Euro

The euro (currency sign: €; banking code: EUR) is the official currency of the European Union's Eurozone, which currently consists of 13 states (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, and Spain) and will extend to include Cyprus and Malta from 1 January 2008. It is the single currency for more than 320 million Europeans. Including areas using currencies pegged to the euro, the euro directly affects more than 480 million people worldwide. With more than €610 billion in circulation as of December 2006 (equivalent to US$802 billion at the exchange rates at the time), the euro is the currency with the highest combined value of cash in circulation in the world, having surpassed the U.S. dollar.

The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. It replaced the former European Currency Unit (ECU) at a ratio of 1:1.

The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the European System of Central Banks (ESCB) (composed of the central banks of its member states). As an independent central bank, the ECB has sole authority to set monetary policy. The ESCB participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the Eurozone payment systems.

While all European Union (EU) member states are eligible to join if they comply with certain monetary requirements, not all EU members have chosen to adopt the currency. All nations that have joined the EU since the 1993 implementation of the Maastricht Treaty have pledged to adopt the euro in due course. Maastricht obliged current members to join the euro; however, the United Kingdom and Denmark negotiated exemptions from that requirement for themselves. Sweden turned down the euro in a 2003 referendum, and has circumvented the requirement to join the euro area by not meeting the membership criteria.

On the other hand, several small European states (Vatican City, Monaco, and San Marino), although not EU members, have adopted the euro due to currency unions with member states. Andorra, Montenegro, and Kosovo have adopted the euro unilaterally, while not being EU members either. The one exception of the smaller nations is Liechtenstein, which continues to use the Swiss franc.

Characteristics of the euro

The euro is divided into 100 cent (sometimes referred to as eurocents). All circulating euro coins (including the €2 commemorative coins) have a common side showing the denomination (value) with the EU-countries in the background and a national side showing an image specifically chosen by the country that issued the coin. Euro coins from any country may be freely used in any nation which has adopted the euro.

The euro coins are €2, €1, 50¢, 20¢, 10¢, 5¢, 2¢, and 1¢. In the Netherlands and Finland, where cash transactions are rounded to the nearest five cents, the two smallest denominations are no longer struck (except for collectors), though they remain legal tender there. (See also Linguistic issues concerning the euro.)


Coins have a common side, and a national side designed by the respective national authorities.

Commemorative coins with €2 face value have been issued with changes to the design of the national side of the coin — as Greece did for the 2004 Summer Olympics. These two-euro coins are legal tender throughout the Eurozone. Coins with various other denominations have been issued as well, but these are not intended for general circulation. These later coins are only legal tender in the nation which issued them.

All euro banknotes have a common design for each denomination on both sides. Notes are issued in €500, €200, €100, €50, €20, €10, €5. The design for each of them has a common theme of European architecture in various artistic periods. The front (or recto) of the note features windows or gateways while the back (or verso) has bridges. Care has been taken so that the architectural examples do not represent any actual existing monument, so as not to induce jealousy and controversy in the choice of which monument should be depicted. Some of the highest denominations such as the €500 are not issued in a few countries, though they remain legal tender throughout the Eurozone.

 
Payments clearing, electronic funds transfer

All intra-Eurozone transfers shall cost the same as a domestic one. This is true for retail payments, although several ECB payment methods can be used. Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as if they were domestic. The ECB has not standardised paper-based payment orders, such as cheques; these are still domestic-based.

The ECB has set up a clearing system, TARGET, for large euro transactions.

 
The currency sign €


A special euro currency sign (€) was designed after a public survey had narrowed the original ten proposals down to two. The European Commission then chose the final design. The eventual winner was a design created by the Belgian Alain Billiet. The official story of the design history of the euro sign is disputed by Arthur Eisenmenger, a former chief graphic designer for the EEC, who claims to have created it as a generic symbol of Europe.

The glyph is according to the European Commission "a combination of the Greek epsilon, as a sign of the weight of European civilization; an E for Europe; and the parallel lines crossing through standing for the stability of the euro".

The European Commission also specified a euro logo with exact proportions and foreground/background colour tones. While the Commission intended the logo to be a prescribed glyph shape, font designers made it clear that they intended to design their own variants instead. Often the sign is based upon the capital letter C in the respective font so that currency signs have the same width as Arabic numerals.

Placement of the currency sign varies from nation to nation. There are no official standards on where to place the euro symbol.

Another advantage to the final chosen symbol is that it is easily created on a typewriter lacking the euro sign, by typing a capital 'C', backspacing and overstriking it with the equal ('=') sign.


The official construction of the euro sign, which was specified to be printed in Pantone Yellow on a Reflex Blue background.
 

Economic and Monetary Union
 
History (1990–2007)

The euro was established by the provisions in the 1992 Maastricht Treaty on European Union that was used to establish an economic and monetary union. In order to participate in the new currency, member states had to meet strict criteria such as a budget deficit of less than three per cent of their GDP, a debt ratio of less than sixty per cent of GDP, low inflation, and interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions from moving to the stage of monetary union which would result in the introduction of the euro.

Economists that helped create or contributed to the euro include Robert Mundell, Wim Duisenberg, Robert Tollison, Neil Dowling, Fred Arditti and Tommaso Padoa-Schioppa. (For macro-economic theory, see below.)

Yielded currencies of the EurozoneCurrency Abbr. Rate Fixed on EMU III


Due to differences in national conventions for rounding and significant digits, all conversion between the national currencies had to be carried out using the process of triangulation via the euro. The definitive values in euro of these subdivisions (which represent the exchange rates at which the currency entered the euro) are shown at right.

The rates were determined by the Council of the European Union, based on a recommendation from the European Commission based on the market rates on 31 December 1998, so that one ECU (European Currency Unit) would equal one euro. (The European Currency Unit was an accounting unit used by the EU, based on the currencies of the member states; it was not a currency in its own right.) Council Regulation 2866/98 (EC), of 31 December 1998, set these rates. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.

The procedure used to fix the irrevocable conversion rate between the drachma and the euro was different, since the euro by then was already two years old. While the conversion rates for the initial eleven currencies were determined only hours before the euro was introduced, the conversion rate for the Greek drachma was fixed several months beforehand, in Council Regulation 1478/2000 (EC), of 19 June 2000.

The currency was introduced in non-physical form (travellers' cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the Eurozone) ceased to exist independently in that their exchange rates were locked at fixed rates against each other, effectively making them mere non-decimal subdivisions of the euro. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new notes and coins were introduced on 1 January 2002.

The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about two months, until 28 February 2002. The official date on which the national currencies ceased to be legal tender varied from member state to member state. The earliest date was in Germany; the Mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted two months. The final date was 28 February 2002, by which all national currencies ceased to be legal tender in their respective member states. However, even after the official date, they continued to be accepted by national central banks for periods ranging from several years to forever in Austria, Germany, Ireland, and Spain. The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022.

On 1 January 2007, Slovenia joined the Eurozone.

Eurozone

 

The euro is the sole currency in Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain. These 13 countries together are frequently referred to as the Eurozone or the euro area, or more informally "euroland" or the "eurogroup". Outside of the area covered by the map, the euro is the legal currency of the French overseas possessions of French Guiana, Réunion, Saint-Pierre et Miquelon, Guadeloupe, Martinique, Saint-Barthélemy, Saint Martin, Mayotte, and the uninhabited Clipperton Island and the French Southern and Antarctic Lands; the Portuguese autonomous regions of the Azores and Madeira; and the Spanish Canary Islands.

By virtue of some bilateral agreements, the European microstates of Monaco, San Marino, and Vatican City mint their own euro coins on behalf of the European Central Bank. They are, however, severely limited in the total value of coins they may issue.

Andorra, Montenegro and Kosovo adopted the foreign euro as their legal currency for movement of capital and payments without participation in the ESCB or the right to mint coins. Andorra is in the process of entering a monetary agreement similar to that of the microstates above.

Several possessions and former colonies of EU states have currencies pegged to the euro. These are French Polynesia, New Caledonia, Wallis and Futuna (the CFP franc); Cape Verde; the Comoros; and fourteen nations of Central and West Africa (the CFA franc). See Currencies related to the euro.

