and doing immense damage to the industry and real economy.

This book deals with the money component. I will deal with the others in future books. The concept of money was never perfect from the start and we still have not got it to function effectively and sustainably. Although money entirely overcame the inefficiency of barter and was superior to the 'giving stage' of human civilisation, is has major flaws:

Unpayable debts can be created by a mechanism where more money is owed than exists.

It can be hoarded. Hoarding removes tokens from circulation and builds up a store of coins like the snow on a hill or the water in a dam. This is a potential avalanche as the Hoarded Money all comes out to play at the same time when confidence in the system falls. Hoarding should be limited.

Money systems need a degree of cooperation by agreement, tradition or force. The issuer needs both authority and force to maintain the system amongst humans. Humans are not like ants, and can rapidly become uncooperative.

The system can collapse, whence food supply and order breaks down and we instantly return to the hunter-gather 'rule of the jungle', Whence the other three items of civilisation breakdown.

The need to ensure that the system cannot collapse is a number one priority. Preparation for marshal law is insufficient.


The use and abuse of money is closely tied to the history of mankind. The study of history without studying the source of money for wars, church and monarchs, is a pointless historical study. Just as the study of economics has been tainted, so has the study of history. The battle to control the issue of money has been a constant influence on the history of human civilization. Our history books quietly avoid discussing who funded the wars and the overthrow of monarchs. They conveniently ignore the role of usury in the Roman Empire and how a collapse of bank-credit collapsed the Roman Empire and drove us into the Dark Ages. Almost all historical events have a money component that is ignored. Most prophets were also money reformers. Most news describing groups as bad-guys is about control of money or territory.

Silver and Gold

When silver and gold are used as money an almost permanent depression takes hold of a nation. The money supply fails to expand with the expansion of business and population. Multiplying the misery, the gold and silver gets hoarded so that less and less is available to the real trading economy. Yet again, the primary function of money as a facilitator of trade is compromised by its use as a store of value. The volume of money can only grow if the supply of these metals increases by mining or plunder. The supply of precious metal can never keep pace with the increase in population and the increase in trade. Even with mining giving a minor addition to the supply, the tendency to hoard and monopolise tends to dominate. When silver and gold are used in their physical metal form, it is called 'fully-backed' Commodity Money. It does not take long until someone kindly offers 'certificates' equal in value to the gold unit. Before long there are vast quantities of certificates for gold that does not exist. This 'unbacked' Commodity Money, created on a printing press, enables the creator to appropriate vast quantities of unearned wealth as they obtain possession of the real assets of the nation.

Do not forget that precious metals obtain most of their value because they have the potential to be used as money. If the metal became plentiful by a huge find or someone cast a spell on it decreeing that it was an agent of evil, we would use it for making fishing weights. Paper with pictures of dead presidents is just as valuable, provided it is not in oversupply. An advantage gold is that its supply cannot be increased as can paper. It is in effect fiat currency with the face of a dead president printed on gold rather than paper. Do not be deluded that gold has magical powers. Here is a nice quip from Richard Posner (2014):

When one day money becomes useless and I have food and water while you have gold, come to me then and offer your gold in exchange. Unless I am feeling irrationally benevolent, you will remain hungry and thirsty. [710]

This is a major problem with the use of precious metal as money. Its supply is limited and inflexible. Steady mining will cause a minor increase in the money supply whilst silver and gold rushes will cause devaluation and inflation of consumer prices. Gold rushes and large silver discoveries affect the economics and prosperity of citizens and nations. When Christopher Columbus discovered the New World and brought back its gold and silver to Spain, there was a massive increase in the money supply in Spain which actually did Spain no good in the long run. The large, but gradual, infusion of new money into the rest of Europe, however, made a big influence to the economics of Europe that is still affecting the planet today. Spain suffered, Europe gained. The gold discovery in California in 1848 made a big economic impact. The increase in the silver and gold supply created inflation due to a drop in the value of gold. However, an increase in the supply is not generally the problem. The more typical problem is a lack of increase. When we use precious metal denominated money (fully-backed Commodity Money), an almost permanent state of recession is more typical. The money supply does not increase. Although the textbooks try to relate the inflation to the increase in the money supply, scant regard is paid to the effect of hoarding. A major part of the problem with Commodity Money is the hoarding of the precious metals by those with greater purchasing power. Then, as now, hoarding of money causes large problems as it reduces the money available for wealth creating transactions. The generation of wealth by human effort is severely hampered when people save (hoard) money. Hoarding is a serious curse to the efficient operation of society. This is an area of economics that needs more attention. Money Supply and Velocity of Money are very rough ways to determine how money is enabling the transactions that sustain civilization.

