Silver - A History as Money

Written By: The WealthCycles Staff

WealthCycles has long created content for the education of our readers in all affairs economic. Today is an exception.

Today, thanks to David Morgan from, we are treated to a guest post by Charles Savoie, who describes the sordid, real history of silver.


The guest post tells of opium;

"From the transport of this drug by a few vessels named opium clippers, a few mercantile houses are also realizing magnificent profits, while the Chinese themselves, the grand consumers of the drug, part with five or six millions pounds sterling per annum."

The transition of the world's leading power (to happen again?);

"Apart from wanting the world to be poor so as to be in control of the globe, the power crazed British wanted the silver back so as to have hard currency to pay troops in wartime, and Britain---not Germany---is easily history’s leading warmonger."

Mr. Savoie references the dirty facts surrounding one side of every transaction -- money.

His guest post corrects outstanding errors using significant sources; errors published by Antal Fekete, Ted Butler and others are highlighted for correction. We would add that mistakes occur and that we do not support ostracizing anyone with good intent, and Antal Fekete has done much more good than harm to broadening interest in learning and debating real economics. For this we are very thankful. At his website he describes just this:

The defining characteristic of the economics of Carl Menger is the realization that value does not exist outside of the consciousness of mankind. This implies that there is no such concept as inherent value – however value is defined – to anything tangible or intangible. Value is everywhere and at all moments in the eye of the beholder. This one principle gave birth to the science of marginal utility and what was later to become the Austrian school of economics.
All economic activity and thus entrepreneurial activity from selling yoghurt in supermarkets to global airline franchises represent an attempt to ‘capture a spread’ or perform ‘arbitrage.’ Arbitrage in its broadest sense is not the specific and narrow definition given in most financial texts. Arbitrage is the name for the process of minimizing entrepreneurial spreads. Crude oil five centuries ago was solely thought to be a poisonous mess. By the careful analysis of chemists and engineers centuries later it was deemed to possess value with regards to energy production and containment superior to the alternatives available at the time. A value and a need for oil were thus created from something that was thought to possess no value whatsoever not that long ago. An engineering company with foresight was the first to realize that a profit could be made ‘buying’ the process of oil extraction and ‘selling’ crude oil to capture a spread.
Other engineering companies also saw this profitable spread and successively – one by one – narrowed that profitable spread until the spread was deemed too small for the next engineering company considering this new venture of extracting crude oil... they went on to do something else. This is the process of marginal utility in action. The value that can be taken by the next participant in the process of oil extraction is determined by the operator at the margin.

Hugo Salinas Price, the Mexican billionaire who is busy harassing the Mexican congress to re-introduce the silver Libertad as legal tender, wrote of his view on Fekete. We highlight the most pertinent sections:

Antal’s thinking is dynamic, through his focus on arbitrage – each of us does arbitrage every time we perform an economic action; it is an omnipresent phenomenon. His other seminal focus is on the marginal actor in the determination of asked and bid prices, the discount rate, the floor and ceiling to interest rates, doing this arbitrage.

Antal opened my eyes to the truth about the much-disparaged Real Bills Doctrine of Adam Smith, which even von Mises rejected. This has further discomfited those who insist on idolizing von Mises. I knew von Mises personally and I have no doubt that he would have generously welcomed the refreshing ideas of Antal E. Fekete, a Hungarian by birth. Von Mises, a Viennese Austrian, was not a vain man; he was a kind man who would never have disparaged or rejected a thinker who was at least his equal.

His first essay published as a Monograph in the CMRE series, “Borrowing Short and Lending Long” was a masterpiece. It gave me my first impulse and inspiration to think of silver as the best possible money for popular use by the Mexican nation. Reading over this essay today, it is the best primer for understanding the financial fragility now reigning in the world, a condition that has yet to run its inevitable course.

We have even contacted Antal Fekete for an interview on how Real Bills can again finance business today. He did not reply. That said, we support sharing the intriguing facts, even when perceived as unpalatable. So thanks to David Morgan from and especially Charles Savoie, who is your author from here forward, enjoy:

CLICK HERE to be linked to the .PDF

After reading the quoted parts again, Fekete agrees Menger's marginal valuation is subjective.

To him, "arbitrage" is performed as we select between mentally rank-ordered preferences.

Rothbard reminds human happiness has no common denominator--no units--and thus can not be the basis of mathematical operations. Profit in human action, or "arbitrage," is not always able to be numerically valued by the person, and often contains an "emotional profit".

Granted, it appears Smith's Wealth of Nations was decades later than the gentleman here, whom surely preceeded Menger:

Beauty is no quality in things themselves: It exists merely in the mind which contemplates them; and each mind perceives a different beauty. One person may even perceive deformity, where another is sensible of beauty; and every individual ought to acquiesce in his own sentiment, without pretending to regulate those of others.

      – David Hume, “Of the Standard of Taste and Other Essays” (1748)

I freely admit that the remembrance of David Hume was the very thing that many years ago first interrupted my dogmatic slumber.

      – Immanuel Kant, “Prolegomena to Any Future Metaphysics” (1783)

Hello! I?m at work surfing around your blog from my new iphone 3gs! Just wanted to say I love reading through your blog and look forward to all your posts! Carry on the excellent work!

testiomials NY Times 1935: Banknotes issued by the government owned Central Bank of China become legal tender--debts payable in silver may be settled in the new legal tender and all holders of silver must surrender it to the Central Bank and accept notes in exchange at face value.”

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