Although not legal tender in Denmark and the United Kingdom, the euro is accepted in some stores throughout both countries, particularly international stores in large cities, and shops in Northern Ireland near the border with the Republic of Ireland, where the euro is the official currency. Similarly, the euro is widely accepted in Switzerland, even by official boards, such as the Swiss Railways.

 
Future prospects (2008–)
 
Pre-2004 EU members

From Greece's participation in 2001 until the EU enlargement in 2004, Denmark, Sweden and the United Kingdom were the only EU member states outside the monetary union. The situation for the three older member states also looks different from that of the newer EU members; the three countries have no clear roadmap for adopting the euro:


Denmark negotiated a number of opt-out clauses from the Maastricht treaty after it had been rejected in a first referendum. On 28 September 2000, another referendum was held in Denmark regarding the euro resulting in a 53.2% vote against joining. However, Danish politicians have suggested that debate on abolishing the four opt-out clauses may possibly be re-opened. In addition, Denmark has pegged its krone to the euro (€1 = DKr 7.46038 ± 2.25%) as the krone remains in the ERM. Although not part of the European Union, both Greenland and the Faroe Islands use the Danish krone (the Faroes in the form of the Faroese króna), and so also fall within the ERM. Denmark will hold a new referendum by 2011.

Sweden: Sweden is obligated to join the euro by the 1994 Act of Accession, when they meet the economic conditions. However, the krona has never been part of ERM II, rendering Sweden ineligible. In 2003, a public referendum rejected euro membership, and Sweden has no plans to adopt the euro. The EU has made it clear that it will tolerate this with respect to Sweden but not those member states that joined in 2004 or 2007.

The United Kingdom has an opt-out from eurozone membership under the Maastricht treaty and is not obligated to join the euro. While the government is in favour of membership provided the economic conditions are right (requiring that "five economic tests" be met), the general population remain opposed and the question has never been put to referendum. The United Kingdom was forced to withdraw the pound sterling from the ERM (the precursor to ERM II) on Black Wednesday (16 September 1992) following pressure from currency speculators, and the pound is not part of ERM II.


Post-2004 EU members

As of 2007, 11 new EU member states had a currency other than the euro; however, all of these countries are required by their Accession Treaties to join the euro. Some of the following countries have already joined the European Exchange Rate Mechanism, ERM II. They and the others have set themselves the goal of joining the euro (EMU III) as follows:
Remaining currencies likely to be yieldedCurrency Abbr. Rate Conv goal



1 January 2008 for Cyprus and Malta - Approved by the Ecofin and conversion rate fixed on
10 July 2007
1 January 2009 for Slovakia
1 January 2010 for Lithuania and Bulgaria
1 January 2011 for Estonia
1 January 2012 or later for Hungary, Latvia, Poland, the Czech Republic and Romania.

Too high an inflation rate postponed the entry of Lithuania and Estonia as planned on 1 January 2007. Some of these currencies do not float against the euro, and a subset of those were unilaterally pegged to the euro before joining ERM II. See European Exchange Rate Mechanism, currencies related to the euro, and individual currency articles for more details.

Originally, the Czech Republic aimed for entry into the ERM II in 2008 or 2009, but the current government has officially dropped the 2010 target date, saying it will clearly not meet the economic criteria. The new goal is 2012.

Similarly Latvia had aimed to join the Euro in 2008 but inflation of over 11% has resulted in a delay as the country does not meet the current criteria. The government's official target is now 1 January 2012 although the head of the Bank of Latvia has suggested that 2013 may be a more realistic date.

The Fifth Report on the Practical Preparations for the Future Enlargement of the Euro Area stated on 16 July 2007 that only Cyprus, Malta (both 2008), Slovakia (2009) and Romania (2014) had currently set official target dates for adopting the euro.

Cyprus, Estonia, Latvia, Lithuania, Malta and Slovakia have already finalised the design for their respective coins' obverse sides.
 

Silver Bullion

Throughout history, silver bullion has served mankind as a primary monetary metal. It is durable, divisible, convenient, has utility value, and cannot be created by fiat.

However, unlike its fellow monetary metal—gold—silver is most commonly used today as an industrial commodity. Industrial demand for silver has grown consistently for the past three decades because of silver's many unique properties, including its strength, malleability, and ductility...its unparalleled electrical and thermal conductivity...its sensitivity to and high reflectance of light...and its ability to endure extreme temperature ranges.


In addition to its industrial uses and qualities, silver is also used in numerous health care products because of the unique antibacterial characteristics that it possesses. The "Silver Bullet" is used by hospitals to prevent bacterial infections in burn victims. Wound dressings and other wound care products incorporate a layer of fabric containing silver for prevention of secondary infections. In a world that is showing increasing concern about the spreading of disease and potential pandemics, silver is increasingly being tapped for its microbicidal qualities.


It is estimated that more than 95% of all the silver ever mined throughout history has already been consumed by industrial use. That silver is gone forever, unrecoverable at any price. In 1900, there were approximately 12 billion ounces of silver in the world. Today, that figure has fallen to about 300 million ounces of above-ground, refined silver. This means that at current prices, it would only take about four billion dollars to purchase all of the above-ground silver in the world today.

Anyone who follows world headlines is certainly aware of increasing and ever-present geopolitical instability. This, combined with the evolving macroeconomic landscape, can be viewed as bullish catalysts for the silver market. Silver's historic role as a store of value and investment, and its increasing demand in an environment where growing industrial use exceeds available new supplies, further suggest a bullish trend for this versatile metal.

Some of the world's leading financial analysts believe that silver is one of the world's most important commodities, with unparalleled investment opportunity for the future. Silver's unique properties, which make it ideal and essential for global industry, create a situation where there is simply no substitute. In addition, silver prices at times have been extremely volatile, making silver an attractive investment and trading vehicle.

Silver mine

History of Silver Mining

Silver has been known since ancient times. It is mentioned in the Book of Genesis, and slag heaps found in Asia Minor and on the islands of the Aegean Sea indicate that silver was being separated from lead as early as the 4th millennium BCE.

Europeans found a huge amount of silver in the New World in the now Mexican State of Zacatecas(discovered in 1546) and Potosí(Peru,also discovered in 1546), which triggered a period of inflation in Europe. The conquistador Francisco Pizarro was said to have resorted to having his horses shod with silver horseshoes due to the metal's abundance, in contrast to the relative lack of iron in Peru. Silver, which was extremely valuable in China, became a global commodity, contributing to the rise of the Spanish Empire. The rise and fall of its value affected the world market.

Silver mining was a driving force in the settlement of western North America, with major booms for silver and associated minerals (lead, mostly) in the galena ore silver is most commonly found in. Notable silver rushes were in Colorado, Nevada, Cobalt, Ontario, California and the Kootenay region of British Columbia, notably in the Boundary and "Silvery" Slocan. The first major silver ore deposits in the United States were discovered at the Comstock Lode in Virginia City, Nevada, in 1859.

Areas of silver mining

Silver is found in native form, combined with sulfur, arsenic, antimony, or chlorine and in various ores such as argentite (Ag₂S) and chlorargyrite ("horn silver," AgCl). The principal sources of silver are copper, copper-nickel, gold, lead and lead-zinc ores obtained from Canada, Cobalt, Ontario, Mexico (such as Batopilas), Peru, Australia and the United States.

Silver ore processing

Silver is commonly extracted from ore by smelting or chemical leaching. Ore treatment by mercury amalgamation, such as in the patio process or pan amalgamation was widely used through the 1800s, but is seldom used today.

Silver is also produced during the electrolytic refining of copper and by application of the Parkes process on lead metal obtained from lead ores that contain small amounts of silver. Commercial grade fine silver is at least 99.9 percent pure silver and purities greater than 99.999 percent are available. Mexico is the world's second largest silver producer after Peru in 2005. According to the Secretary of Economics of Mexico, it produced 80,120,000 troy ounces (2492 metric tons) in 2000, about 15 percent of the annual production of the world.

Investing in silver

Methods of investing in silver

Bars

A traditional way of investing in silver is by buying bullion bars. In some countries, like Switzerland and Liechtenstein, bullion bars can be bought or sold over the counter of the major banks.

