Butler's Mistake
Lorenzo Montana
December 21, 2006This is to express my profound disappointment with something that was said by one of my heroes, Mr. Ted Butler, in his most recent interview with James Cook and to refute it. I realize that, in an interview, one does not have much time to gather one’s thoughts before answering a question. It is much easier to express one’s thoughts exactly and precisely in writing.
I have a high regard and respect for this honest man as a value investor, both for his encyclopedic knowledge of silver and for his generous contribution in helping all of us silver investors to understand silver’s fundamentals. However, the mistake I found in the interview is serious and must be dealt with because it is philosophical. It is the fundamental issue in Economics and it is also a moral issue.
This interview was posted on Dec 19 at http://www.silverbearcafe.com/private/home.htmlprivate/miracles.html
I have underlined the parts I shall refer to and bold typed the entire text.
(Quote) Cook: What about the monetary value of gold and silver?
Butler: If monetary value means a valuable asset worthy of investment consideration, then I agree. If you mean silver being used as money, it’s a pipe dream. In the modern world money is not the highest and best use. This issue was settled 40 years ago when the U.S. stopped using silver in coinage because there wasn’t enough around to hold the price below the melt value.
Cook: The U.S. recently put a ban on exporting and melting U.S. copper and nickel coins because the base metal content is now worth more than the face value of the coins. Any thoughts on this?
Butler: I think it highlights the overall demand and scarcity of natural resources, and how we must continue to put these resources to their best and highest possible use. That doesn’t include them being used as money.
Cook: What do you mean? They are used as money.
Butler: Yes, but that is obviously changing. The price of base metals has skyrocketed, due to strong industrial demand. It now costs too much to continue using them in coinage. We need the properties of copper and silver for electrical conduction, and nickel for stainless steel and zinc for rust proofing more than we need them in coinage. It’s no big conspiracy that the materials previously used for coinage will change. In the meantime, the government is trying to discourage these coins from being melted for their metal content value while they gear up for making new coins out of different materials. It’s a simple and logical reaction on their part for a world running tight on natural resources. The world must better utilize all its resources.(End of quote)
I have many objections here to what was said.
Firstly, to the statement ‘Money is not the highest and best use (of silver)’, I would reply that that is something for the marketplace, and not for government, to decide. Only the marketplace, free from any hindrance by government, can decide what the highest and best use is for anything, including silver. The Keynesians and the Monetarists support governmental interference in the marketplace, and that has led to all the problems we have today, all beginning with inflation. What we need is a free, bimetallic gold and silver standard with real bills, not central bank funny money manipulation for the benefit of the moneyed elite and politicians. And, Mr. Butler, can you tell me what higher use there can be for silver than to serve human life? To serve as a store of value and protect one’s life savings? Do governments do that?
Secondly, as much as I admire Mr. Butler for the reasons cited above, I strongly disagree with his apparent assumption that it is natural, normal, and morally justifiable for government to issue any kind of material to be used as money. It is not. According to the morally and economically correct Constitution of the U.S.A., the role of government is not to decide what is money, but simply to set standards for weights and measures and to mint for the people. Anyone who values freedom from government in all aspects except in the protection of individual rights would defend this. (emphasis added by editor...JSB)
Thirdly, I am sure Mr. Butler would agree, it is up to the marketplace to decide what are the highest and best use of copper, zinc, lead, aluminum, and other base metals. Silver and gold are not exceptions, are they? Does Mr. Butler believe that taking silver away from the people in 1964 to give away at bargain basement prices to the Silver Users Association was a good thing? I don’t think so! And then again, isn’t your money, your money? Or does your money also belong to the government? We know what government thinks...it’s theirs! Now, they forbid one from melting down pennies and nickels! They can put us in jail for 10 years for doing what we want with our money...sorry, I forgot... their money!
Conclusion: So, who decides what is to be used as money? The government or the free marketplace? I think we all need a lot more philosophy and a lot less government. Was Mr. Butler purposely looking for a reaction? I did not get to all the possible points I had to make, but I would appreciate comments or replies.
Lorenzo
Author Lorenzo Montana was a philosophy major in his youth at a Jesuit college (Aristotelian); has been an Ayn Rand objectivist and a student of Austrian School Economics since 1974; has taught Business and Economics and was a university administrator for many years. He is, in his own words, as angry as the Mogambo Guru about injustice caused by the insane politics wreaking havoc throughout the world. Peace, he believes, can come only from the justice of the capitalist social system: with free enterprise and free markets, limited government, real money and full recognition of and respect for all the sacred rights of the individual. 'Politicians and governments need to be shackled, not the people', he says.