Wednesday, May 2, 2018

Silver was Bitcoin long before the virtual currency was invented

The idea of money and legal tender has evolved a great deal over the course of time.  From the use of sea shells (cowry shells) as a medium of exchange in both China and India, to the rise of gold and silver becoming money going back to the empires of antiquity.  And for thousands of years physical commodities were the primary store of wealth before the advent of fiat currencies.

And ironically silver has been used historically as money far more often than gold has, since gold was primarily used for decoration and jewelry.  In fact we have written here at The Daily Economist about how silver was the basis for nearly every currency we have in the world today, and the U.S. still has on its books a law signifying the dollar as being a specific weight of fine silver as its value.

But as the era of central banks and fiat currencies took over the system of commodity based money, its own evolution appears to now be driving towards a completely electronic and digital platform.  And on the margins have come the rise of cryptocurrencies such as Bitcoin, Ethereum, and Litecoin.

Two of the biggest selling points of cryptocurrencies like Bitcoin is their 'limited supply' feature, as well as their ability to be divisible.  But when you take a look at a commodity that was once used for millennia as money, it too had the same features as cryptos, and in essence was Bitcoin long before Bitcoin was created.

Right now it is estimated that there are between 3 and 3.5 billion ounces of silver available in bullion or monetary form.  And if you were to take just the population of the U.S. as an example (325.7 million people), and divide the total amount of above ground monetary silver (bars and coins) between them, it would come out to 107 ounces per person.

Total Silver Mined 3000BC-2005AD:
     49 Billion ounces or 1537000 Tonnes 
Irretrievably lost 3000BC-2005AD:
     25 Billion ounces or 789000 Tonnes 
Silver above ground end of 2005AD:
     24 Billion ounces or 748000 Tonnes 
Silver above ground 2005 is:
    2005 Industrial recoverable at high enough price.
        4 Billion ounces or 124000 Tonnes
2005 Silver in coins and medallions 
1.2 Billion Ounces or 81000 Tonnes   
    2005 Silver in bars and rounds
        1.4 Billion Ounces or 43500 Tonnes
    2005 Silver in jewelry and silverware
        17 Billion Ounces or 499500 Tonnes
Now if you expanded that to the entire population of the planet earth (7.3 billion), that would change the equation to each person having only two ounces of silver apiece.

So the supply of silver right now is extremely similar to that of Bitcoin in that it provides enough for every man, woman, and child on the planet, and has proven to be divisible throughout history.

Unlike cryptocurrencies, which rely upon individuals having a computerized device and a working internet to use them, silver is both recognized and accepted by nearly everyone around the world as being a viable store of value.

So in the end one must raise the question... why try to remake the wheel (cryptocurrencies) when we already have a form of money that worked fine for thousands of years, and can do virtually all the things needed for commerce and wealth protection that a token such as Bitcoin can?


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