Physical silver, such as bars or coins, may be stored in a home safe, a safe deposit box at a bank, or placed in allocated (also known as non-fungible) or unallocated (fungible or pooled) storage with a bank or dealer.

Various sizes of silver bars:

• 1000 oz troy bars. – These bars weigh about 68 pounds avoirdupois (31 kg), and vary about 10% as to weight, as bars range from 900 oz to about 1100 oz (28 to 34 kg). These are COMEX good delivery bars.
• 100 oz bars. – These bars weigh 6.8 pounds (3.11 kg), and are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey. Those two brands cost a bit more, usually about 40-50 cents per ounce above the spot price, but that price may vary with market conditions.
• Odd weight retail bars. – These bars cost less, and generally have a wider spread, due to the extra work it takes to calculate their value, and extra risk due to the lack of good brand name.
• 1 kilogram bars (32.15 oz)
• 10 oz bars and 1 oz bars (311 and 31.1 g)

Coins

American Silver Eagle bullion coin.

Buying silver coins is another popular method of physically holding silver. One example is the 99.99% pure Canadian Silver Maple Leaf. Coins may be minted as either fine silver or junk silver, the latter being older coins with a smaller percentage of silver. For example, U.S. pre-1965 half dollars, dimes, and quarters are 25 grams per dollar of face value and 90% silver (22½ g silver per dollar). (1965-1970 and 1975-1976 Kennedy half dollars are "clad" in a silver alloy and contain about one-third of the pre-1965 issues.)

Junk silver coins are also available as sterling silver coins, which were officially minted until 1919 in the United Kingdom and Canada, and 1945 in Australia. These coins are 92.5% silver, and are in the form of (in decreasing weight) Crowns, Half-crowns, Florins, Shillings, Sixpences, and threepence. The tiny threepence weighs 1.41 grams, and the Crowns are 28.27 grams (1.54 grams heavier than a US $1). Canada produced silver coins with 80% silver content from 1920 to 1967.

Rounds

Some hard money enthusiatists use .999 fine silver rounds as a store of value. A cross between bars and coins, silver rounds are produced by a huge array of mints, generally contain an ounce of silver in the shape of a coin but have no status as legal tender. Rounds can be ordered with a custom design stamped on the faces or in random assorted batches.

Certificates

Silver Certificate.

A certificate of ownership can be held by silver investors instead of storing the actual silver bullion. Silver certificates allow investors to buy and sell the security without the hassles associated with the transfer of actual physical silver. The Perth Mint Certificate Program (PMCP) is the only government guaranteed silver certificate program in the world.

The U.S. dollar, denominated in $5 and $1, was once a silver certificate.

Accounts

Most Swiss banks offer silver accounts where silver can be instantly bought or sold just like any foreign currency. Unlike physical silver, the customer does not own the actual metal, but rather has a claim against the bank for a certain quantity of metal. Many digital gold currency providers, such as e-gold and GoldMoney, offer silver as an alternative to gold and work on a similar principle. Other electronic silver accounts include the eLibertyDollar and Phoenix Silver. Silver accounts are backed through unallocated or allocated silver storage.

Exchange-traded funds

Exchange-traded funds (or ETFs) represent a quick and easy way for an investor to gain exposure to the silver price, without the inconvenience of storing physical bars. The silver ETFs are:

• iShares Silver Trust (NYSE: SLV), launched in April 2006 by iShares.
• Central Fund of Canada (TSX: CEF.NV.A, NYSE: CEF) has 45% of its reserves held in silver with the remainder invested in gold.
• In September 2006 ETF Securities launched ETFS Silver (LSE: SLVR) which tracks the DJ-AIG Silver Sub-Index, and later in April 2007 ETFS Physical Silver (LSE: PHAG) which is backed by allocated silver bullion.

Investing Strategies

There are three important reasons cited by enthusiasts for holding precious metals, especially gold, silver, palladium and platinum, in every investment portfolio: strategic asset allocation, tactical asset allocation and hedging. Strategic asset allocation supposedly helps fully diversify a portfolio by balancing asset classes of different correlations in order to maximize returns and minimize risk. A recent study carried out by Ibbotson Associates suggested that allocating from 7 to 15.7 percent of a portfolio to precious metals results in increased returns and decreased risk. Hedging is a way of offsetting investment risk; the perfect hedge eliminates the possibility of future losses. The old Wall Street saying, "Put 10% of your money in gold and hope it doesn't work", neatly summarizes the hedging attributes of precious metals. And in today's economic climate, there are plenty of risks to hedge against: currency exchange declines, loss of purchasing power, and black swan events - sudden unexpected financial crises such as war, terrorism, natural disasters, health pandemics, derivatives accidents, collapse of a major bank or corporation, disruptions of the oil supply, and so on. However, this theory is controversial, as other financial experts from large banks and publications such as Money Magazine suggest you maintain no more than a 1% precious metal allocation in your portfolio. Whatever your financial position, always do your own research before committing significant sums of money to any investment.

Taxation

In many tax regimes, silver does not hold the special position that is often afforded to gold. For example, in the European Union the trading of recognised gold coins and bullion products is VAT exempt, but no such allowance is given to silver. This makes investment in silver coins or bullion less attractive for the private investor, due to the extra premium on purchases represented by the irrecoverable VAT (charged at 17.5% in the United Kingdom, and 19% in Germany, for example).

Other taxes such as capital gains tax may apply for individuals depending on citizenship and if the asset is sold at increased value.

Silver price (1)

Silver price

The price of silver is notoriously volatile, as it fluctuates between industrial and store of value demands. At times this can cause wide ranging valuations in the market, creating volatility.

Silver often tracks the gold price due to store of value demands, although the ratio can vary. The gold/silver ratio is often analysed by traders and investors. Over most of the 19th century the gold/silver ratio was fixed by law in Europe and the United States at 15.5, which meant one troy ounce of gold would buy 15.5 ounces of silver. The average gold/silver ratio over the 20th century was 47.0.

Annual average price of silver. The large spike occurs in 1980

Year to 31st December	Silver price US$/oz	Gold price US$/oz	Gold/silver ratio
1910	0.54	20.67	38.28
1920	0.54	20.67	38.28
1930	0.33	20.67	62.67
1940	0.35	34.50	98.57
1950	0.80	40.25	50.31
1960	0.91	36.50	40.11
1970	1.64	37.60	22.93
1980	15.65	641.20	40.97
1990	4.17	423.80	101.63
2000	4.60	272.15	59.16
2005	8.83	513.00	58.10
2006	12.62	628.20	49.78

From September 2005 onwards, the price of silver has risen fairly steeply, being initially around $7 per troy ounce but reaching $14 per oz. for first time by late April of 2006. The monthly average price of silver was $12.61 per oz. during April 2006, and the spot price was around $13.68 per oz. on April 6, 2007.

Factors influencing the silver price

Private and institutional investors

From 1973 the Hunt brothers began cornering the market in silver, helping to cause a spike in 1980 of $49.45 per ounce and a reduction of the gold/silver ratio to 17.0 (gold also peaked in 1980, at $850 per ounce). However a combination of changed trading rules on the New York Mercantile Exchange (NYMEX) and the intervention of the Federal Reserve put an end to the game. In 1997, Warren Buffett purchased 130 million ounces (4,000 metric tons) of silver at $4.40 per ounce (total value $572 million). Similar to gold, the silver price has more than doubled in value against the United States dollar since December 2001. On May 6, 2006 Buffett announced to shareholders that his company no longer held any silver. In April 2006 iShares launched a silver exchange-traded fund, called the iShares Silver Trust (NYSE: SLV), which as of April 2007 held 130 million ounces of silver as reserves.

The large concentrated short position

The CFTC publishes a weekly Commitment of Traders Report which shows that the 4 or fewer largest traders are holding 90% of all short contracts. This level of concentration is unprecedented in any commodity, and should arouse suspicion. Furthermore, these 4 or fewer traders are short a total of 245 million ounces (as of April 2007), which is equivalent to 140 days of production.

