The world is in a uniquely Roman moment

In the late third century BC, the Roman republic was locked in a long and brutal war with its mortal enemy, Carthage.

Hannibal had only recently crossed the Alps with his legendary elephants and humiliated the Roman military at the Battle of Cannae in southern Italy.

Yet in the midst of all that war and chaos, Rome’s republican government believed that if they wanted to have a powerful army, they also needed a strong and reliable currency to pay for it.

So in the year 211 BC, Rome created a silver coin known as the denarius— roughly 4.5 grams with a silver purity of more than 95%.

The whole point of the denarius was to be able to pay soldiers; in fact the coin was initially valued so that a Roman could buy a full day’s worth of food, cover modest lodging, and still have a bit of silver left over. So it was essentially a fair day’s wage for soldiers and skilled laborers alike.

That’s why the denarius became so highly trusted… and why it lasted for centuries.

Long after the war ended and Rome had vanquished Carthage, the denarius remained their primary currency for centuries; and as Rome grew and expanded its borders, the denarius became a de facto reserve currency across the empire and beyond.

The denarius was trusted across three continents— accepted from the bazaars of the Middle East to the frontiers of Britain—precisely because its silver content was consistent and its value unquestioned.

But after centuries of stability during Rome’s republican era, the denarius began to be debased in the early days of the empire.

Nero reduced the size by nearly 25% (which meant 25% less silver). Subsequent emperors reduced the silver purity, until, by the mid-3rd century AD, the denarius contained roughly 5% silver.

And while it still bore the same name and the emperor’s face, its purchasing power had collapsed. What once covered a worker’s daily wage could, within a few generations, hardly buy basic staples like bread.

As a result, entire regions—especially across Western Europe—fell back into barter. The value of Rome’s money had become so untrustworthy that it was safer for workers to trade their labor for chickens rather than coin.

And this is what makes the fall of the Roman denarius such an interesting historical example: there was nothing to replace it. No rival currency rose to dominance to replace it.

Eventually, yes, the Byzantine Empire’s gold solidus did eventually become the de facto reserve currency several centuries later.

But for literally hundreds of years there was a monetary vacuum— no standard coin or currency that was used across the Mediterranean and Middle East for trade and commerce.

This vacuum is unusual. Later on, for example, once the Byzantine gold solidus became the most popular coin for cross-border trade, it was eventually displaced by the Venetian ducat.

The ducat, too, was eventually displaced by other currencies. The florin, escudo, Spanish real de ocho, Dutch guilder, British pound, etc. displaced one another as the dominant global trade currency, i.e. reserve currency.

But the Roman denarius wasn’t really displaced by anything. People had to figure out for themselves what goods and services to use for trade. Again, it was a vacuum.

The world may be approaching a similar vacuum now.

We’ve been warning for years that foreign governments and central banks are losing confidence in the US dollar.

And it’s not hard to see why.

US politicians run multi-trillion-dollar deficits and couldn’t care less. The national debt has surged past $37 trillion and is projected to climb by another $25 trillion over the next decade.

Congress is bitterly divided and dysfunctional even within parties, while lurching between government shutdowns. And the Federal Reserve, once viewed as the sober guardian of stability, is caught between its own policy failures and becoming a political puppet.

On top of that, US leaders have turned the dollar into a weapon.

Throughout the last several administrations, sanctions against foreign countries have been used at an unprecedented scale. This makes foreign governments far less incline to hold US dollars or US government bonds.

As a result, the amount of global trade conducted in US dollars has declined; and the percentage of US dollars held as reserve assets around the world has declined.

But at the moment there is nothing on the horizon that could replace the dollar.

No one trusts China or its renminbi. The Russian ruble is a nonstarter. The euro is fragile with no unified fiscal backing. And the so-called BRICS currency is still nothing more than a talking point.

Which leaves the world in a uniquely Roman moment: the dollar is fading, but there’s no rising, trustworthy currency to take its place as the global reserve.

That’s why foreign central banks are turning to the one asset that isn’t political, cannot be printed, and has stood the test of time over thousands of years—gold.

Central banks’ confidence in the US dollar is declining, so they have bought up hundreds of metric tons of gold. In fact, foreign central banks now hold more gold than US dollars.

It is this massive demand from foreign central banks that has driven the value of gold to an all time high— over $3,600 per ounce.

But this trend is just getting started.

Central banks have only converted a small percentage of their US dollar reserves into gold so far. And we believe this trend will continue (unless Congress suddenly wakes up and becomes fiscally responsible. I’m hot holding my breath.)

Which is why we believe gold could easily hit $5,000 and then $10,000 per ounce within a few years.

Yet while we have been absolutely right in our prediction for higher gold prices over the past few years, we have been particularly bullish on the companies which produce gold and other precious metals, i.e. mining, royalty, and service businesses.

And that prediction has also been spot on.

While gold has doubled over the course of three years, many of these stocks are up 2x, 3x, even 5x in just a few months.

The reason is simple: their costs are steady, but revenues explode as gold rises. And because so many of these firms were debt-free, profitable, and trading at dirt-cheap valuations, the gains have been extraordinary.

Even now, they still look inexpensive given how much money they’re making and how fast earnings are growing. We think many could double again as more investors rush in.

If you want to see which precious metals stocks we believe could double in the coming months, check out our premium investment research service, The 4th Pillar.

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Source

Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.

From Simon Black of SovereignMan.com

Source: https://www.schiffsovereign.com/trends/153493-153493/