One interesting aspect is that the hoarding of gold does not have the avalanche hyperinflation characteristic. When gold is hoarded, it tends not to be spent in a hurry like fiat money because it retains value. Hoarding of gold damages the economy in the same way but does not create an avalanche hyperinflation effect because, in times of stress, people want more of it rather than less. Unfortunately, the stockpiling severely damages the trade.

Commodity Money

Commodity Money is money that is made of a commodity that has intrinsic value. Intrinsic value means that the commodity has value even when not used as money. The value of Commodity Money is derived from the commodity from which it is made. Commodity Money has been used many times during the history of civilization. The precious metals, silver and gold are very commonly used but other items, such as copper, large stones, salt, shells, cigarettes, livestock and food items have been used.

Money only does its job well when it is moving, enabling transactions. A hoarding tax, in the form of a Demurrage Tax, will help where hoarding occurs. A typical Demurrage Tax would be a monthly 1% tax on all money holdings. Although this seems evil, it would reduce income tax by a significant amount, money would move faster and far more wealth creating transactions would occur. Some of the hoarding of metallic money is done for personal saving for a rainy day. This takes the money out of wealth creating circulation. A far worse situation occurs when the gold is hoarded specifically for the purposes of manipulation of the money. This is a common occurrence when gold is used as money. Similar happened at the time of Jesus when the temple authorities supported the silver shekel manipulation by the money-changers.

In reality, gold is not essential for the survival of the human race. We can live quite satisfactorily without it. It has a minimal commercial use. Historically its limited supply has enabled the affluent to plunder the wealth of the citizens. Like sheep, we believe it to be precious. Its value is so easily manipulated allowing the well off to appropriate the real wealth and assets of the people.

Manipulation of Gold

This is most likely to occur when the least abundant metal is given prominence. Gold deserves the reputation for being the most manipulable money system, when given the chance. Here is Thomas Edison writing on the subject of gold manipulation:

It is a terrible situation when the Government, to insure the National Wealth, must go in debt and submit to ruinous interest charges, at the hands of men, who control the fictitious value of gold. Interest is the invention of Satan.

And some words from Anthony Migchels:

Gold based currency without usury! There is no such thing. Gold based currency will always circulate in the form of Bank Credit. Only the Gold owned by individuals is debt-free, but once they spend it, it will quickly end up within the banking system lent out at interest.

And some words from a favourite pastor, Sheldon Emry:

Many who recognize the evil of usury (interest) still assume that money should be composed of valuable metal and redeemable by some such precious material as gold and silver. As we have seen, however, it is the stability of the Government and the correct volume of currency available which gives value to money, not some arbitrary amount of metal.

The control of the gold supply of the world, by the Bankers, has been used by them to fluctuate and to control the currencies of all the world's governments, not for the good of the People, but for the enrichment of the Bankers.

Yet, men are still deceived by the artificial price placed on gold and silver by the Bankers.

America did have an early experience with gold. A small quantity was found at Jamestown, shortly after the colony began, and Captain John Smith wrote later that the men neglected their work to search for gold, and the colony almost perished of famine the next winter. God seems to have blessed America with a LACK of gold, and its scarcity has had little effect on our production of food and real wealth. Christian teachings and God's blessings have provided American prosperity, not gold. Russia and India have large per capita supplies of gold, again providing nothing toward national prosperity.

