Butler And Cook: The Silver Boys

UP AGAINST THE WALL
By Theodore Butler
Mid-March 2008
(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
As of early March there was no surprise in the silver Commitment of Traders Report. The concentrated short positions of the largest 4 and 8 traders set new records, as the big shorts sold into the recent rally. The big 4 are now net short 62,229 contracts, or over 311 million ounces. That’s the equivalent of more than 177 days of world mine production. The eight largest traders are now net short 79,042 contracts, or more than 395 million ounces, or more than 225 days equivalent production. Never has there been a greater concentrated position of any type (long or short) in silver, or in any other commodity. If Nero were a commodity regulator, he would be fiddling while danger in the silver market burns out of control.
The shorts in silver and gold are up against the wall. Their collective open losses are of a magnitude many times greater than anything they have ever experienced in the past. In fact, it is my observation that these concentrated shorts have actually lost (on paper and in meeting resultant margin calls) more than they made in total over the past five or ten years. In silver, the big four shorts are out more than $1 billion in the past two weeks, and around $2 billion in the past two months. The big four gold shorts are out close to $3 billion in the past two months. Similar losses can be found in oil, natural gas, base metals, the grains, cotton and some other markets.
Who are these shorts that are being mauled? Generally, they are banks and financial institutions and large exchange member insiders who have traditionally inhabited the short side in most markets. They are the market makers.
What has caused this sudden and profound change of fortune for the shorts? Two things. One, the relentless demand for raw materials caused by world economic growth, primarily in the BRIC nations (Brazil, Russia, India and China). Two, the influx of heavy commodity investment demand by institutions, primarily the index funds for now, but with the sovereign funds also showing interest.
The index funds, with some 200 billion dollars already invested, have bought a wide variety of commodities futures contracts, including crude oil, natural gas, wheat, soybeans, corn, cotton, sugar, coffee and base metals (mostly in London), among others. In gold and silver, the index funds buy primarily in the ETFs, instead of futures contracts. The index funds are blue-chip institutional money. These are long-term buy and hold positions and since there is no leverage, no margin call liquidation potential exists. (As contrasted to the tech funds who operate on margin.)
Last year, I first wrote about the index funds upon the initial release of the COT supplemental report which broke out the index funds’ holdings in various futures markets, "The Changing Of The Guard?"
http://www.investmentrarities.com/01-16-07.html

Here are some excerpts;
"Just how big the index funds have become was recently revealed with the release of COT supplemental report, which commenced on January 8. This report covers 12 agricultural commodities (not silver) and breaks down, for the first time, how many contracts are held by the index funds. In a word, they hold a lot. I was genuinely surprised by how many contracts they held.
These index funds, as expected, were almost exclusively on the long side. As a subset of the commercial category, they held a larger and more dominant position than any other category in just about every market. In many markets, the long position of the index funds exceeded the long position of two, or all, of the other long position categories (commercial, non-commercial and non-reporting) combined. That’s big.
While the index funds’ positions were extremely large, and necessitated an equally large short position being created to allow it to exist, it should be mentioned that these funds will not stand for physical delivery, creating a short squeeze. In a delivery crunch, caused by outside influences, however, it is not hard to imagine incredible financial pressure being brought to bear on short sellers in general, due the index funds presence."
The massive and non-leveraged buying by the index funds has leveled the playing field. Previously, the shorts dominated the markets, by financial strength and treachery, aided and abetted by the CFTC and the exchanges. The index funds have altered and evened the equation by sheer financial size and non-leveraged buying. For instance, the index funds are long one billion bushels of Chicago wheat futures, almost 50% of the net futures open interest and more than 50% of the US winter wheat crop.
It is the combination of tight supply/demand fundamentals in most commodities and institutional index fund buying that has pressed the short sellers up against the wall. Since these two factors appear to be long-term phenomena, any short-term sell-offs would offer only temporary respite to the shorts. It looks like the long-term bullish force of tight supply/demand and index buying is a paradigm shift of major significance.
Unfortunately for the shorts, the very nature of their commodity position has created a problem that may prove insurmountable for them. The positions that are going against them are very leveraged. These short positions are similar to the leveraged long positions currently being liquidated in mortgages, credit securities, derivatives and municipal bonds, by hedge funds and financial institutions. But all these securities and derivatives being marked down and liquidated are long positions, whereas the commodity positions under stress (including silver and gold) are very much short positions.
