Silver (Part Two)

Silver, a precious metal once considered on par with gold and among the best currencies in human society, has surprisingly become an invisible force driving the cyclical nature of history, a catalyst for the collapse of the Ming Dynasty at its end. One reason humans choose silver over gold is that precious metals used in physical form have limited divisibility (if divided too finely, they become unusable). If the total amount is limited, it cannot meet the demands of ever-growing economies. According to data from the World Gold Council and the U.S. Geological Survey (USGS), the total amount of gold mined to date is approximately 200,000 tons. Assuming the minimum usable value of a gold coin is 5 to 10 grams, all the gold mined would only amount to 20 billion to 40 billion coins. Assume the total global economic transaction volume (with annual GDP roughly representing the economic scale) is 100 trillion US dollars. If all transactions were conducted in gold coins and the velocity of money, V, was given (e.g., V = 10 per year), then according to the Fisher equation, the required total amount of money, M = GDP / V = ​​10 trillion US dollars. If the global limit for minting gold coins is 20 billion, then the value of one gold coin would need to reach $500. The price of a single coin is too high, making small transactions completely impossible. Digital gold, Bitcoin (BTC), does not have this problem. Currently, the smallest unit of BTC on the native blockchain is the satoshi (sat), and 1 BTC is 100 million satoshis. The total supply of BTC is 2100 trillion satoshis. Assuming full circulation, 1 satoshi is worth approximately 4.76 US cents. This is perfectly sufficient to support small transactions. If the economy continues to expand, then Layer 2 scaling technologies such as the Lightning Network can be used to further split the satoshis. Because physical gold limits the minimum size of transactions it can support, large economies have had to adopt silver as a secondary currency to meet the needs of economic exchange. Of course, before the monetization of productive assets, for a considerable period in Chinese history, taxes were levied directly on the people through the collection of goods (such as grain) or labor (such as corvée labor). The emergence and development of monetary capital changed history. In 1581 (the ninth year of the Wanli Emperor's reign), Zhang Juzheng implemented the "Single Whip Law" nationwide, merging land tax and corvée labor into a single tax levied in silver. This deeply tied national finances to silver, creating enormous demand for it. Following this, silver began to flow into China with increasing frenzy. From 1570 to 1644, silver flowed in on a large scale through three routes: Manila, Europe, and Japan, making China the ultimate recipient of global silver. From 1634 to 1639, the Pacific trade chain broke down. The Spanish monarchy restricted silver shipments from Mexico to Manila. In 1639, a large-scale massacre of Chinese merchants occurred in Manila, nearly halting trans-Pacific silver trade. To make matters worse, from the 1630s onwards, the Tokugawa Shogunate gradually implemented a policy of national isolation (especially after the 1635 edict), strictly limiting the export of silver. Japan's silver supply nearly dried up. The sudden interruption of silver inflows caused a sharp deflation. The soaring price of silver encouraged people to hoard it further, exacerbating the reduction in circulating silver. Severe deflation caused a significant drop in the price of grain denominated in silver. With silver expensive and goods cheap, farmers needed to sell many times more grain than before to obtain the equivalent amount of silver for taxes. However, the imperial court, disregarding the increased burden on farmers, continued to collect taxes in silver and even increased them. Coupled with frequent natural disasters and a sharp decline in grain production, farmers were even more unable to exchange silver for taxes, driving them to desperation and forcing them to revolt. The widespread peasant uprisings forced the imperial court to use military force to suppress them, further exacerbating the financial burden and necessitating further tax increases. This created a vicious cycle. By 1639 (the twelfth year of the Chongzhen Emperor's reign), the Ming Dynasty's financial crisis was already evident. In 1642, the finances completely collapsed, leading to a final struggle. In 1644 (the seventeenth year of the Chongzhen Emperor's reign), Li Zicheng captured Beijing, the Chongzhen Emperor hanged himself, and the Ming Dynasty perished. From 1581, when Zhang Juzheng tied the nation to the silver chariot, to the fall of the Ming Dynasty in 1644, only 63 years had passed. The monetization of precious metals also allowed officials and wealthy merchants to amass vast fortunes. After all, hoarding gold and silver at home is much easier than hoarding an equivalent amount of grain. Grain not only takes up a lot of space but also spoils easily. No matter how much the officials and wealthy households eat, they can't consume that much grain. Emperor Chongzhen ultimately died of poverty. The national treasury was empty. Li Zicheng, on the other hand, reportedly extorted tens of millions of taels of silver from officials and gentry after entering Beijing. In reality, for a country, gold and silver are not important; what matters is the grain, tangible necessities of life, and means of production that it always possesses—these are the fundamental elements. The timeline continues. In 1696, Newton—yes, the physicist Newton—was appointed Warden of the Royal Mint. In 1699, he was promoted to Master of the Mint. In 1717, Newton, through an official report, fixed the price of gold at 21 shillings. This effectively fixed the price of gold, leading to an undervaluation of silver and thus prompting Britain to lean towards the gold standard, although it was not yet legally established at this time. The Coinage Act 1816 formally stipulated that the Sovereign gold coin (containing 7.32238 grams of gold) was the sole legal tender with unlimited legal tender status (silver coins were subsidiary coins with limited legal tender status). Silver changed from the standard metal to a subsidiary metal. In 1821, Britain fully restored the convertibility of paper money into gold, marking the formal establishment of the gold standard. Gold and silver clashed in Europe. Gold won. European countries gradually entered the gold standard era. From the late Ming Dynasty to the mid-Qing Dynasty (approximately 1550-1800), China maintained a huge trade surplus for a long period thanks to the export of silk, porcelain, and tea, leading to a continuous inflow of silver into the world. This is the so-called "Silver Age." After the fall of the Ming Dynasty, the Qing Dynasty inherited the Ming system, and taxes were still mainly collected in silver. To reverse its trade deficit, the British East India Company began large-scale opium smuggling into China. From approximately 1800 to 1839, British opium imports surged, and China's silver began to shift from a net inflow to a net outflow. It is estimated that by the time of the Opium War, China had lost over 100 million taels of silver to the opium trade, equivalent to several years' worth of the Qing government's fiscal revenue. From 1840 to 1842, the First Opium War broke out. The Qing government was defeated and signed the Treaty of Nanjing in 1842, initiating the process of institutionalizing the outflow of silver through treaties. Subsequent defeats and enormous war reparations (payable in silver) emptied the national treasury. The heavy taxes levied to pay these reparations overwhelmed the peasantry. Meanwhile, the legalization of the opium trade led to a constant outflow of silver, completely immersing China's finances and economy in the Western-dominated colonial system. Looking at history in context, the "silver circulation"—from the large-scale inflow of silver to its severing and subsequent forced outflow—had a profound impact on the economy and finances of the Ming and Qing dynasties, ultimately leading to their downfall. The "dollar circulation" or "dollar tide" experienced by global economic integration after World War II also resulted in the plundering of wealth from large-scale economies or regions, demonstrating a striking similarity. The dollar circulation impacts peripheral countries and regions through exchange rates, interest rates, and capital flows, causing asset price surges and crashes and debt crises. These structural impacts are highly similar to the economic turmoil and social disorder caused by the inflow and outflow of silver in the Ming and Qing dynasties. On Saturday, January 17, 2025, BTC rebounded and then stopped falling, temporarily rising above 95k. Gold continued to reach new highs before slightly retreating to $4595. The US dollar index rose above 99. This issue's internal report contains approximately 5000 words, mainly covering: market dynamics, macroeconomics, obstacles in the bill vote, impact on the remittance market, Ark Fund target price, bear market rebound, RSI bottoming out, resistance areas, etc.