Industrial demand

The use of silver in items such as electrical appliances and medical products has increased since 2001. New applications for silver are being explored in batteries, superconductors and microcircuits, which may further increase non-investment demand. The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long term rise in industrial usage. However, offsetting this is the enormous reduction in the use of photographic film, which uses silver halide, due to the advent of digital cameras.

Silver price

Precious metals remain the most undervalued of all the asset classes. Precious metals, and particularly silver, remain the most undervalued of all the commodities. Silver is even more undervalued than gold and is undervalued when compared to other strategic commodities such as oil and uranium.

Silver is currently trading at just below $14 per ounce. Gold Investments continue to believe that silver will surpass $20 per ounce in 2007, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high of some $130 per ounce in the next 8 years.

The fundamentals reasons for our very bullish outlook on silver is due to continuing and increasing global macroeconomic and geopolitical risks; silver’s historic role as money and a store of value; the declining and very small supply of silver; significant industrial demand and most importantly significant and increasing investment demand.

Silver price: global macroeconomic and geopolitical risks

Property markets and equity markets in the western world are near or at all time record highs. There is increasing macroeconomic and geopolitical uncertainty in the form of the sharp slowdown in the US housing market, increasing trade friction between the US and one of their prime creditors China (the negative impact of the introduction of US trade tariffs on Chinese paper products and the US’ WTO piracy claim may not have been fully realised by and priced into the financial media and the markets) and the continuing geopolitical tensions with Russia, Venezuela and in Iraq, Iran and the wider Middle East. These factors look set to at least curb returns in most property and equity markets.

Indeed these and other significant risks such as record debt levels in the western world, the huge and unprecedented US trade, budget and current account deficits and the massive fiscal profligacy of the Bush administration are not subsiding. These factors have ramifications for the predominant global reserve currency of recent times – the US dollar.

The IMF, World Bank and OECD have warned that the global economy faces increasing "downside risks" including rising oil prices, falling stock markets and trade imbalances. The IMF’s semi-annual World Economic Outlook (released April 5th 2007) said an economic slowdown in the US would have only a modest global impact if it were confined to the property sector.

The IMF report warned, however, that the shock to the global economy could be more significant if the property downturn spread to consumer spending and business investment. This seems likely as the US consumer is more indebted now since 1933 with little or no savings whatsoever. The Comptroller Auditor General of the US, David Walker stated “last year (2006) was the first year since 1933 that Americans spent more money than they took home and, as you probably recall, 1933 was not a good year for the United States.”

The US’ national gross debt is $8,883,212,488,519 trillion ($8.8 trillion) and growing. When George Bush came to power US’ national gross debt was $5.7 trillion. Even the most sanguine, tunnel-visioned bull would have to admit that the fundamentals of the US economy are bad and deteriorating.

Other long term risks and challenges facing the global economy come in the form of the threats posed by a bird flu pandemic, peak oil and global warming.

Silver price: historic role as a store of value

Thus the monetary metals and safe haven assets of gold and silver are likely to continue to outperform other asset classes. Also they are likely to outperform other commodities such as the base metals, oil and uranium. These commodities would be likely to experience a fall in price were there to be a significant slowdown in the global economy which would create demand destruction.

Because of their historic and continuing role as monetary or currency metals and as safe haven assets gold and especially silver are likely to outperform. This is because they are not simply commodities but also currencies which cannot be debased like our modern fiat paper and electronic currencies.

Gold and silver has been used as money in more regions and countries and for longer periods of time than the relatively modern use of paper currencies. Interestingly, silver has been used in more regions and countries and for longer periods of time as money than gold. Nobel Laureate Milton Friedman, said of silver "The major monetary metal in history is silver, not gold.” In Mexico today, there is a movement to return to using silver as money with a bill being put before by the Mexican Congress by Hugo Salinas. The currency of India is the rupee and it comes from the Sanskrit word ‘raupya’ which meant silver or coin of silver. The French word for money is ‘argent’ which came form the Latin argentum meaning silver. The franc was established as the national currency by the French Revolutionary Convention in 1795 as a decimal unit (1 franc = 10 decimes = 100 centimes) of 4.5 g of fine silver.

Most countries in the world used silver for smaller denomination coins in the 19th Century and through the 20th Century up until the 1950’s, 1960’s and 1970’s when currencies were gradually debased. Debase means to degrade, dilute or devalue. For instance, in the US up until 1965, silver dimes and quarters were made of 90% pure silver. In 1965, the US government debased and devalued the currency and reduced the silver content to 40% pure silver. These legal tender silver bags are still bought today by savvy investors.

Silver price: declining supply

Before looking at the demand side of the silver equation it is important to consider the supply side.

In 1900 there were 12 billion oz of silver in the world. By 1990, the internationally respected commodities-research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver. Today, that figure has fallen to about 300 million ounces in above ground refined silver. It is estimated that 95% of the silver ever mined has been consumed by the global photography, technology, medical, defence and electronic industries. This silver is gone forever.

CBS Marketwatch published an article in March 2007 entitled ‘Silver may shine brightest among metals’, in which Kevin Kerr wrote that “Due to current supply/demand trends, the amount of silver above ground is projected to shrink to a critically low level in 2010. As supply shrinks, prices will keep rising steadily to new highs. Many in the investment world are unaware of this part of silver's story. Industrial demand has been outstripping mining supply for the past 15 years, driving above ground supply to historically low levels.”

Silver production was flat this year and is expected to be flat again next year. Incredibly, the amount of mined silver has been less than its demand every single year for the last 15 years. This hasn't resulted in significantly higher prices yet because the world has been able to fill the gap from inventories and official government stockpiles.

However, today the U.S. government's stockpile is all but gone, and sales from other official sources, such as China, Russia and India, are declining, too. The decline in refined silver stocks, from around 2.2 billion ounces in 1990 to around 300 million ounces today means that silver stocks are near an all time low.

The supply of silver is inelastic. Silver production will not ramp up significantly if the silver price goes up. Supply didn't increase in the 1970’s when silver rose 35 fold in price – from $1.40/oz in 1971 to a high of nearly $50/oz in 1980. Importantly, silver is a byproduct metal and some 80% of mined silver is a byproduct of base metals. Higher prices for silver will not cause copper, nickel, zinc, lead or other base metal miners to increase their production. In the event of a global deflationary slowdown demand for base metals would likely fall thus further decreasing the supply of silver.

There are only a handful of pure silver mines remaining. This inflexible supply means that we cannot expect significant mine supply to depress the price after silver rises in price. It is extremely rare to find a good, service, investment or commodity that is price inelastic in both supply and demand. This is another powerfully bullish aspect unique to silver.

Silver price: significant and increasing industrial demand

Another important factor as to why silver is likely to outperform other asset classes and commodities besides the declining silver supply is increasing industrial demand.

Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, excellent malleability and ductility, its unparalleled electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges.

Silver has the highest electrical conductivity of all metals, even higher than copper. It was used in the electromagnets used for enriching uranium during World War II (mainly because of the wartime shortage of copper). Silver has the highest thermal conductivity and optical reflectivity of all metals. Silver’s unique properties restrict its substitution in most applications.

Non investment demand for silver is based primarily on industrial demand including electrical, medical and photography and also in jewellery and silverware. Together, these categories represent more than 95 percent of annual silver consumption. In 2005, 409.3 million ounces of silver were used for industrial applications, while over 164.8 million ounces of silver were committed to the photographic sector, and 249.6 million ounces were consumed in the jewellery and silverware (‘don’t sell the family silver’) markets. Jewellery and silverware are traditionally made from sterling silver. Sterling silver is 92.5 % silver, alloyed usually with copper.

Industrial applications for silver have always been significant but have increased significantly in recent years. Industrial applications for silver have increased since 2001 to a record in 2005, according to London-based researcher GFMS Ltd. In their most recent report, they predict a 6% growth rate in industrial applications of silver in 2007. Silver is used in film, mirrors, batteries, medical devices, electrical appliances such as fridges, toasters, washing machines and uses have expanded to include cell phones, flat-screen televisions and many other modern high tech devices.

Increasing industrial demand for silver is forecast due to strong economic growth in China, India, Vietnam, Russia, Brazil and other emerging economies in Eastern Europe, Asia and the world. Growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will increase.