There is a world of difference between liquidating a leveraged long position in a panic and doing the same with a short position. The simple difference is this; a long position can’t go below zero, and at some price above zero, an opportunistic buyer will purchase the position. A short position being liquidated under panic conditions contains no such guarantee. Finding an entity willing to assume a massive short position if the shorts start to panic, is a world apart from dumping a long position.
There is no telling to how high a price a short liquidation (buying back) of a position might drive a price. For a commodity held short where no adequate supply exists to deliver against (think Minneapolis wheat and COMEX silver), the sky is truly the limit. Add in the fact that the COMEX silver short position is held in extremely concentrated hands (4 or less), and you have the ingredients for an historical short panic. This is precisely why the regulators have really dropped the ball in allowing this condition to persist and grow worse, in spite of my constant warnings.
I have written previously about the non-economic and illogical aspect to anyone shorting silver in great quantities at the super-depressed prices of the recent past. If you didn’t want to take advantage of the incredible opportunity that silver offered, fine. But why in the world would anyone want to short it big? At least we finally have the answer to that question. Shorting big was dumb. It was pure manipulation.
Is this the time for an epic short panic in silver? Perhaps, especially as more people recognize the problem. The combination of severe recent financial stress on the shorts, the fundamentals and index fund buying, combined with the impossibility of buying back the out-sized short position easily makes it a difficult situation for the shorts. A wounded animal is always dangerous, depending on how serious the wounds. They are up against a wall and, if not resolved soon, it is likely to fall on them.
A WORD OF PRAISE
By James R. Cook
It’s a good time to take a moment to celebrate a major milestone in the silver market. Recently, the price passed $20 for the first time in more than 27 years. To some extent, this validates the course we set seven years ago, when we began to advocate silver as a long-term holding. For more than seven years we have devoted our efforts and millions of dollars to spreading the research of silver market analyst Ted Butler. Based upon the record, it was time and money well spent. Our customers have benefited greatly.
We’d like to congratulate Mr. Butler on a magnificent accomplishment - teaching the world about silver. For those wise enough to act on his teachings, he has made them a fortune, with much more to come (according to him).
We consider Mr. Butler to be far more than an analyst or teacher. He is also a pioneer and trendsetter. He has introduced just about every important concept in silver and gold, over the past ten years. You can hardly read anything important about precious metals that Mr. Butler hasn’t previously discussed. Many who write about silver today fail to give credit to Mr. Butler for his insights and new ideas. They wouldn’t be writing about silver if it weren’t for him.
We first contacted Ted Butler in the latter part of 2000. It was post-Y2K and business was slow. Although I was never a believer in the end of the world predictions brought about by a massive date change computer failure, many customers and former brokers were believers. When the world didn’t end at the start of the year 2000, their rationale for buying precious metals ended. We had to find a new approach to reinvigorate sales.
I shared these thoughts with a long-time friend. He suggested I call a former commodity broker in Florida (Butler), who had written some provocative research on silver and gold on the Internet. I did just that. (Sadly, my associate who gave me the suggestion passed away shortly thereafter, before I could even properly thank him.)
My contact with Butler was a revelation. I’ve been in the precious metals business for more than 30 years. Yet here was someone telling me things about silver that I’d never known. I was friends with the late silver guru Jerome Smith, and Butler confirmed everything that Smith wrote, but he added much more. He talked about metals leasing, forward selling, paper short sales and market manipulation. He explained his attempts to alert the authorities.
I pointed out the widely held belief that there was a glut of silver and that metal prices were determined only by people buying silver as an inflation hedge. He responded that wasn’t true and only a minor part of the story. The real facts resolved around the COMEX, short sales, leasing and the manipulation. These were things I had never heard before, and neither had our clients. Even after the years we have been associated with him, it is still hard to accept his contention that there is less silver bullion in the world than gold bullion. But I have learned that he has rarely been proven wrong. I remember complaining to Ted about $5 silver and the lack of movement in the price. He responded that someday we would complain that the price didn’t stay down long enough.
