Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In August 1963 a group of East German farmers pulled some 17th-century silver taler coins out of a potato field in the village of Glave. By the next harvest, historians had found several hundred more and come up with a fun thesis: the great Albrecht von Wallenstein, a Bohemian general in the Thirty Years’ War, had buried a cache of taler in a jar on his way out of town in the late 1620s. A trader today would say that the general had been long physical silver.
Over the weekend, someone on the Reddit forum /WallStreetBets began encouraging people to buy physical silver. The forum was not unanimous in its support for the trade. Some found it a distraction from other bets, just another day of silver obsessives pushing their favourite trade. But on Monday, the spot price for silver rose as much 12 per cent in London before retreating to end up 7 per cent. The price fell a further 4 per cent in trading on Tuesday.
Some traders might have been buying to squeeze those betting against the metal, forcing prices higher. But some on r/WallStreetBets were making the very long-term case: if you are holding real silver, then no matter what happens, you are still holding real money. Let’s call this the von Wallenstein trade: in a time of uncertainty, you put away a literal jar of silver.
The von Wallenstein silver long assumes that in a catastrophic financial collapse, it’s possible to find shelter at all. And it looks back to a time that never existed: a time of true strong metal money, with none of that inflated, unreliable credit money.
“This is it. This is our Financial Revolution,” wrote Marco de Yolo on r/WallStreetBets. “We will not need the dollar and we will leave them holding the bag.” The dollar collapse is coming, goes the argument, and anyone with bank deposits or investments in dollars is a sucker, holding a metaphorical bag full of nothing.
In the late 19th century, American farmers wanted to back the country’s money with silver because there was so much of it. They wanted monetary policy to be looser. But that’s not Marco de Yolo’s brand of populism. He wants a return to silver money precisely because there is so little of it. Silver, he wrote, is the “people’s currency”.
Textbooks teach a history of money that progressed neatly from one thing to another: barter to metal to credit. Accept this history and you may find yourself nostalgic for something that never existed: a time of metal, for example, when money was sound and reliable. Or a time before metal, when barter was restrained by social and moral obligations. But money has almost always been messy, mixed, and unfair.
Those coins the farmers found in a jar, for example: the taler system in northern Europe never rested exclusively on financial markets of pure, reliable silver. In the 16th century, investors in the trading town of Leipzig pulled silver taler from the Ore Mountains in Saxony and Bohemia, then pushed them out into global markets. But Uwe Schirmer, a financial historian at the University of Jena in Germany, has pointed out that the regular arrival of silver coins on market days also temporarily inflated credit markets, easing trade in cloth and other commodities. The silver generated more credit transactions and helped close them. But it never replaced them.
The Leipzig markets, like almost all markets, were great for merchants and princes connected to the silver trade. Money has almost always been a mixed system of a few commodities and a lot of credit, all of it unevenly distributed. Even in a silver system, physical silver was never the people’s currency. In 19th century America, farmers didn’t want silver coins. They wanted higher prices for their wheat. Silver was just a way to get it.
Wealthy and powerful people have a way of making markets unfair. When the US Federal Reserve pushes up financial asset prices in a crisis, this is of course better for people who hold financial assets. But there has never been an asset that destroys the plutocrats. If the dollar system collapses, there will be no new silver princes, just a long, brutal slog back to re-establishing markets for credit, and then more of the ancient fight to make them fairer.
So traders might buy silver if they want to speculate this week. But they should remember when they do that the von Wallenstein trade didn't even work for Albrecht von Wallenstein. He was assassinated in Bohemia before he could return to Glave and close out his bet. Catastrophic, uncertain times are just that: no one knows what’s going to happen. To fantasise about collapse because you’re the only one holding anything real is to imagine shelter where there is none.