We have similar in Western Australia. The mining boom has affected every corner of society. Labour power is directed toward the mining industry, pushing up labour prices along with food production costs and house prices. I believe that Western Australia has suffered from mining not gained.

Commodity Money systems are often needed after the collapse of a poorly managed and abused fiat money system. A silver system or a silver and gold system is far less prone to manipulation than a gold system. We had a silver and gold system for many years. This is commonly called Bimetallism. Bimetallism is more successful than Mono-Metalism. Mono-Metalism is usually gold backed Commodity Money.


Bimetallism is a money system where the value of the monetary unit is defined as being equal to a fixed amount of silver and/or gold and the ratio of silver to gold is also fixed. Key characteristics of the system include:

The government will mint both silver and gold for any individual into coins free of charge and in any quantity. This is usually called 'free coinage' even when a small fee is charged.

Both gold and silver money are Legal Tender in unlimited amounts.

Interestingly, the gold or the silver is not legal tender until it is minted into coins with the appropriate stamping. Gold and silver tend only to have steady value when used as Commodity Money. Much of the perceived value of gold or silver is due to the possibility that it might be used as money and its history as money.

When bimetallism is operating, problems occur when different countries have slightly different ratios between silver and gold. Gold tends to be the rich man's money and silver tends to be the poor man's money. Poor people often never get to touch gold coins. Typically the ratio between silver and gold was 16 to 1, meaning that 1 ounce of gold is deemed to be exactly equivalent to sixteen ounces of silver. The ratio between silver and gold at present is about 50 to 1.

Gold Silver Ratio 1260-2015

PeriodVariationChangePeriod in years
3200BC - 1860BC2.5 to 20.818.35060
1860AD to 2015AD12 to 10088.0155

Source: Foundation for the Study of Cycles, SLG - World Gold Charts

The ratio of silver to gold was remarkably stable during the periods where Bimetallism was operating. The market ratio remained stable during the massive gold discoveries of the 1850s. The mechanism called arbitrage encouraged the balance. If silver becomes more valuable than gold in the bullion market, then silver coins will get melted down and sold or exchanged for alternative money in gold. Thus, the ratio will become self-correcting. There is no reason why they should not be a multi-metallic standard bringing other metals such as platinum into the system. Those that gain from the hoarding of gold, argue strongly against Bimetallism with claims that Bimetallism is unstable. Be careful that the instability is not purposely created to win their argument.

Gold Silver Ratio 1792 to 2002.

In times of economic turmoil, such as severe economic depressions or hyperinflation, people first turn away from bank credit, converting their bank-credit into cash (government real money). Then they sometimes turn to Commodity Money instead of the money authorized by their governments. You may wish to consider this yourself. Whichever way you wish to argue, there is always some chance that the banking system will collapse. Even if you believe there is only one in a million chance that it will happen, you should consider investing in some small-denomination silver and gold coins, and a few other items to be used for barter. Silver one-ounce coins might be the best. These coins look pretty and are a joy to own. They might feed your family in the event of a currency collapse. Bicycles and canned food would also be wise. With the level of debt to money commonly exceeding 2:1, a collapse is not beyond the imagination. Some people think that even something minor, such as the failure of the electricity grid, could spark riots within three days. A banking collapse, or even a banking run, would deny you access your bank accounts. You would have to survive on whatever cash is left in your wallet. If your employer does not pay in cash, you could be destitute within a week. Your employer may not even be able to pay you, because your employer is not getting paid by clients. You will make me feel a little better, if you keep a little cash handy, rather than giving all your money to a bank. The cash may get you through the first stage of a collapse, and the silver coins and the cans of beans may get you through the next stage. After that, you have to pray.

Australia's Gold

For some strange reason, Australia's gold is stored in the vaults of the Bank of England. I was born in England, and my advice is: "Don't trust them. Bring it back to Australia.".