After a number of conversations with him in 2000, I asked if he would write his thoughts for IRI clients for the purpose of getting people to buy silver. His main objective has been to end the silver manipulation. He thought that widespread dissemination of the real silver story would aid in meeting that objective. He would also try to motivate people to buy silver because he knew it would be a good thing for them. He has been able to explain the nuances of silver by relying on public facts, easily confirmed but previously overlooked. Consequently, he has caused massive amounts of silver to be purchased. It’s one thing to present original research, but quite another to motivate readers to act on that research.
We believe that Mr. Butler is single-handedly responsible for the vast majority of investment silver purchased in the past seven years. No one else comes close (although his mentor, Izzy, did appear to cause the US Mint to run out of Silver Eagles in February after three months of record sales following Izzy’s Silver Eagle article).
Thanks to him, our customers have many hundreds of millions of dollars of silver profits. At $20 an ounce we reached a milestone in silver. We’re grateful for the truly outstanding accomplishments of Ted Butler, who saw so many things that nobody else could see.
STILL A GREAT TRADE
By Theodore Butler
(This essay was written by silver analyst Theodore Butler, an independent consultant, Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
The price moves in silver have been dramatic. Volatility looks to be increasing. It is something we must adjust to. After all, prices are 4 to 5 times greater than the lows of several years ago. Volatility should be greater. I’m convinced that one day we will look back to the current volatility as being contained. Everything is relative.
I wish I could tell you the near-term price movements in silver, but you know that is impossible. Could we suffer a sharp sell-off? Yes. Could we truly explode in price from here? Yes. Could we chop around current levels? I suppose.
If we do get a sharp sell-off, it will only take place because the big shorts are finally able to rig it. It will not come as a result of any free market cause. This should be obvious to any alert market observer. The regulators at the NYMEX and the CFTC should be ashamed of themselves for allowing such market manipulation to exist.
Since the short term is (always) iffy, what can we say with confidence about the long term in silver? Silver is still undervalued. Silver is cheap relative to other precious and base metals, despite its dramatic price advance. In fact, because so many commodities have also advanced, silver is still historically undervalued when compared to the broad array of commodities.
Someday, I am convinced that silver will vastly outperform just about every other commodity. When that occurs, it will probably indicate that silver is blowing off, or even in a bubble. Then I will not be able to make the case for silver’s relative undervaluation and the sale of long-term positions will have to be considered. For now, however, silver is not overvalued compared to almost everything else.
The long-term supply/demand fundamentals for silver (and other commodities) still look favorable. There is no evidence of a massive surplus developing in silver. Even if the overall fundamentals of other commodities turn negative, due to a severe slowdown in the world economy, silver (along with gold) enjoys the unique characteristic of flight-to-safety buying in bad economic times.
Most importantly, the potential bullish impact of the resolution of the outrageously large silver short position remains intact. If anything, the short position has become even more extreme, given the growing concentrated nature of this short position. Therefore, in spite of the open losses the shorts are experiencing and the great profits accruing to silver investors, the price manipulation is still in place. It is the unusual concentrated aspect to the COMEX silver short position that assures, in my opinion, that it must still be resolved, and that the resolution will prove bullish beyond expectations.
Those who make judgments on price alone are prone to conclude that silver is no longer manipulated. Some even argue that it never was. But, as I have long contended, proper analysis goes beyond looking at the current price. As long as the concentrated short position in silver is so out of whack with every other commodity, the manipulation must be considered to be in force. It may not be a successful manipulation for the perpetrators, but it will be in force.
If you told me years ago, when silver was stuck in the $4 to $5 trading range, that we would breach the $20 mark with the short position still in place, I would not have believed you. A move above $20 would surely have been the result of noticeable short covering. This would have resulted in silver being overvalued to other metals and commodities.
This is the best possible circumstance that could have occurred at this time for silver investors. Think about it - silver is up big in price and we haven’t used up any short covering fuel and we’re still cheap compared to everything else. I firmly believe that short covering will someday launch silver to the sky. Other important forces, like industrial user panic buying and widespread investment demand will also contribute. Because that rocket fuel has not been used up yet, it’s as if we’ve moved the launch site for the silver rocket from sea level to the top of Mt. Everest.
Therefore, if we do get a sharp sell-off, it should be bought. But, given the circumstances in silver, there is no assurance we will get that sharp sell-off. So, what to do? Long-term holders should buy silver now. Short-term fluctuations won’t matter much if the price is a lot higher a year from now. Cost averaging is another excellent approach.