Silver is known as the healthy metal and has many and increasing medical applications. While silver's importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. "Born with a silver spoon in his mouth" is also a reference to health as well as wealth. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.

Today silver is used in many health-care products. Specifically, the ‘silver bullet’ is used by nearly every hospital in the world to prevent bacterial infections in burn victims and allow the body to restore naturally the burnt tissue. Increasingly, wound dressings and other wound care products incorporate a layer of fabric containing silver for prevention of secondary infections. Surgical gowns and draperies also include silver to prevent microbial transmission. Other medical products containing silver are catheters and stethoscope diaphragms.

In a world that is showing increasing concern about the spread of diseases and pandemics such as bird flu, silver is being increasingly tapped for its biocidal properties. Research is ongoing on the use of silver and its compounds for therapeutic uses and on its potential use as a disinfectant in hospitals and other medical facilities.

Silver has many unique properties which make it ideal and indeed essential in global industry – especially in the global photography, technology, medical, defence and electronic industries. Yet, silver is a finite resource and the supply of silver is increasing only very incrementally.

Silver price: significant and increasing investment demand

According to the CPM Group, there are some 300 million ounces of refined silver in the world. That means that with silver priced at $14/oz., there is about $4.2 billion (300 million oz x $14) dollars worth of silver in the world. This means that the total silver market capitalisation is a very small $4.2 billion.

The increasing demand caused by investment demand is very compelling. Especially due to a number of key investment factors - the introduction of the iShares Silver ETF, the huge short position, the global liquidity bubble, the significant growth in the global money supply, the proliferation of millionaires, ultra high net worth individuals and billionaires, the proliferation of hedge funds and the exponential growth in derivatives.

ETFs

Investment demand for silver has also been rising rapidly the past few years with investors hedging themselves against rising inflation, possible currency devaluations and geopolitical and macroeconomic risk.

The silver market is currently in a transitional period where investment demand is starting to have a real impact on silver prices. Much of the new demand comes from iShares Silver ETF launched in April 2006. The fund has so far attracted 120 million ounces of silver investment. It is up nearly 30 million ounces since the start of 2007. It's important to remember that the silver market is very small - only some 300 million ounces.
That means the ETF alone now accounts for more than one-third of the global silver market, and growing investment into the iShares ETF should drive prices much higher. If even a small amount of money flows into the silver market from investors, ultra high net worth individuals (ultra-HNWIs), hedge funds, pension funds and institutions around the world, silver will almost certainly reach the nominal non inflation adjusted high it reached in 1980 of nearly $50 per ounce.

Huge short position

Perhaps the foremost analyst of the silver market today is Mr Theodore Butler. He believes that gold and particularly silver are the laggards in the commodity complex due to price manipulation. At over 300 million ounces, the largest 8 traders on the COMEX are short more silver bullion than exists in total known world inventories, including total SLV holdings and total COMEX inventories.

Butler sums it up succinctly, ”If there is one thing that separates silver from any other asset class, or any other item in any asset class, it is the presence of an unprecedented concentrated short position in COMEX silver futures. It is the existence of this concentrated short position that will, at some point, launch the silver price to the heavens. This short position has grown so large, and is held by so few entities, that it no longer matters how it will be resolved. It must be resolved and, whether that resolution involves default or buying by short covering, it will have the same bullish impact on price. You don’t have to look any further than the concentrated COMEX short position as to why silver has not outperformed every other commodity. Just as it explains price under performance, it is telling you why there must be overperformance in the future. At some point, the price of silver must accelerate upward to price levels that are truly shocking.”

Money Supply

There is some $50 trillion worth of bonds and $40 trillion worth of paper money in the world.

Money supply is increasing at extremely high levels globally. The annualised growth of some national broad money supplies are United States M3 up 10%, Eurozone M3 up 9.0%, UK M4 up 13%, China M2 up 15.9%, South Korea up 10.6%, Australia M3 up 13%, Russia M2 up a staggering 48%.

This has given rise to increasing inflationary pressures, a huge liquidity bubble and to ripe valuations in many stock and property markets.

Huge Increase in Billionaires, Multi Millionaires and High Net Worth Individuals

There has been an unprecedented increase in wealth amongst a tiny segment of the population in recent years. The number of millionaires in the world is multiplying very rapidly and there are now approximately 9 million millionaires in the world. There are approximately 70,000 ultra-HNWIs who have a net worth of more than $30 million.

Forbes recently estimated that there are now a record 946 billionaires in the world. In 2006, there were 178 new billionaires. These included 19 Russians, 14 Indians, 13 Chinese and 10 Spaniards, as well as the first billionaires from Cyprus, Oman, Romania and Serbia.
Bill Gates and Warren Buffet are worth some $51 billion and $40 billion respectively. One man’s net worth increased in one year by multiples of the total value of all silver in the world. Carlos Slim Helo, is a Mexican of Lebanese origin whose net worth increased from $20 billion in 2006 to almost $50 billion in 2007 or by some $30 billion.

All the billionaires' combined net worth increased by $900 billion to reach $3.5 trillion. There are a total of 8.7 million millionaires around the world, representing a total wealth of a mind boggling $33.3 trillion. A trillion is an extremely large number and difficult for most to comprehend. It is one million million or 10 to the power of 12. It is an absolutely huge number and it is important to remain conscious of the sheer size of this number.

Conversely, the total value of all above ground stock of silver is a very small $4.2 billion.

If only a tiny fraction of these millionaires, ultra-HNWIs and billionaires decided to diversify out of their extensive property and stock portfolios and invest even a very small amount of their portfolios in silver it would result in the silver price increasing in price exponentially. Given the extremely strong investment fundamentals of silver this seems likely.

Hedge Funds

Globally, hedge fund’s speculative capital have doubled to more than $2 trillion (or two thousand billion) in the last three years. Some hedge funds have started moving into the silver market. Charles Supapodok of Artemis Capital Management is seeking to raise a $300 million hedge fund to invest mainly in silver. Artemis Silver Fund, advised by Artemis Capital Management, will put 80 percent of the fund's holdings in silver.

Again due to the incredibly small size of the global silver market if even only a percentage of the roughly 9,000 to 10,000 hedge funds in the world decide to take positions in the silver market the price will increase in value by multiples.

Derivatives

The Bank for International Settlements has estimated that the total value of derivatives contracts was $450 trillion at the end of 2006 (up from $260 trillion in June 2006) and is increasing exponentially.

There is still a debate as to whether derivatives are a good or a bad thing. Ben Bernanke and most in the financial industry believes they are good as they create liquidity and help spread risk throughout the system. Greenspan was a little more sceptical and warned that they could create ‘moral hazard’ as they did when LTCM collapsed in 1998 sending shockwaves through the financial system. He also warned that they could lead to "cascading cross defaults."

Warren Buffett is similarly not as sanguine: “Charlie [Munger] and I believe, however, that the macro picture is dangerous and getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one other. The troubles of one could quickly infect the others. . . . Linkage, when it suddenly surfaces, can trigger serious systemic problems.”

“The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.”

For this reason Buffett has called derivatives “financial weapons of mass destruction.”

The systemic risk posed by the near infinite creation of hundreds of trillions of dollars of derivatives means that the finite currencies and safe haven assets of gold and silver are likely to be diversified into increasingly.

If only a tiny fraction of the humongous derivatives market was to reallocated into the silver market, silver would increase in value exponentially.

Silver's price history

Silver remains historically undervalued. Despite the incredibly bullish fundamentals outlined silver has so far underperformed nearly all the other commodities. Silver has gone from below $5 to some $14 and is up some 190% in the last 7 years.

This seems like a lot but when compared to other commodities and metals it is very little:

Oil is up from $10 to $63 or 600% and more than 6 fold.

Zinc from $.35 to a high of $2.00,. now $1.50/lb or nearly 5 fold.

Copper, from $.75 to a high of $4.00, now $3.58/lb or nearly 5 fold.

Lead from $.20 to $.90/lb or nearly 5 fold.

Nickel from $3 to $22/lb or more than 7 fold.

Indium, Molybdenum, Selenium, Cobalt are all up 1000% or 10 fold and more.

Uranium is up a phenomenal 1300% or 13 fold.

