A Certain Precious Metals’ Perspective

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Could there have ever been constructed four finer sentences strung together for the purpose of defining eight items related to money and social standing than the following?

"Gold is the money of kings. Silver is the money of gentlemen. Barter is the money of peasants. And debt is the money of slaves."

While they sound impressive, and while I understand the reason for their construct, I actually take umbrage with the linkage of debt to slavery because slavery is a man-induced condition whereby one man is responsible for the enslavement of another while debt is often (but not always) a choice made by the individual. If that were a paragraph to which I could be allowed to impart my name, I would say "And debt is the money of sloth", rather than "slave," where those that opt for debt over savings wind up with an unfavourable outcome, one connoted by the original sin of "sloth." Ergo, the alteration. . .

"Debt is the money of sloth; barter is the money of peasants; silver is the money of gentlemen; but GOLD is the money of kings."

Now that sounds one helluva lot better because it disassociates the unfortunate "slave" from the term "debt" as one may safely assume that the laborers that built the Great Pyramids of Egypt didn't owe anyone a dime while those mighty workers that built the American cotton dynasties had very little knowledge of the concept of "debt" while struggling to endure the Atlantic crossing in the hold of a Spanish or Dutch or Portuguese vessel.

It gets even more interesting. Take a look at the following picture of a "carriage" a solid gold, US$158 million vehicle that must be pulled by eight horses and which contains 128,000 ounces of gold.

Photo by Joey O'Rourke

We must therefore rewrite the quote one more time to include the rightful owner of this majestic vessel of epic history and grandeur.

"Debt is the money of sloth; barter is the money of peasants; silver is the money of gentlemen; but gold is the money of QUEENS."

England is, in fact, the only nation on the face of the earth whose citizens, after essentially removing all legislative power from the monarchy, allowed them to remain as an integral part of the heritage and social fabric of its people. Under this system, the British Empire was born and went on to be omnipotent in its scope and historical influence since the early 1300s. The Golden State Coach is a suitable emblem of just such an empire and is deserving of considerable mention.

Now, is "barter" truly the domain of "peasants"? In modern times, the resurgence of the art of "barter" is only noticeable in countries where regimes continually debase currency. In India, "barter" in the public food markets and bazaars is not only expected but also DEMANDED because to engage a vendor without the act of barter is actually an insult to the vendor, as in, one has SO much money that little value is given to the product being displayed. In Weimar Germany 1921-1923, "barter" was a necessity as the prices of milk and bread and meat and vegetables would change literally by the hour as the Reich mark used by the citizens was soundly rejected in favor of stores of value that actually fell into the category of "staples." People who haggle over price are not normally "peasants" but rather "price seekers" whose primary function is to collectively seek out the fair, market-determined "price" of a particular good or service. Finally, in terms of social standing, those that barter in the search for fair and honest pricing are typically of the working classes, not all of whom would be deemed "peasants."

"Debt is the money of sloth; barter is the money of "the working classes"; silver is the money of gentlemen; but gold is the money of queens."

Which leaves us to the topic of "silver" so beautifully described in the original quote: "Silver is the money of gentlemen." That word bears repeating: "gentlemen." In modern parlance, a gentleman is any man of "good, courteous conduct." Originally, a gentleman was a man of the lowest rank of the English gentry, standing below an esquire and above a yeoman, which meant that the bulk of commerce transacted throughout the empire was in silver, not gold, because the bulk of commerce could not afford gold's constrictive qualities but rather preferred silver's far-more-ductile applications. Hence, silver shall remain "the money of gentlemen."

Over time and throughout the annals of history, both gold and silver have been the currencies of choice for those citizens desirous of vessels within which one might shelter one's true wealth. However, since the advent of the modern fiat regimes and the abandonment of the Breton Woods agreement by Nixon in 1973, the investing populace gradually at first, then suddenly came to the recognition that sound money (gold and silver) had been subjugated by the U.S. dollar so foreign treasuries and central banks began to build large foreign reserves of dollars and abandoned gold. Despite that trend ending in and around 2003, through interventions and moral suasion, gold and silver prices were managed by the controllers so as to diffuse their historical roles as economic "coal mine canaries."

Since the arrival of the New Millennium, we have had the dot.com meltdown, the 9/11 attacks, the Great Financial Crisis (err-fraudulent bailout), and unprecedented credit creation and money-printing, yet gold has never been allowed to resume its rightful place on the throne of fiscal sanity. Many would point to the ascent from $250 per ounce in the late 1990s to $1,920 in August 2011 as the move that would constitute gold's "rightful place" but that is not exactly correct. From the graphic shown below, it makes no common sense whatsoever to believe that the U.S. is better equipped or more likely to repay its gargantuan debt load than China, Japan or Italy.