There is one special group of investors in a great position to buy silver. They don’t have to be concerned about whether silver sells off sharply or explodes in price. These are the gold only investors. I recommend they switch gold for silver.
Yes, I know trading gold for silver is a sensitive subject in many ways. I have many friends and acquaintances who are strong gold believers. I understand the merits of gold. I am not a bear on gold. I have introduced new facts about gold, like the depressing and manipulative nature of leasing and forward selling.
Almost everyday, I read intelligent and articulate articles discussing the merits of gold and silver. Almost universally, the conclusion of those articles is that the authors expect silver to outperform gold. A lot of their reasoning is based upon the growing awareness of silver’s industrial consumption and its rarity compared to gold, since gold is not consumed industrially.
I have read reports where the authors expect the gold/silver ratio to tighten to 30 to 1, or 20 to 1, or even 16 to 1. That was the ratio in 1980 when silver hit its record price of over $50 an ounce. Since the gold/silver ratio is currently around 50 to one, if the ratio tightened to 16 to 1 (a prediction I agree with), silver would have outperformed gold by three times.
In other words, if a 16 to 1 ratio developed at the current price of gold ($975), it would mean a price for silver of over $60 an ounce. If the price of gold were at $1200 an ounce, a 16 to 1 gold/silver ratio would indicate a silver price of $75 an ounce. Clearly, a move in the gold/silver ratio to 16 to 1 (or any number less than the current 50 to 1 ratio) would impact the price of silver much more powerfully than the price of gold.
Yet, the very authors predicting a dramatic tightening in the gold/silver ratio invariably conclude that you shouldn’t sell your gold to buy silver, but instead hold your gold and buy silver with other funds. I suppose that might be decent advice for those who own gold and also possess sufficient cash to buy silver in addition to the already owned gold. But what do you do if you own gold, but little or no silver, and hold insufficient cash to make a meaningful investment in silver? Many gold believers would say you should hold the gold and wait until you get other money to buy silver. I would disagree with that advice. I would say, if you really believed that silver would go to the 16 to 1 ratio witnessed in 1980, you should not hesitate in selling your gold in order to buy silver. In fact, it would be illogical to do otherwise.
I am not asking you to take my word for it. What I ask is that you consider the reasons I set forth. (For the record, I am not advising that you consider trading the gold/silver ratio with futures contracts or on margin. Nor am I making a short-term prediction on what the gold/silver ratio be. I am talking only about the sale of fully paid for gold in order to purchase fully paid for real silver on a long-term basis.)
The heart of your decision is in determining the likelihood that the gold/silver ratio will approach the 16 to 1 ratio of 1980.The facts would seem to suggest that will happen at some point in the future. The first fact is that when the gold/silver ratio traded at 16 to 1 back in 1980, there was a rough balance between the amount of above ground gold and silver available bullion in the world. To be fair, I am including the hundreds of millions of ounces of silver that came to market in the great silver melt of the early 1980's. At the time of the 16 to 1 gold/silver ratio in 1980, there were roughly 3.5 billion ounces each of gold and silver in available-above ground world inventories.
So much silver has been consumed industrially in the past 28 years (since 1980), that it has drawn down existing inventories, because mine production wasn’t sufficient to meet demand. The situation is the opposite in gold, where due to its high price, it is used primarily as jewelry or held as an investment. These applications make gold readily available to the market. Even gold enthusiasts acknowledge that almost all of the gold ever mined is basically still with us.
The very different nature of the consumption patterns in gold and silver leads us to the conclusion that there is a lot less silver around today in above ground inventories, while there is more gold than there was in 1980. How much less silver and more gold? Based upon published production, consumption and inventory statistics, there appears to be one billion ounces of available silver remaining (down 2.5 billion ounces in 28 years) and 5 billion ounces of gold (1.5 billion ounces additional since 1980).
The simple equation for you to contemplate is that if the gold/silver ratio traded at 16 to1 (albeit briefly) in 1980, when there were 3.5 billion ounces of each in existence, how hard is it to picture the ratio achieving that milestone now with 5 times as much gold as silver in existence? With silver so rare compared to gold, how hard is it to imagine the 16 to 1 ratio being blown away to the downside, as the world wakes up to these facts?