Many commodities are up between 5 and 13 fold. Silver is not even up 3 fold. If silver were to catch up with these other less rare and less precious metals, it would have to increase in value by some 500%. From the bottom at some $5/oz in 2001, that would result in silver being valued $25.

Silver reached $50 briefly in 1980 when just one billionaire Bunker Hunt (one of a handful of billionaires in the 1970’s) attempted to corner the silver market causing the price to surge (in conjunction with many investors seeking to hedge themselves from the stagflationary 1970’s). A lot of technical orientated analysts, investors and hedge funds are looking at this figure and as nearly all the other asset classes and commodities are all at near all time records there is every reason that silver will do likewise in the coming years.

Silver is priced at some $14/oz today. The average price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today’s dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60 and $44. It is for this reason that we believe silver will be valued at over $50 in the next 3 to 5 years.

Why silver is the investment opportunity of a lifetime

Finally, it is important to put today’s total value of all above ground refined silver in the world - $4.2 billion – in context.

$4 billion worth of Boeing planes was bought by Ryanair in 2005. $4 billion was the cost of stamp duty tax on Irish property in 2006. €8 billion worth of overseas commercial property was bought by Irish investors in 2006. Scottish Ministers are in charge of £2 billion (some $4 billion) of tax revenues. Macquarie, the Australian bank, recently acquired the O2 Airwave police radio business for £2 billion. The 2006 Sunday Times Rich List UK estimated that there were 20 people with a minimum wealth of £2 billion (some $4 billion) residing in the UK.

Further context is provided in the fact that the actor Will Smith has had a worldwide career box office of $4.4 billion. Microsoft is growing revenues at over $4 billion a year. In March and April of 2007, just two months, one man’s wealth increased by $4 billion. Since Forbes calculated its 2007 wealth rankings, they recalculated that in two months the Mexican tycoon Carlos Slim’s fortune rose $4 billion to $53.1 billion.

Rarely are there 'no brainers' in life and very rarely are there ‘no brainer’ investment opportunities. Invariably, ‘too good to be true’ investments turn out to be just that.

However, this is not the case with silver. It remains the investment opportunity of a life time.

Silver is unique in terms of being both a monetary and an industrial metal and having the highest optical reflectivity and the highest thermal and electrical conductivity amongst all metals. Silver industrial and investment demand is increasing very significantly and meanwhile supply is falling. The fact that the huge majority of the investment public and financial services industry remains ignorant of the fundamentals in silver means that the bull market in silver remains in it’s early stages. Silver remains probably the most undervalued asset class.

How to Speculate in Silver

• Silver options and futures
• Silver ETF
• Silver mining stocks
• Spread bet silver

How to Invest in Silver

• Perth Mint Government Silver Certificates
• Allocated and unallocated silver accounts
• 1000 troy oz bars – (weigh some 31 kgs) These bars are COMEX good delivery bars.
• 100 troy oz bars – (weigh some 3.11 kgs) These bars are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey.
• 90% Silver Bags
• 40% Silver Bags
(Pre-1970 U.S. legal tender 90% and 40% silver coins, which were used as money until they were replaced by the precious metal free coinage introduced in 1970 and used today. Bags of U.S. dimes, quarters, half-dollars containing 90% silver or 40% silver are traded based on their precious metal silver weight.)

Silver bars and silver bags can be taken delivery of but due to the volume, weight, difficulty to store securely and cost of insured delivery most investors buying silver in volume opt for unallocated and allocated silver accounts or government silver certificates due to their being no annual and ongoing storage/insurance fees.