Gold Price

The Gold Standard

There are elements calling for a return to a gold standard. This would create an 'Unbacked Commodity Money' system. 'Unbacked Commodity Money' is often called Representative Money. The usual logic is that our Fiat Money system is failing. This is not a reason to move to another flawed system. The problem is not the lack of backing by precious metal but the dramatic way the money supply is increased by a banking system creating vast quantities of a substitute money. The banking system has created between twenty to thirty times as much bank-credit as there is government cash currency. This 'Credit' is not backed by anything. We could live with this privately created credit, if it was not for the vast quantities of magnifying debt it creates. The solution is not a gold backed Commodity Money, the solution involves repairing the damage done to the fiat money system by the issuance of unbacked bank-credit. This unbacked bank-credit is lent into circulation into asset inflating areas rather than into vital circulation. This 'repair' is commonly called 'Return to Sovereign Money'. The 'Positive Money' organisation runs the argument that: "All money should be issued by the government". All of these 'Sovereign Money', 'Positive Money' groups need your support.

Gold Mining

Another problem with the Gold Standard is that much human effort is used to dig gold to simply store it in vaults. This appears to be a waste of human effort as it does not lead to improved living conditions. It is an inefficient use of resources to mine gold and stick it in vaults. In a mining area, the digging of gold becomes more important than growing food. Food production declines. Many gold mines use nasty chemicals that poison the local land permanently.

Quotes about Gold
Vincent Kate and Michael Edward

In 1913 the US took a big step away from gold when it authorized the Federal Reserve to issue paper notes that were only 40% backed by gold while claiming they were fully convertible. This fell apart when people tried to exchange their paper money for gold in 1933. Instead of admitting the central bank was bankrupt, the government confiscated everyone's gold, made it illegal for them to hold gold, and devalued the paper to $35 per ounce of gold. At Bretton Woods the US agreed that central banks around the world could redeem $35 US for 1 ounce of gold. As countries tried to exchange their dollars for gold it became clear US did not even have enough gold to back the dollars returning from overseas. Instead of admitting the central bank was bankrupt, the US said it was 'closing the gold window'.

Richard Posner 2014

Can someone please give me a sane reason why anyone would pay over a thousand dollars for an ounce of shiny metal that has virtually no intrinsic value?

Simply put, at no time and in no way has gold ever been a vital necessity for human survival. It has nearly always served only one purpose; to enrich those who hoard it and manipulate its pretended "value" in order to take real wealth, unearned, from people who actually do productive work of benefit to society.

And yet today, members of modern, ultra-high-tech societies respond to gold like a horde of drooling, mindless, idol worshipping troglodytes at the yearly sacrifice of the virgins.

People have been indoctrinated for centuries and today still continue to perceive gold as some magically invaluable commodity. They do this without any substantiation or justification whatsoever. They simply "believe".

This enables individuals in the "financial industry", a non sequitur if there ever was one, to steal vast amounts of unearned wealth by manipulating the imaginary value of a basically worthless metal.

Gold is really not different from all the worthless paper and "financial instruments" that are used as chips in the Wall Street casino every day. They and gold alike are make-believe commodities and unlike crops, oil, iron, copper or other real commodities that are actually useful, are not resources vital to survival and have no intrinsic value. ...

Unless made subject to legal regulation, gold is useless as a stable medium of exchange. Gold has no value in and of itself and therefore, if used for that purpose, should be treated as what it is; fiat money.

Therefore, if it is to be used as money, its exchange value must be set by law and not subject to speculation and manipulation by the gamblers of the imaginary "financial industry". Only in this way could it become a stable and useable currency.

Since the value of any given commodity can and will fluctuate radically as a result of market manipulation, no currency backed by a commodity can ever be stable.

Since a commodity may be privately owned, its value can and will be manipulated by those in a position to acquire it at will. Consequently this will enable them to "corner the market". Therefore they will be able to manipulate the perceived value of the commodity, which will inevitably lead to such special interests gaining control of the economy, the monetary system and the government.

