Keith Weiner, an economist, gold expert, and the CEO and founder of Monetary Metals discussed on the roles of silver and gold as stores of value in today's economy, the inefficiencies of the current financial system, and the potential future of a gold-based monetary system. This article delves into Weiner's insights, exploring the monetary characteristics of silver, the impact of macroeconomic policies like tariffs and interest rates, and practical considerations for investors seeking to preserve wealth through precious metals.
Silver’s Monetary Characteristics: The Stocks-to-Flows Ratio
Weiner began by addressing silver’s role in wealth preservation, emphasizing its high stocks-to-flows ratio. This metric, defined as the total above-ground inventories of silver divided by its annual production, indicates that silver retains significant monetary characteristics despite its industrial applications. Unlike typical commodities, where increased supply might depress prices, silver behaves more like money. People hold it for non-consumption purposes, suggesting a persistent demand to retain it rather than consume it.
In contrast to gold, which boasts an even higher stocks-to-flows ratio, silver’s ratio remains substantial, underscoring its monetary value. Weiner explained, “Money should behave that people just desire it… If people desire it, that means they’re not consuming it, they’re holding it.” This characteristic makes silver a compelling option for wealth preservation, particularly for investors with limited capital.
Practical Considerations for Stacking Physical Metals
For individuals earning wages—such as a skilled machinist or plumber taking home $1,000 weekly—allocating 10% ($100) to precious metals poses practical challenges. Weiner highlighted that $100 purchases over two ounces of silver, a tangible amount that feels substantial. Conversely, the same amount buys only about one gram of gold, a tiny wafer that is costly to produce and package, often resulting in wider bid-ask spreads.
“If you want to put $100 into metal, gold may not be the most efficient thing. You’ll see wider bid-offer spreads on these tiny little one gram or half gram products than you would see on, let’s say, a one ounce silver bar or silver round,” Weiner noted.
Thus, silver offers a more cost-effective and tangible option for smaller investors looking to stack physical metals efficiently. Weiner advised focusing on one-ounce silver bars or rounds to minimize transaction costs in an “unsustainable financial environment.”
Market Dynamics: Silver’s Rising Scarcity
Weiner pointed out a significant shift in the silver market. Historically, from 2011 to 2018, silver and gold price increases were often driven by speculative buying in the futures market, leading to temporary spikes followed by reversals. During this period, a rising gold basis—a measure of a commodity’s abundance to the market—indicated that price increases were not durable, as they were driven by futures trading rather than physical demand.
However, recent data suggests a change. As silver prices rise, Weiner observed a rising co-basis, indicating increasing scarcity. “The silver price is obviously rising up… and with that, we see a rising co-basis in silver, which means rising scarcity,” he explained. This scarcity suggests that the current price increase is more sustainable, potentially signaling further upside. In contrast, gold’s basis and co-basis remain flat despite price increases, making silver’s fundamentals particularly strong at present.
Macroeconomic Shocks: Tariffs and Interest Rates
Weiner identified two potential shocks to the precious metals market: tariffs and interest rate policies.
Tariffs and Market Disruptions
Tariffs, particularly in the U.S., have introduced uncertainty. Weiner noted that while the immediate impact of tariffs may have subsided, they damage trust and disrupt the basis trade (buying spot metal in one market, like London, and selling futures in another, like New York). Tariffs increase costs, making such trades uneconomical and potentially reducing market liquidity. This could lead traders to become more reluctant to make markets in precious metals, affecting price stability.
Interest Rates and Economic Implications
Weiner anticipates a return to zero interest rates, driven by economic necessity and political pressures, such as those from Stephen Mirren’s appointment to the Federal Reserve Board and President Trump’s advocacy for low rates. He argued that low interest rates are bullish for precious metals, as they reduce the opportunity cost of holding non-yielding assets like gold and silver.
However, Weiner cautioned that zero interest rates exacerbate economic distortions. Over the past four decades (1981–2022), falling interest rates lowered the cost of capital, enabling marginal projects—such as additional hamburger restaurants or property developments—that would not have been viable otherwise. This led to an overbuild of infrastructure reliant on cheap borrowing. Raising interest rates would force the liquidation of these projects, a scenario policymakers are unlikely to tolerate. Instead, Weiner predicts a continuation of low rates, fueling a “hell of a boom” in the short term but contributing to long-term economic fragility.