In my opinion, it is the unawareness throughout the world of these simple facts that provide the unusual profit potential of a switch from gold to silver. Where else have you read that silver is rarer than gold? How many people are aware of this? Is not the key to investment success seeing things before the crowd? Make no mistake, this is strictly about getting the most investment bang for your buck. This is not about ideology or strongly-held beliefs. This is about positioning oneself in the best investment possible, in order to get the best investment return.
There is an added bonus to gold if enough investors make the switch to silver. Because there is 250 times more gold than silver in the world, on a dollar basis, even the tiniest amount of gold switched into silver could have a profoundly bullish impact on the price of silver. Higher silver prices would likely benefit the price of gold. As always, I would prefer higher gold prices, since this should further benefit silver.
Gold investors are in a particularly advantageous position to make the switch to silver. They are among the few who can take advantage of the buying power created by the historically high gold prices to buy silver cheaply. It’s like a company making a strategic acquisition by buying another company because their own stock is richly valued and they are able to use it as a strong currency. In addition, any temporary sharp sell-off in silver is likely to see a similar sell-off in gold, meaning that those switching are not assuming any unreasonable short-term risk.
I know this is a sensitive issue, that many analysts and advisors are reluctant to confront. I think this is due to the emotional aura that surrounds gold. Emotions aside, if your reading of the facts tell you that gold is likely to outperform silver, then don’t consider switching. But, if your reasoning tells you that the facts strongly suggest silver is likely to outperform gold, then a switch would seem to be in order. It doesn’t make much sense to conclude that silver should perform better than gold and not do something about it.
UNSOUND MONEY
By James R. Cook
The Federal Reserve is doing everything in its power to expand credit. New schemes are floated weekly. All the so-called solutions are inflationary. In addition, the treasury is giving everyone money. Soon they will be throwing it out of helicopters. This is how a country destroys the value of its currency.
The central bank controls the issuance of money (and credit). There’s no competition. This monopoly on money allows politicians to pay the bills for ever-expanding social programs and military escapades. It’s called inflating. If government spends too much, they cover the deficit by printing or creating new money. Without inflating, you can’t pass out money to stimulate the economy. Without inflating, social programs can’t expand. Thus the creation of new money became an indispensable ingredient to the goals of populist politicians. Easy money aids the spread of liberal policies and big government. Inflating and socialism go hand in hand – you can’t have one without the other.
It’s now come to the point where we must either inflate or face deflation and a credit collapse. We are not going to take the necessary, but bitter, deflationary medicine now. However, the consequences are serious. London Times Editor William Rees-Mogg wrote, "Inflation gradually pushes the whole community towards speculation, since ordinary life begins to require speculator’s skills." The free market thinker, Henry Hazlitt summarized, "In a free enterprise system, with an honest and stable money, there is dominantly a close link between effort and productivity, on the one hand, and economic reward on the other. Inflation severs this link. Reward comes to depend less and less on effort and production, and more and more on successful gambling and luck."
Hazlitt continues, "It is not merely that inflation breeds dishonesty in a nation. Inflation is itself a dishonest act on the part of government, and sets the example for private citizens. When modern governments inflate by increasing the paper-money supply, directly or indirectly, they do in principle what kings once did when they clipped coins. Diluting the money supply with paper is the moral equivalent of diluting the milk supply with water. Notwithstanding all the pious pretenses of governments that inflation is some evil visitation from without, inflation is practically always the result of deliberate governmental policy."
Mr. Hazlitt concluded his case against inflation. "It is harmful because it depreciates the value of the monetary unit, raises everybody’s cost of living, imposes what is in effect a tax on the poorest….wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals."
Another great monetary thinker, Elgin Groseclose, explained the process we’ve employed in America for many decades. "By mortgaging the future, pledging the productive power of unopened mines, uncut forests, unbuilt factories and unborn generations, a tremendous demand may be created for wares already produced in the markets."
When you hear the media, Hollywood radicals and left-wing politicians renouncing business, it brings to mind Henry Hazlitt’s explanation. "A period of inflation is almost inevitably also a period when demagogy and an antibusiness mentality are rampant. If implacable enemies of the country had deliberately set out to undermine and destroy the incentives of the middle classes to work and save, they could hardly have contrived a more effective set of weapons than the present combination of inflation, subsidies, handouts, and confiscatory taxes that our own politicians have imposed upon us."