Using a commodity for money in a global economy of very large urbanized societies or nation states could in no way be successful. To the best of my knowledge, there is no valuable commodity that exists in sufficient quantity to be used as currency for the monetary system of even a single nation let alone the entire world.

Since the financiers never limit currency in circulation to the worth of the backing commodity, there could never be enough of said commodity available to cover all the currency in circulation at any given time. That means a fractional reserve system and that means trouble.

The only viable means of providing a stable economy for the sorts of societies we live in today is by the use of legal tender, real money. Let commodities be what they are and allow them to be bought and sold in a free and fair market. No commodity such as gold can ever be real money. [710]

National Geographic

Gold is not vital to human existence; it has, in fact, relatively few practical uses. Yet its chief virtues-its unusual density and malleability along with its imperishable shine-have made it one of the world's most coveted commodities, a transcendent symbol of beauty, wealth, and immortality. From pharaohs (who insisted on being buried in what they called the "flesh of the gods") to the forty-niners (whose mad rush for the mother lode built the American West) to the financiers (who, following Sir Isaac Newton's advice, made it the bedrock of the global economy): Nearly every society through the ages has invested gold with an almost mythological power.

Humankind's feverish attachment to gold shouldn't have survived the modern world. Few cultures still believe that gold can give eternal life, and every country in the world - the United States was last, in 1971 - has done away with the gold standard, which John Maynard Keynes famously derided as "a barbarous relic." [711]

Thomas Edison

It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one fattens the usurers and the other helps the people. If the currency issued by the Government was no good, then the bonds would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold.

Robert A. Mundell 1999

When the international monetary system was linked to gold, the latter managed the interdependence of the currency system, established an anchor for fixed exchange rates and stabilized inflation. When the gold standard broke down, these valuable functions were no longer performed and the world moved into a regime of permanent inflation. What will be the character of the international monetary system in the next century and how will gold intersect with it? This subject may strike modern audiences as a strange topic, but back in the 1960s, when people were deliberating about the future of the international monetary system, gold figured importantly in the discussions. Even today, the importance of gold in the international monetary system is reflected in the fact that it is today the only commodity held as reserve by the monetary authorities, and it constitutes the largest component after dollars in the total reserves of the international monetary system. [712]

Stephen Zarlenga

Aside from going counter to the true nature of money as an abstract legal power, there is a very practical matter that supporters of Gold money can't address: There is never enough supply of gold sufficient for such a money system. The Gold supply has not kept pace with the growth of population and commerce. This periodically increased the real value of gold.

Money systems usually solved this problem by cheating - pretending to be operating a gold based system but really mixing private bank paper into the money supply, pretending it was convertible; leveraging the amount of gold in the system through fractional reserves of one type or another. Because this bestowed great power and unearned wealth onto bankers, there has never been a shortage of apologists for such mixed systems - we call them 'economists!' [713]


The goldsmith bankers quickly succumbed to the temptation to issue "extra" notes, (unbacked by gold). Why? Because the "extra" notes enriched the bankers by allowing them to buy property with notes for gold that they did not own, gold that did not even exist. [714]

Mike Montagne, People for a Mathematically Perfected Economy

Alternate standards such as the gold standard have no power whatever to arrest multiplication of debt by interest. [715]

Stephen Zarlenga

So both Aristotle and Plato noted the paramount principle - that the nature of money is a fiat of the law, an invention or creation of mankind. This principle, part of a lost science of money, must now be relearned in the 3rd Millennium in order to achieve the monetary reforms needed to move back from the brink of nuclear disaster, to move away from a future dominated by fraud and ugliness, toward a world of justice and beauty. [713]

[710] Richard Posner 2014: The Gold Myth and Commodity Money: Ancient Scams of Historical Proportions


[712] Robert A. Mundell, Nobel Laureate for Economics, 1999

[713] Stephen Zarlenga, Director, The American Monetary Institute , "The Lost Science of Money"


[715] Mike Montagne, People for a Mathematically Perfected Economy