My brother bought a monster-box of silver coins a few months back. That hasn't been a very good investment so far. However, his intent is not to sell the coins but to one day use them as currency. His reasoning is simple and clear. We're moving towards a cashless society. Digital currencies are being pushed by central banks, with the stated objective to make all transactions known to the currency issuers; namely the central banks.
The official aim of digital currencies is to stamp out the parallel economy. However, there are several other benefits for the authorities. Interest rates can be made negative, and every transaction can be taxed. Money can be confiscated, or eroded over time.
Digital currencies hold the promise of total control. They are the Holy Grail of central banking. But reality is not on the side of the control freaks. There's a way around the control net, and that's what my brother aims to take advantage of.
Silver and gold can be used as money. This will come in especially handy in the parallel economy where cash is now used to settle transactions. Without cash, silver and gold becomes obvious alternatives. Coins can be used instead of bank notes.
My brother expect the demand for gold and silver to go up as a direct consequence of central bank interference. The more they push for a cashless society, the more demand there will be for gold and silver coins.
Silver will do particularly well because it's of more use in small transactions. Gold will be used to buy big things like real-estate and cars. Silver will be the preferred currency by handymen, local shops and farmers. Everyday transactions will be done in silver.
Looking into historic values for silver, we see the enormous potential in this metal. In Roman times, before they debased their currency, one Denarius corresponded to a day's wage for a skilled laborer. With six Denarius making up one ounce of silver, my brother's stash of one ounce coins will be worth a small fortune if this valuation ever returns.
The day that an ounce of silver buys six days of labor is far off, if it is to return at all. However, the potential is there. Early Roman society had a free market economy. The value of silver was established through free exchange. Hence, it's not impossible that a free market will eventually revert to that valuation. Once silver becomes accepted as currency in the parallel economy, the price of silver will climb towards this historic value.
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| American Silver Eagle |
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