When Money Fails, Look To Silver

Usually when I describe technology, it concerns mechanical and electronic things.

For example, I spend a lot of time describing rigs and drilling operations. I write about rocks and mining and downstream processing and refinery systems and the like.

But in this article, we’re going to discuss a different form of technology. In particular I want to introduce you to a not-so-new form of technology that can protect and grow your wealth!

Technology — the Secret Sauce of Resource Investments

When I provide investment insight, I don’t just say “here’s an oil play” or “here’s a mining play.” That is, I don’t start by arguing the conclusion. My style is to lay out facts, and then follow those facts to wherever they go.

Typically, I introduce a resource idea by discussing the basic element or compound (oil, copper, gold, etc.). Then I describe a particular company’s approach to exploiting the element — the geological asset, the management, the technology that makes it all work.

Let’s look at an example from the energy sector. Longtime readers know how much I respect oil service players. These companies offer a wide array of products and services for exploration, drilling, well completion, recovery, oil field maintenance and much more. (They’re also what sparked America’s energy renaissance.)

But what makes oil service companies so good is their long-term commitment to developing better oil field technology. These companies are defined by superb technology and a culture of excellence in applying it in the oil patch.

The oil service sector devotes serious funds to research and development, and it shows in the number of patents they file. They constantly field new products and services. They deliver results that customers can measure in terms of increased oil and gas output.

Overall, the secret sauce of energy development is technology.

Technology and Systems

The energy patch truly illustrates the classic Greek definition of technology — tekhne, meaning arts or crafts, and logia, meaning to study.

But of course, the term “technology” applies to more than just the energy patch. Tech is everywhere in human activity. The broad idea of technology covers how people make and use tools, crafts, techniques, machines and human ingenuity to solve problems.

Technology helps people perform tasks and achieve their goals. When you add one kind of technology to another, you get into systems. Then there are systems of systems — from drilling ships to space shuttles and much more.

Money Is Technology!

I could go on with the general philosophy behind technology and systems, but at this point, and as I hinted at the top of the article, I want to discuss a different form of technology. In particular I want to talk about money. Money, although most people don’t view it as such, is technology.

Think about it. Money is not a “natural” thing.

Money is a human abstraction. Money is an idea that’s harnessed to certain standards. For example, archaeologists tell us that primitive societies used colored stones, seashells or pieces of bone as money.

Then for much of human history (including now, depending where you are), mankind used gold, silver and copper as money. In the 13th century, Kublai Khan introduced what some consider the first paper currency (the “chao”) throughout China — an idea that Marco Polo brought back to Europe.

The point is that across the ages, money is a construct — an invented tool — whether it’s seashells, gold, paper currency or even digital ones and zeros on a mobile device app.

Another way of viewing it is that money is an agreed-upon standard. Money is like time zones, where it’s the same time to the east, west, north and south. Money is like a standard units of measurement, where a pound of steel weighs the same as a pound of feathers. Or money is like the width of railway gauge, so that rail cars from one railroad can run on the tracks of another railroad.

Thus, money is, at root, technology as much as any other basic machine like the wedge, lever or wheel. And along with other basic machines, the idea of money has evolved over many thousands of years of human history.

Today, Kublai Khan’s Chinese “chao” have evolved into modern U.S. Federal Reserve notes, as well as the multitude of other world currencies, from pounds to euros to yuan and much more.

When Money Breaks Down…

Now, I’d like you to consider what happens when a system of money — a system of technology — doesn’t work, or just breaks down. It brings to mind an old expression from the Soviet Union, that “They pretend to pay us, and we pretend to work.”

In other words, the Soviet Union was a society with a centrally planned command economy. The system of account, exchange and value was geared for the good of the state, but not much geared for the overall good of the people.

Over time, the currency — the Soviet ruble — ceased being much good for anything. Indeed, the ruble was a dodgy unit of account, a poor medium of exchange and a problematic store of value. Basically, there was little to buy in the Soviet command economy, and the Soviet people behaved accordingly. Their “money” (such as it was) shaped their attitudes.

The Soviets may have had good technology when it came to things like building tanks, rockets and nuclear bombs. But the Soviet economy failed to deliver for the good of the people. Eventually, the Soviet ruble was an economic technology that failed — along with the national construct known as the Soviet Union.

The Best Time-Tested Technology: Precious Metals…Silver

Looking ahead, I’m concerned with the trajectory of U.S. governance and the future of the economy. But I don’t anticipate that the U.S. federal system will somehow collapse, like what happened with the Soviet Union — although I’m willing to have that talk at another time and place.

Still, for the life of me, I cannot envision how the U.S. will avoid more inflation. Federal spending is out of control, and the economy is struggling to gain traction.

I don’t see how U.S. “monetary technology” — the dollar — can hold its value over the long haul. Next to moving out of the country to Singapore (like Jim Rogers, for instance), my fallback position is to keep building a precious metal portfolio based on physical metal and investing in well-run miners.

Along with gold, every portfolio should have exposure to silver.

Indeed, if you don’t own physical silver — coins, small ingots, bars, etc. — then get some! Buy metal and take delivery. I’ve been saying that for a number of years, since silver was selling at $10 per ounce. Don’t dwell over the near-term ups and downs. Silver is your safety fund for if (or when) the wheels come off the economic bus.

The recent silver selloff is due to turn around — silver is currently selling in the range of $27 per ounce. That’s far above the historical lows of $5-10 per ounce from the early 1980s, 1990s and early 2000s. But it’s also far down from the high over $45 last year.

Silver has a long, steadfast history as money, going back to ancient times. Yet it’s also a substance with a promising future, thanks to its critical role as an industrial-technological metal. Aside from the traditional uses as money, silver has innumerable uses in electronics, medicine and other metallurgical applications.

In the past several years, silver prices have moved due to demand driven by investors. Silver appeals, along with gold, as a safe (at least, safer) haven as an investment in times of economic uncertainty. Like now.

Money is technology. Many modern currencies are a failing technology. It’s time to get back to basics, and that means silver.

That’s all for now. Thanks for reading.

Byron King
for The Daily Resource Hunter

When Money Fails, Look To Silver was originally featured in The Daily Resource Hunter. Check out the newest Daily Resource Hunter research video “The Price of Gas Explained”.

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