Silver has been used as money for over 4,000 years, from ancient civilizations like Mesopotamia and Rome to the U.S. bimetallic standard until the 19th century. Until 1958, our dollar bills were redeemable in silver, and our loose change was made of 90% silver. One of the main reasons for this is because silver is a store of wealth.
A store of wealth is an asset that maintains or increases its purchasing power over time, protecting against inflation, economic instability, and currency devaluation. When the dollar was tied to silver, up until the mid-20th century, its supply was constrained by precious-metal backing. From that point forward, the dollar was no longer backed by silver and began to inflate and lose purchasing power over time.
Our current dollars are losing purchasing power because they are not backed by silver and instead rely on government trust rather than intrinsic value. Essentially, the government was once restrained in its ability to spend by the amount of silver and gold it held in reserve and by its ability to borrow. Today, the U.S. carries close to $40 trillion in debt, a figure that continues to grow as the dollar functions as fiat currency rather than traditional money.
Silver’s global supply is limited by mining output (about 27,000 metric tons annually), making it scarce and resistant to debasement. In contrast, the Federal Reserve can create new dollars at will, which can lead to inflation. For example, the U.S. money supply (M2) grew by more than 25% in 2020 alone, diluting the value of existing dollars.
Silver has often appreciated relative to the dollar during inflationary periods, helping preserve purchasing power. From 1971 to 1980, for instance, silver prices rose from $1.39 to over $50 per ounce amid high inflation, while the dollar lost roughly half of its purchasing power. Dollars erode in value through inflation, which is essentially a hidden tax.
Silver also has significant industrial uses, including electronics, solar panels, and medical applications, ensuring demand beyond its monetary role. Dollars, by contrast, are paper or digital entries with no inherent utility and are vulnerable to extreme inflation, as seen in cases such as Zimbabwe in 2008 or Argentina in recent decades, where currencies collapsed while precious metals retained value.
The bottom line: if you want to preserve the purchasing power of your savings, it is important to consider all options, including silver. There are risks associated with any investment, so do your due diligence.
See you next week.
For informational purposes only. This column does not constitute investment advice. Special support provided by First National Bullion.