Money

The history of economy is as old as humans them selves. As soon as people started to interact with each other they started to make goods first for them selves then later in need for other goods they could not make them selves but other people could make them. In the first markets people were meeting each other and change all the goods they made or purchased for another goods with their neighbors. This type of trade is called barter. Even after invention of money barter has steel some place in our society today.
What is Barter?
Barter is often regarded as an old-fashioned means of exchange that was superseded because money is far more efficient. After all, in a monetary system an apple grower who needs shoes simply has to find a cobbler. In a pure barter system the apple grower would have to find not just any cobbler but one who happened to want apples at that time. However the inconvenience of barter was just one factor, and in most places was probably not the most significant one. Barter has, undeservedly, been given a bad name in conventional economic writing, and its alleged crudities have been much exaggerated (Rev. ed. Cardiff, p.10). Barter and money are not necessarily completely incompatible. One of the most important improvements over the simplest forms of early barter was first the tendency to select one or two particular items in preference to others, so that the preferred barter items became partly accepted. Because of their qualities in acting as media of exchange although, of course, they still could be used for their primary purpose of directly satisfying the wants of the traders concerned. Barter still often plays an important role in trade with countries whose currencies are not readily convertible, e.g. the communist countries during the cold war. At the retail level barter has become the main means of exchange on occasions when currencies have collapsed completely as a result of hyperinflation, e.g. in Germany after the two world wars. In normal circumstances retail barter is much less important but its persistence has puzzled some economists (A History of money from ancient times to the present day. Rev. ed. Cardiff: University of Wales Press, 1996). After people were used to barter they realized they needed some other monetary system to trade goods, because it was impossible to make any trade with shoemaker if one wanted a new shoes and had for example apples if shoo maker did not want apples.
People started to use different kinds of goods to exchange for the goods they desired. There were some differences in different parts of world. Some where used precious stones, gems, jewels, gold, silver and other metals. In some part of world people used some other thing to purchase goods. American Indians used Wampum as money we can say.
Wampum-money used by American Indians
Wampum was usually made from the Northern Quahog, a hard-shell clam known to biologists as Mercenaria mercenaria. The name "quahog" is a variation of the Native American name for the clam. The quahog got its Latin name in 1758, when Linneaus himself picked the word mercenaria, because he knew that beads of quahog shell were used for currency in 17th century New England, and "mercenaria", the Latin word for money, seemed to be appropriate. Three hundred years ago, wampum could buy enough land to start your own plantation. In fact, you could even use wampum to pay your taxes to the Commonwealth of Massachusetts and pay your tuition at Harvard College. Wampum is typically a cylindrical bead, not a disk bead, and much of its value comes from the work that goes into drilling pieces of shell lengthwise.
Money used in history
In other parts of the world people usually started to make and use coins made from pieces of gold or silver. However the first coin was not a practical means of symbolizing exchange (as the economists believe). The earliest coins were temple tokens, pilgrimage souvenirs, detachable bits of holy power, made of substances at once chthonic (underground) and celestial (sun/moon, gold/ silver)--an exchange not between humans but between humans and spirits. As coinage is "secularized" it already appears as debased, polluted with lesser metals, subject to "inflation." But inflation is breath, i.e., and spirit. Money begins as half spirit half material, a doorway between worlds. But money becomes ever more spiritualized as it circulates through "History." Money is a Gnostic System, or an imaginable machine. Money has been used for something like 3000 years. City-states in the ancient Near East had extensive trade from city to city, and they used precious metals as a medium of exchange. When trades were settled a certain amount of metal could be used to settle the difference. There was a problem of quality control, however. There were problems of determining that the quantity and purity of the metal was as agreed. The answer was quality control and certification.
The early kings of Lydia standardized the hunks of metal and guaranteed their quality by stamping the king's picture on them. These were the first coins. This guarantee of quality by the Lydian kingdom -- already a rich and powerful one -- was very successful, and made the Kingdom of Lydia even richer, indeed proverbially rich. Croesus and Midas -- of all kings the most proverbially wealthy ones -- were among the kings of Lydia. But what Lydia could do, other kingdoms could also do. By 1000 AD, metallic coin monetary systems had spread through much of the Old World. Paper money were first used in China
As in so many other things, the Chinese were the innovators for the next step. The Chinese invented printing, and not too much later, they also invented paper money. It was widespread in China by around 1000 AD, but the Chinese abandoned it after about 1500, in the general decline of Chinese society after the Mongol conquest. Paper money was to evolve much more indirectly in Europe, though. A bimetallic standard is a monetary standard where the monetary unit is defined as consisting of either a certain amount of a metal or a certain amount of another, with the monetary authority being ready at all times to coin either metal at the legal price. For example, in the United States for the greater part of the 19th century the dollar was defined as consisting either of 22.5 grains of gold or 371 grains of silver (a grain is 0.065 grams). People could bring gold or silver bars at the Mint (the agency responsible for coining money) and they would get gold or silver dollar coins in exchange (www.micheloud.com).
Story of early Canadian money
Metallic coins were hard to find in Canada. People hoarded the coins and paid in hides. Part of what we call today "Canada" was French until 1763. The king of France used to send a Governor that administered the colony with some civil servants and soldiers. Trade within the community was limited because of the scarcity of means of exchange, namely, coins. Earlier trappers used hides as money, but the people that came from France regretted the so practical metallic money used in their country. The problem was that, as in other colonies, metallic coins had a tendency to leave the colony very soon or disappear. People, in accordance with Gresham's Law, hoarded these rare coins, not willing to give them away to pay for goods unless forced to do so ; furthermore, if they wanted to buy manufactured products from France, they had to pay in coins. Thus often coins sent at great expenses left Canada by the same boat on which they came.
All kinds of things were tried to retain the coins on the colony's territory, but none succeeded. The Governor found solution. The boat that brings the troop's pay is late. The Governor decides to issue fiat money, using playing cards. A break occurred in 1685. The annual boat that brought goods (including a load of metallic coins) from France usually came in the summer, but this year he only reached Canada in January. The coins were meant to pay the troops, and thus the soldiers had waited for 8 months! The Governor, having tried everything possible, like feeding the soldiers on credit, letting them work for peasants...) decided to requisition all decks of playing cards in the colony. He then had each card cut in quarters, wrote a monetary value on each, signed and stamped them. Then he let it be known that these cards had to be accepted in payment for anything that was for sale in the colony, without any raise in prices. The soldiers were paid with these cards, and the merchants accepted. When the boat arrived each and every card was exchanged at par against metallic coins in a week. This was an emergency solution, and had worked fine. All the cards were destroyed after the conversion, and life returned to normal. The Governor used this trick every year, issuing more and more cards each time. But the problem was recurrent, and soon the story began all over again, and repeated itself year after year, notwithstanding the "strong disapproval" of the King. Sometimes paper was used instead of playing cards (which had become hard to find), and this system could have given Canada an efficient monetary system, were it not for the excessive emissions. After 1690, the card emission had become annual. Around 1706 the exchange of cards against coins was already random, the King being less generous with this colony that brought him so little. Several years of arrears grew, and cards exchanged at a third of their nominal value, when merchants accepted them altogether! Emissions multiplied, leading to 400% inflation in 1713. After several unsuccessful attempts to convert the outstanding cards in real values, the governor almost stopped the emissions of new cards. French Canada began to suffocate by lack of money (as a mean of exchange, not as standing for resources). People tried to cope with credit, bills of exchange and other IOU's. In fact money was so badly needed that in 1729 merchants sent a petition to the king to reintroduce the playing card money.
He accepted and the cycle began again, leading to strong inflation and ultimately loss of trust in paper money, especially in 1755 during the 7 years war against the English. Inflation and fear of repudiation of any form of paper money became chronic. Peasants refused to sell their goods for anything other than metallic coins, shopkeepers raised their prices every week. Metallic coins still disappeared, as people hoarded them to protect them from requisition from the government who needed them to buy grain. The playing card money was over (william-king.www.drexel.edu)
Problems with money
Banking appears as a kind of alchemy, making wealth out of credit, something out of nothing. And the US dollar bill, a virtual crypt-text on the ethereal nature of money, can sum up the whole process. Sheer representation, money could become paper (text) backed by metal, then by imaginary metal, then by sheer imagination. By the eighteenth century all nation-states were in debt, to their own self-created banks. By 1973 the long alchemical process ended with Nixon's "toppling the gold standard," a feat of pure heraldic magic. The "Global Market" manifested as a gnostic sphere in which thought, transmitted at digital speed, coagulates as symbolic wealth. By now trillion dollars clay whirls around the globe in a noosphere (or "numisphere") have its own, devouring all such lesser ideologies as communism or democracy. "Money's gone to Heaven," become absolutely pure, and all-powerful. Money, though always based on trust, demands some material presence. Even electronic means of payments, though speediest for exchange, remain secured by paper records and ledgers, held in safe deposit, to reliably store their value. Humans go back and forth on money's proper ingredients. As times worsen, as in prison camps or during disasters bartering flourishes, trading with cigarettes or jewelry, even children. Today, only eight percent of the planet's money is in paper or coin. The rest is in ledgers.
Trust in barter is face to face. Contemporary trust in money is religious in the sense that its value relies only on rules made by banks and the customs of governance--far removed from most citizens' spheres of influence. And remember money differs from wealth, a matter of richer substance. Wealth is well being, an affluence, a contentment money may nurture but can never buy.

Slovakia

If you could take our Earth in your hand and examine it with a strong magnifying glass, you would find, that Slovakia is a tiny territory with what is perhaps the highest concentration of beauty. Slovakian history is European history. Historical finds dating from the earliest periods of human settlement, archeological finds from the times of Roman Empire and monumental foundations of basilicas dating from the Great Moravian Empire prove the early existence of highly developed cultures at the area of todays Slovakia.
Among the first inhabitants were Slavonic tribes who came before 7th century. The first territory was Samo`s empire, estabilished in the year 628. In the 8th century arised the Great Moravian Empire.
Later, Slovaks were conquared by the Hungarians who occupied them for over thousand years. In 1918, after the Austro – Hungarian monarchy broke down, independent Czechoslovak republik was formed. After the Munich dictate CSR was split and Slovak fascisist state with president Jozef Tiso was created. But thanks to the Slovak National Uprising (29.8.1944) our position changed to winners. After the WWII CSR was renewed but under the communist dictatorship. In 1968 CSSR was changed into a federal state and new process of democratization (known as Prague Spring) led by Alexander Dubcek was stopped by invasion of the Warsaw Pact troops in August. The years of normalization followed. In November 1989 so called Velvet Revolution changed almost everything. The new Slovak republic was estabilished on 1st of January 1993.

A relatively small territory is situated in the heart of Europe. Slovakia contains an immense source of natural, cultural and historical monuments. Who comes here even if for a short time, sees the countryside, visits typical villages and towns with historical sights and buildings. Natural beauty, favorable condition for summer and winter vacation, beautiful caves, thermal and mineral natural springs with healting effects, water areas, cultural and historical monuments, interesting castles and houses, typical lively folk architecture, folk art and folklore - all this can Slovakia offer to its visitors all year round.