Why on earth would anyone place their faith in the currency of a nation whose banks blew up the financial system and then got rescued while millions of jobs went offshore with nary a soul going to jail?

Another graphic that depicts the Ponzi-like status of the U.S. dollar is the total public debt measured against the 8,133.5 metric tonnes of gold and the 25,000 metric tonnes of silver held by the U.S. Treasury.

The purpose of this exercise is to illustrate why the U.S. dollar has no right to wear the robe of the world's reserve currency. Britain lost its right to strut around waving the pound in everyone's face after a century of empire-building through naval superiority after the Germans bombed them into submission during WWII. Debts incurred defending their little island crippled their economy and torpedoed the pound leaving them a shadow of the nation that ruled the waves for a generation or two. Soon after the Allies emerged victorious, the mantle of reserve currency status was transferred to the mighty American dollar backed by an omnipotent military machine and a juggernaut of growth in the U.S. post-war expansion. However, the U.S. fell victim to hubris and mistaken patriotism and forgot all of the warnings imbedded by its Founding Fathers about faulty imperialism and the dangers of empire maintenance and in a series of steps that violated the spirit and intent of its Constitution, it abandoned the use of silver and gold designed to govern the frailties of the common man and instead set about to convince the planet that it was the only nation allowed to print its currency based upon the full faith and credit of its government.

During the mighty boom years of the post-war period 1945-1969, it was hard not to believe in America's Divine Right to world supremacy. The U.S. had the massive job-creating industrial powerhouse that allowed men to forge ahead as sole breadwinners in families where stay-at-home mothers raised their baby-boomer children. However, as has been proven throughout history whether Spartan or Roman or British Empires, declines from the throne of world domination occur quietly at first, where the duel dangers of denial and desperation combine to unseat the emperors. I believe that in the case of the U.S., it began in the late 1950s when General Eisenhower issued a warning during his farewell speech: "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."

In the next decade, assassinations of two Kennedys and Martin Luther King as well as civil strife and a totally ill-fated and ill-planned sojourn into Vietnam left the American Empire on the verge of disintegration, and it was only after the stagflation 1970s that a rebirth of sorts occurred with the arrival of Ronald Reagan. The problem with the last 40 years is that it was allowed to go completely out of control when Richard Nixon terminated the Bretton Woods Agreement and rendered the U.S. dollar a totally "fiat" currency. Gone forever was the convertibility of dollars to gold and with that, the American military-industrial complex had full authorization to spend whatever and wherever it wished. Had Bretton Woods not been abandoned, the safeguards envisioned by the Founding Fathers would not have allowed the fiscal profligacy that enabled the American war machine to terrorize the Middle East in the name of "stability." It still continues to this day with U.S. troops actively engaged in Afghanistan, Iraq, Syria, Yemen, Somalia, Libya and Niger.

This is the primary reason that I have always said that gold will be hard-pressed to see $1,900 again until the USS Nimitz pulls into Gibraltar for a re-fit and they refuse the credit card—which IS coming.

The Silver "Double-Tap" for 2019

The two charts above in combination with last week's silver COT allow me to establish a strategic "double-tap" in that we have technical evidence of a breakout in silver with the 200-dma moving average at $15.56 in the crosshairs while we have the gold-silver ratio (GTSR) above 85, an ideal entry point for silver relative to gold. Since gold has broken back above $1,250, it stands to reason that the GTSR should decline, which gives silver added torque going into year-end. I am going to assume that gold can print $1,300 in the next three weeks and as it advances, the GTSR, now at 85.23, declines to 80. That takes silver to $16.25 from tomorrow's $4.75 entry point, an advance of 10.16% for the trade. I have already written and tweeted my two purchases of the SLV April $13 calls for $1.00 and $0.92 and which now reside at $1.16. If SLV makes the same move, it will get to $15.12 putting the April calls at an intrinsic value of $2.12 representing a 120.8% return.

So, the breakout in gold above $1,250 is the first "tap" while the second is the GTSR north of 85; this "double-tap" signal is the impetus for the trade.

While gold may be the currency of kings and queens, silver was and is designed to be the currency of the masses, and whether or not these masses are comprised of gentlemen is irrelevant; when the dollars currently fleeing crypto, cannabis and finally the FANGS get reinvested between now and year-end, it is my belief that gold and silver will be recipients, with SILVER firmly in the Millennial crosshairs.

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Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Charts and image provided by the author.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.