The silver bullion market is more established and matured in the United States than it is in South Africa. One of the ways in which this state of affairs is apparent is availability of relevant contextual information on silver. For example, I can number dozens US and Canadian economists who’ve specialised in precious metals analysis and have made their research accessible to the lay investor. However, I cannot name more than a handful of South African economist who have taken the time to make relevant information accessible to the South African silver investor within or own context.

In light of this, I hope that the series of blogs to follow will make a small contribution to making relevant information available by providing a few of my own thoughts on one of the most important books published on silver in recent history, namely, The Silver Manifesto, by David Morgan and Christopher J Marchese. Of special interest to me is the co-author, David Morgan, who is one of the most respected precious metals analysts today. Since he has dedicated his entire life to the study of money, economics, and precious metals, no silver bullion investor can afford to ignore the wealth of data that he and Marchese make available through their publication.

Each fortnight I will summarise a chapter in the book, and provide some personal reflections on the content not only as a silver investor and dealer, but also, as a keen amateur student of monetary history.

Chapter 1: A Monetary History of Silver—3,400 B.C.–1792

While the first chapter aims to provide a brief monetary history spanning over 5000 years (an impossibility for a tiny chapter in a relatively short book if you ask me), the value of this first chapter is in the foundational concepts extracted from monetary history. That is, the authors consider a number of introductory concepts that will help the reader better grasp the more ‘advanced’ content of the chapters that follow. For example, what is the origin and nature of money, why is it necessary, who chooses what constitutes money, and what makes a chosen monetary system sound or unsound? While these questions are answered superficially (often in different sections) throughout the first section of the chapter, from the outset, authors are emphatic in defining money primarily as silver and gold, not paper or fiat currencies issued and controlled by central banks and governments. The paper ‘money’ in one’s wallet is not money per se; they are fiat currency notes with intrinsic value of a few cents. Moreover, the authors take issue with the modern monetary fiat system and central banking in general, explaining that it is in fact bank interventions (i.e. fractional reserve banking, artificial interest rate manipulation), are the cause of the cyclical boom / bust cycles in our modern economy. The necessity of a truly free market money, absent of government interference, is crucial for a sound and fair monetary system.

The concept of deflation is likewise addressed, taking issue with the unhealthy fear that market pundits and ‘expert’ economists on popular government censored channels have of deflation. Deflation, ironically, is common place in free market economies and is synonymous with the concept of liberty. In truth, it seems that governments are afraid of deflation because of their significant debt burden, which is easier to pay back in an inflationary environment. The higher the inflation, the cheaper the debt repayment is in real terms.

The rest of the chapter is dedicated to demonstrating that silver was utilised as money throughout most of recorded history; from as early as 5000 BC, through the Lydian system, the Medieval period (including the various Chinese dynasties and broader Asia), the Renaissance, and even the discovery of the Americas. I found this segment to be a fascinating read, especially as the authors successfully expose how each attempt at creating a paper money system (a derivative of real money) has ended in economic bankruptcy and disaster. The value or purchasing power of each paper currency throughout history eventually returned to almost zero (there is usually some value left in the paper itself, and the cost of the printing).

For the South African silver investor, there are three take away points in chapter 1. The first is the question of the silver price in the near future. While the authors predict that the silver price should be in triple digits within the next five years, they make an almost throw away comment that is infinitely more important to the South African silver investor than the current price. That is, investors should rather focus on the value of each ounce of silver, than the currency value (like the US dollar, or the South African rand). In other words, view each ounce of silver in terms that highlights its value relative to other commodities. A case in point the silver price in terms of the Zimbabwean dollar before and during the time of hyperinflation. The currency value of an ounce of silver was irrelevant, and could only be discovered in terms of other commodities. I am certain that during the peak of the Zimbabwean hyperinflation (peaking at an inflation rate of 98% per day or a monthly rate of 79.6 billion percent), no thinking person would accept Zimbabwean currency notes for even an ounce of silver. In this respect, silver, in Zimbabwean dollar terms, hit a rate that may as well be quantified as infinity to 1. Essentially, the point is this; learn to value your silver ounces in terms of other commodities and not in Rand terms or even Dollar terms. This will provide a more accurate measure of your wealth.

The second issue that stood out as relevant is, that sound money should be free of central bank manipulation and interference. Personally, since our own reserve bank is not going anywhere any time soon, it is up to each individual to create a system of wealth and saving that bypasses as much as possible these interventions and manipulations. This means becoming your own central banker for even a small portion of one’s portfolio (i.e. 5% – 10%) by owning precious metals (especially silver) and preserving your wealth.

Thirdly, it is a helpful starting point to understand that when discussing the silver spot price (in Dollars or Rands), it is never the price of silver that increase or decreases. Rather, it is the currency that is devaluing or increasing (though government manipulation and currency wars between nations) relative to silver and/or other commodities.

This book is available for digital download on Amazon.com