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(Some Unconventional Thoughts On Balance Of Trade) A nonchalant comment Id posted to a thread on Facebook (1) reflecting on a Zerohedge article (2) relating to bullion bank, Scotia Mocattas curious accounting for their silver holdings, sparked a small brush-fire of e-mails among a few folks. Particularly, it was my characterization of silver as having the analogical position of a fulcrum, providing a natural balance to the rational valuations of gold and copper and the further societal effect that this function imparts. Consequently, I received a note to request that I write this article, expanding further on these interconnections. As I havent the luxury of time to write extensively (let alone exhaustively, which I will not embark on here), I was initially hesitant to commit to the assignment, but because I nevertheless believe it important that folks can benefit greatly by affording the subject of money a deeper insight than they generally expend, I hunkered down to give the task my best shot.
Note the crossed K-like symbol on the Saxon, Greek and Chinese coins!
Digging Down
What then, accounts for this standard? Why have these three metals united into such an inviolate triumvirate throughout the monetary chronicle of civilizations? We might begin with reflection on psychology. We can easily observe that people crave untrammeled liberty for themselves, to as great an extent as is possible and still co-exist with others. Those with ambition to control commerce, incidentally desire to curtail the liberty of their fellows while retaining most of their own. This is the first clue as to why no one of the metals was ever allowed to dominate the other prior to the 19th century. The triumvirate impartially guarantees the liberties
of the ambitious and humble without favor. It broadens their trade horizons globally, from prince to pauper, encompassing everyone in every society. To illustrate the practicality of this phenomenon, we can see that when the Chinese economy disintegrated under their paper flying money fiasco by the mid-1400s, while they resolved to replace the stamps with silver (emulating the Indians) on the Zhu-Tael weight scheme (the same concept as Grain-Ounce), their oldest circulating cash was copper, which served to bridge their reconstruction in the interim, just as the first overseas traders began to arrive offering abundant silver (3) more for their silk and crockery. The weight of copper cash determined the ratio against silver, which in turn, variously induced their real-time estimation of gold. That process at times rendered an exchange of 1:8 gold-silver, to the delight of lucky Portuguese ships captains, undoubtedly. Though it took 300 years to fully rebalance their economy to perch upon silver, had the Chinese completely abandoned their copper cash for the flying money; as with Rome, our knowledge of China may likely only come from history books. It was humble copper that saved China from devolving back to its autonomous provincial roots. Remarkably, the same coinage of the 1500s onward, continued in regional trade on Tael-weight until the advent of World War Two!
The effect is especially poignant in combination with population growth demand factor, when we consider that Roman high officials received salaries of approximately 4,676 silver dollars per year in undiminished dinarii (6), and Congressmen in 1855 received salaries of 3,000 silver dollars (7). Further, in Egypts 18th dynasty (8), as in 1855, copper exchanged with silver on a
100:1 ratio. On todays exchange, copper by Troy-weight, still hovers within that same ratio (128:1)!
(10)
The current calculations for 2011 are down to 3 cents of purchasing power. Using the same 3,000 of 1855 Congressional salary, we find that in constant Purchase Power, their silver dollar now has an equivalent banknote exchange value of 90 (as the banknote reaches cent PP, the ratio will then be 200:1 banknotes to silver dollar)! When the American banknote becomes truly worthless, silver will replace all other valuators. As it was when China faced this very same conundrum in the 1450s, we will do well to mimic their response; hardening our banknotes in copper with the intention of again straddling the balance-beam of silver that Americas founders had the genius to bequeath us in reflection on the Chinese example, so fresh an illustration in their own history. Remember, the Continental was originally a copper piece intended to be valued in turn against silver.
Throughout the notes below, we see all along that copper, silver and gold stood as humanitys money (except in the modern era). We can also determine that silver distinguishes itself as the fulcrum on which balance the resulting valuations of copper and gold, each imbuing the various economic levels of society a share of financial independence and opportunity. In the depths of economic despair, an occasion that was pivotal in monetary history, the Chinese recognized this maxim and while stalwart copper saved their civilization, yet they accommodated to reality and reorganized on silvers scales, even to the extent of an abnormally high silver cost against their gold. In the end, it is the three columns together, however, that most firmly hold the capital block of Honest Commerce aloft. -By Pat Fields, Saturday, June 11, 2011 Notes: 1) http://www.facebook.com/ken.shock/posts/149431788462015 2) http://www.zerohedge.com/article/scotia-mocatta-loses-60-its-physical-silver-onemonth-reclassification- total-comex-registere 3) http://www.highbeam.com/doc/1G1-91271525.html 4) http://www.lehigh.edu/~inarcmet/papers/pense%201992.pdf 5) Chart: http://www.businessinsider.com/chart-of-the-day-silver-content-in-roman-coins2011-5 6) See Note (4) 7) http://socyberty.com/history/jeffersons-debt/ 8) http://www.reshafim.org.il/ad/egypt/trades/metals.htm 9) http://www.thecapitol.net/FAQ/payandperqs.htm 10) http://www.aier.org/research/briefs/1826-the-long-goodbye-the-declining-purchasingpower-of-the-dollar