If the monetary authorities keep expanding credit, there comes a time when too many people no longer want to hold the money. They want to exchange it for goods and assets. Quite suddenly prices begin to run away and nobody wants to hold dollars because they are depreciating too fast. The late economist Hans Sennholz said this. "The ultimate destination of the present road of political fiat is hyperinflation with all its ominous economic, social, and political consequences. On this road, no federal plan, program, incomes policy, control, nationalization, threat, fine, or prison can prevent the continuous erosion and ultimate destruction of the dollar."
These days the Fed feverishly pumps out additional money and credit to forestall a collapse. Newsletter editor Dan Denning described this perverse predicament. "The scope of the debt problem in America hasn’t been fully understood. The single distinguishing feature of the current version of American capitalism is credit creation. So much debt has been created in the last twenty years that it requires huge amounts of new credit simply to keep the system liquid. The necessity for ever-larger amounts of credit to keep the system liquid weighs on the ability of the Fed to reflate. It’s like pouring more and more water in the bathtub with a big hole in the bottom."
It’s interesting to read what the economist Andrew Dickinson White wrote about the great French inflation in the 18th century that destroyed the currency and economy of France, and compare his comments with today. "Whenever a great quantity of paper money is suddenly issued, we invariably see a rapid increase of trade. The great quantity of the circulating medium sets in motion all the energies of commerce and manufacturers; capital for investment is more easily found than usual, and trade perpetually receives fresh nutriment."
He describes the consequences. "There arose the clamor for more paper money. At first, new issues were made with great difficulty; but, the dike once broken, the current of irredeemable currency poured through; and swollen beyond control. It was urged on by speculators for a rise in values; by demagogues who persuaded the mob that a nation, by its simple fiat, could stamp real value to any amount upon valueless objects. As a natural consequence, a great debtor class grew rapidly, and this class gave its influence to depreciate more and more the currency in which its debts were to be paid. The government now began, and continued by spasms to grind out still more paper; commerce was at first stimulated by the difference in exchange; but this cause soon ceased to operate, and commerce, having been stimulated unhealthfully, wasted away. Manufacturers at first received a great impulse; but, ere long, this overproduction and overstimulus proved as fatal to them as to commerce.
"A still worse outgrowth was the increase of speculation and gambling… For at the great metropolitan centers grew a luxurious, speculative stock-gambling body, which, like a malignant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibers to the remotest hamlets. At these city centers abundant wealth seemed to be piled up. In the country at large there grew a dislike of steady labor and a contempt for moderate gains and simple living.
Mr. White continued, "… how easy it is to issue it; how difficult it is to check its overissue; how seductively it leads to the absorption of the means of the working men and men of small fortunes; how heavily it falls on all those living on fixed incomes, salaries, or wages; how securely it creates, on the ruins of the prosperity of all men of meager means, a class of debauched speculators, the most injurious class that a nation can harbor – more injurious, indeed, than professional criminals whom the law recognizes and can throttle; how it stimulates overproduction at first and leaves every industry flaccid afterward; how it breaks down thrift and develops political and social immorality."
It’s going to get crazier, wilder and looser. That’s because inflating requires more and more inflating. According to the economist Ludwig von Mises, "Because an inflationary policy works only as long as the yearly increments in the amount of money in circulation are increased more and more, the rise in prices and wages and the corresponding drop in purchasing power will go on at an accelerated pace."
All the paper money that ever existed in the world, prior to what we use now, inevitably became worthless. Hundreds of paper currencies in scores of countries wound up in the wastebasket. As Voltaire once noted, "Paper money always returns to its intrinsic value – zero." One of the definitions of money is that it’s a store of value. That’s not the case with our dollar. It continues to lose value. Who can make a convincing case that it won’t wind up like other worthless paper currencies? In their book, The Coming Collapse of the Dollar, James Turk and John Rubino point out, "Whether ancient or modern, monarchy or republic, coin or paper, each nation descends pretty much the same slippery slope, expanding government to address perceived needs, accumulating too much debt, and then repudiating its obligations by destroying its currency."