In his article, The Heat Death of the Economic Universe, Weiner describes this as a diminishing return on exponentially growing debt, where more borrowed dollars produce less economic output. This dynamic could drive demand for precious metals as investors seek refuge from an unsustainable financial system.
Reforming the Federal Reserve
Weiner expressed skepticism about central banking, advocating for a free market in money and credit. He criticized proposals for executive influence over the Federal Reserve, likening the Fed chair’s role to an “impossible central planner.” He argued that socializing credit decisions inherently politicizes them, making stability elusive. While a free market is ideal, Weiner acknowledged that if a central bank must exist, a governance structure that minimizes rapid policy shifts is preferable to direct executive control, which could exacerbate volatility.
Warning Signs of Systemic Collapse
Weiner warned that a simultaneous collapse of Social Security and the U.S. dollar is possible, but mitigation through a gold-based monetary system may be limited once collapse is imminent. He likened the situation to “Humpty Dumpty”—once broken, it cannot be easily fixed. Key warning signs include capital erosion, such as neglected infrastructure (e.g., rusting metal, rotting wood, or unsafe elevators), indicating that maintenance budgets cannot keep pace with capital investments.
The dollar’s value, measured against gold, has already declined significantly. Weiner noted that the dollar was recently worth 8.4 milligrams of gold, down from 16–18 milligrams not long ago. This erosion underscores the importance of holding physical metals to preserve wealth.
Tariffs vs. Free Market Principles
Weiner critiqued tariffs as disruptions to free market principles, which rely on the free movement of people, goods, and money across borders. Tariffs and restrictive policies stifle economic opportunity, increase costs, and reduce availability. For example, blocking iPhone imports could raise prices dramatically or make them unavailable, harming consumers without clear benefits. Similarly, restricting capital flows prevents viable projects from securing financing, stifling innovation and growth.
A sound money framework, such as one based on gold, would facilitate cross-border trade and investment by providing a stable, universally accepted medium of exchange. Weiner envisioned a future where gold serves as a settlement mechanism, with title transfers in neutral jurisdictions like Dubai replacing inefficient physical shipments.
Investor Questions: Market Signals and Commodities
Weiner addressed several audience questions, offering actionable insights:
1. Key Market Signal: Investors should monitor the silver basis and co-basis, available on Monetary Metals’ website. The current rising co-basis indicates increasing scarcity, a bullish signal for silver prices.
2. Top Commodities: Weiner is most bullish on gold and silver due to their monetary characteristics, not other commodities, which may face oversupply as interest rates fall and marginal projects are greenlit.
3. Silver Miners vs. Gold Miners: Silver miners may have more upside if silver’s price momentum continues, but mining investments carry significant risks (e.g., geological, metallurgical, and price risks), making them challenging for retail investors.
4. Future Monetary System: Within 10 years, Weiner predicts progress toward a gold-based system, particularly for international trade settlement. Neutral jurisdictions like Dubai could facilitate title transfers, and Monetary Metals aims to offer returns on gold holdings, restarting its use as a productive asset.
Conclusion
Keith Weiner’s insights highlight the enduring value of silver and gold as stores of wealth in an unstable financial environment. Silver’s high stocks-to-flows ratio and cost-effectiveness make it an attractive option for smaller investors, while its rising scarcity suggests potential for sustained price increases. Macroeconomic factors, such as tariffs and zero interest rates, underscore the need for precious metals as a hedge against systemic risks. Weiner’s vision of a gold-based monetary system offers a path toward stability, with practical steps for investors to engage through platforms like Monetary Metals. As economic uncertainties persist, silver and gold remain critical tools for preserving wealth and navigating the complexities of the modern economy.
For more information, visit monetary-metals.com or follow Keith Weiner on X at @realKeithWeiner.
Disclaimer: This article is not a recommendation to buy or sell any shares, products, or services. Always conduct your own due diligence and consult with a financial advisor.
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