All Along The Silver Demonetization Watchtower

The particularly ruthless destruction of wealth that disproportionately have an effect on the poor and elderly is a process that slowly, then all at once, destroys the middle class - which has its roots in the debasement of money.

This is as pervasive today as it was in the days of coin clipping.

Monetary debasement is an ongoing and fluid process, although Greshem's law allows for some filtering. Yet monetization of monetary metals is alive and well.

Of all the barriers to entry a physical silver investor must face, perhaps none is more egregious as those that have evolved in the United Kingdom silver market.

Manipulation and suppression continues, obviously, in the West but much more subtly and pervasive in the UK, where investors would naturally choose to invest in silver for myriad reasons. Many of these reasons point to ridiculously low prices and facing a massive psychological barrier in the form of the Value Added Tax (VAT).

While the coming end to the 117 year-old London Price Fixing is about to be formally relegated to the news recycling, the irony is not lost on UK investors who want exposure to physical silver. 

The UK Silver Triple Witching

UK silver investors must fork over an extra 20% on top of the total retail (with premium) value when buying physical silver.

This is after income tax. And before capital gains.

The fact that this doesn't apply to Gold Sovereign coins that come with no VAT (and no capital gains taxes) adds further insult to injury.

It might as well be made illegal to invest in silver in the UK.

Of course, there are various ways around this, but these are more obstacles for an investment that begins far outside of the mainstream collective.

The psychological effect results in the rationalization that silver must be very cheap.

And there is an even more egregious side to this. It conjures the real absurdity with the U.S. Student Loan debacle - they are non-dischargeable. The precious metals VAT are a European-wide phenomenon and legally cannot be reversed within the UK system. What's worse is that while other EU members suffer the same VAT, the amount is unevenly distributed. For example, Germans pay more than 75% less in their version of the VAT.

If silver was re-monetized and freed from the shackles of VAT, the ups and downs of a mostly DEBT based BANKING system would surely have FAR LESS influence on the economic situations of the people.

A full comprehension of the silver market, from just in time industrial delivery, real physical demand (including the surge in jewelry to the decades), and severe underpricing might provoke the question: What's 20% in a market undervalued by many 100’s of percentages?

Perhaps that is easy for current investors to swallow, but not so much for the investor who wants exposure to silver or to enable the ordinary people of Europe to once again own real and physical liquid asset.

Silver has been a scarce and severely under-priced commodity for decades. Stifling investment demand would certainly benefit the big silver users’ cartel.

Again, there are ways around it, but the thought and effort required can be an additional premium for a culture used to investing with the click of a mouse.

Could we see a similar tax structure imposed in the U.S., in addition to the capital gains and dealer 1099 reporting requirements on non-legal tender coins and bullion?

Any official tax policy now in the context of the current unprecedented world financial situation would simply ignite awareness and interest.

Witness the rise of smuggling in India as draconian import measures were imposed. Or the surge in firearms purchases in the wake of gun control discussion.

Demand cannot be destroyed by manipulating the price covertly.

An overt attack would merely fuel the fire.

The VAT boils down to one other way of going about demonetization. It reflects the shortage that was developing more than 40 years ago, the same one that U.S. President Johnson spoke of in his speech to officially demonetize silver from currency circulation on July 23rd, 1965:

“Now, all of you know these changes are necessary for a very simple reason--silver is a scarce material. Our uses of silver are growing as our population and our economy grows. The hard fact is that silver consumption is now more than double new silver production each year. So, in the face of this worldwide shortage of silver, and our rapidly growing need for coins, the only really prudent course was to reduce our dependence upon silver for making our coins."

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