Slovakia is largely a mountanious country. Only in the southren and sout–eastern there are the extensive lowlands : Záhorska, Podunajská and Výchotoslovenská. The lowest point of Slovakia is located near the town Streda nad Bodrogom (94m above the sea level).
Up to the half of Slovakia`s territory is taken up by the Carpatian Arch, mountains that stretch across the north, that contains several small ranges: The Small Carpathians and the White Carpathians, the Small Fatra and the Large Fatra, the High Tatras and the Low Tatras, and Slovenské Rudohoria Mountains.
In the west, The Small Carpathians, situated in the lenght of almost 100km from Bratislava (the capital). With its natural beauties this area attracts many tourists in every season of the year
The White Carpathians create a natural border between Slovakia and Czech Republic.
The Small Fatra, with Vrátna valley is the centre of the winter sports.
The High Tatras are the largests National Park of Slovakia, the highest mountains in the country. They are situated in the north of Slovakia, and create the border between Slovakia and Poland. In the flora of this area you can find 1500 species of various plants. And in the flora, there is still possible to see the bear, the lynx, wild cats, otters, mountine eagles, the chamios, the marmot and other animals.
The highest peak of High Tatras is the Gerlachovský Štít, with its 2655m is situated in the middle of whole massif. The peak Lomnický štít with its high of 2635m dominate in the eastern part and peak Kriváň with 2494m dominate in the wetstern part of High Tatras. Between them there are 25 more peaks higher than 2500m.
The High Tatras are also famous for its numerous valleys which are largely the results of glacial activity. There are more than 90 lakes in them. The largest and the deepest of the lakes is Veľké Hincovo pleso (53m deep and its surface covering 18,2ha). The most frequently visited lake of the High Tatras is Štrbské pleso situated in the heigh of 1355m. It is popular for wonderful views of the surrounding mountain peaks. The turists, who are interested in an old architecture should visit the town Starý Smokovec. It is one of the oldest settlements of of the High Tatras. Starý Smokovec, together with Nový and Horný Smokovec create an important administrative centre and the most significant resort of mountain turism, winter sports and rekreation all the year round. A funicular conects it with Hrebienok (1236m) at the foot of the peak Slavkovský štít. Hrebienok is a good starting–point for tours to the valleys: Veľká Studená dolina and Malá Studená dolina.
In the area of the Slovak Paradise are faunded nomerous karstic phenomena, subsurface corridors, rock windows, caves, roaring waterfalls, but also the vast plains and ridges with fascinating far-reaching views. The variety of vegetation was influenced by the diference in the temperature and humidity on the rosks headed by the sun and in the cool canyons. There are thermophilic plants on the plains and rocks while the narrows provide good conditions for mountainious species. Much of the area is covered with spruce, fir and maple.
Plentyful plant families support a variety of fauna too.The area of Slovak Paradisie has the good conditions for butterflies (1324 species), the lizards, the brown bear and the lynx. Numerous caves make good homes for various species of bats. The richness of fauna and flora and beautiful sceneries provides an atractivity for tourists. The village Čingov is the main holiday resort and the starting-point of the marked tourist routes.Other attractive places you can visite are:
11km long canyon on the river Hornád – Prielom hornádu; 14km long canyon of the river Hlinec - Stratená dolina and the oldest cave in Europe – Dobšinská ľadová jaskyňa.

Most of the slovak rivers originate within its borders. Only four rivers bring water from neighboring countries: the Morava, the Danube, the Dunajec, and the Tisa. River Váh is the largest river of Slovakia and it empties into the largest river of Europe, into the Danube, which flows into the Black Sea.
Slovak rivers also abound in naturally attractive places. Especially in the High Tatras, or in the Slovak Paradise you can admire numerous small natural waterfalls, that were formed by glaciers. The 18km long waterfall Kmeťov vodopád in the High Tatras is the highest in Slovakia. Water reservoirs such as Hrušov, Orava, Liptovská Mara, Zemplínska Šírava became guite famous among water sport fans. Underground minerals and thermal springs are significant for recreational and physical therapy. About 1300 mineral springs are in Slovakia, with all types of mineral thermal waters.At the present time, mineral and thermal springs, natural curative sources and climatic conditions suitable for treatment are utulized for therapeutic purposes in 23 resorts. The most famous spa is Pieštany. Others, such as Trenčianske Teplice, Bardejov, Sliač, Dudince, as well as a few open air spas in the mountains, including Štbské Pleso and Nový Smokovec, also attract their share of grateful visitors.

Bratislava, the capital of Slovak Republik, has had a changing and colorful history. Bratislava is residence of Slovak President, the seat of the natoional, political, economical, social and scientifical bodies and institutions. It is the seat of country`s government and parliament. The most important university - the Comenius Univerzity seets in Bratislava., and also a number of other universities.
With the Slovak National Thatre and other diferent kinds of theatres, concert and exhibition halls, cinemas and various clubs it is the centre of country`s cultural life.
Situated at the cross-roads of important routes leading from the Mediterranean to the Baltic Sea, and of the foot of mountains and confluence of two rivers, it became an important settlement in Celtic and Roman times. At the turn of the 5th and 6th centuries the Slavs and the Avars settled in its territory. In the 9th century Bratislava became an important town of the Great Moravian Empire. In 1291Bratislava had been granted full urban privilegies by king Andrew. The town grew in significance especially under the rules of king Sigismund of Luxemburg and Mathias Corvinus, who made Bratislava the base of their foreign policy towards their western neighbours. By rebuilding the castle and putting up a second line of the town`s fortification, Sigismund made of Bratislava a key place, while Mathias Corvinus, by estabilishing the university Academia Istropolitana (1465) turned Bratislava into a center of his empire. After the battle of Mohacs in 1526 when Turks defeated Hungarian troots Bratislava became the capital of the Austro-Hungarian monarchy. The hungarian kings and queens were coronated in the Ghotic Minister of St. Martin. The Hungarian assembly used to hold its meetings in a Baroque palace in the Michal Street. In modern times this place has served as an University Library.
There are around 300 unique historical places and buildings in the old premises of Bratislava which were turned into museums and galeries and are now opened for the public. In the Castle of Bratislava are exibithed the greatests treasures of the country`s ancient history such as a Paleontholic Venus, golden Paleontholic jewellery, Celtic coins, silver Roman dish and jewellery...
The Old Town Hall, the oldest town hall on the territory of Slovakia, is also a museum today. Its exposition include the Gothic wall paintings and a panel celing in the original chapel which is now hall.
The largest palace of the town is Primaciálny Palace, built in the classicist-baroque style. The palace serves primarily as a picture gallery. The most beautiful part of the palace is the Mirror Hall. Recently the representative rooms of Primaciálny Palace have served as a temporary residence of the president of Slovak Republik.
One of the most beutiful palaces built in rococo style is the Mirbach`s Palace. The Slovak National Galery is situated close to the river Danube. In the front park of the galery the viitors can admire sculptures. In the exhibition halls there is an exhibition of Slovak art from the 12th century up to the present days.
Apponyi`s Palace is situated in the centre of the Old town, near the Old Town Hall.

The visitors can see here various exhibitions connected with winemaking, the folk costumes, ceramics...
There are two historical museums shows at the history of the city: the museum of historical clocks called U dobrého pastiera, and an historical pharmacy museum called U červeného raka, which is situated near theMichal`s Tower. The exposition instaled in Michal`s tower informs about the fights which took place in Bratislava.
Košice, the metropolis of the East Slovakia has a long history.The permanent settlement existed on its territory since the Palaeontholic period. In the Middle ages, for its loccation on a trade route leading from the Balkans to the Baltic sea it gradually developedto an important economic and administrative centre of the region. Košice was garanted the town privilegies around 1290. And it was granted the town privilegies of the free royal town in 1342. The Turkish invassion stopped the developement of the town, and the town was rebuiltint to a strong anti-Turkish fortness.
The long centtral square is actually the boardenet main street running parallel with a trade route from the end of the 13th century. The late-Gothic Minster of St Elizabeth dominates the square. Built on the older parish church it ranks among the most notable Ghotic minster of Central Europe. The complex also includes St. Michel`s Chapel from the 14th century and Urban`s Tower with its famous bell, Urban.The exhibition from the anti-Habsburgs uprising you can find in The East-Slovak Museum. Among the noteworthy buildings representting the monuments of architecture of Košice belong the Levoča Housa, Mikluš Prison, classistic Town Hall, Rákoczi`s Palace (tachnical museum) and Dessewffz Palace (galery).

Banská Bystrica was in the past a famous mining town – „copper town“, and in present, its growing importance is very well evident to every visitor coming to the town. It is an important administrative, economic and cultural centre of the Central Slovakia. It is also a seat of one of the most recently estabilished universities, the University of Matej Bel, which is now only five years old. The centre of the town is dominated by the town castle which dates from the 14th century and the late Gothic town hall rebuilt in the 15th century. In the centre the visitors can admire Gothic, Renaissance and Baroque houses. One of them, the Thurzo`s house is now a museum with valuable archeological expositions. One of the most interesting memorials of Slovakia is the Museum and Memorial of the Slovak National Uprising.

It is situated in a monumental modern building but there is also a free space around in which heavy arms used in the uprising are placed.

Other famous cities:
Pezinok and Modra are the cities known all over the world as the largest producers of the wine.
Piešťany is the famous world health rezort with a lot of sanatoriums, spa-treatement houses. The symbol of the city is the crutch-breaker and mud-bath procedure.
Trenčín was in the past the seat of the famous sovereign Matúš Čák Trenčiansky. Nowadays, it is the town of fashion and industry. Zvolen has very interesting castle – Castle of Zvolen, which is an Gothic art museum.
Banská Štiavnica was known as a “silver town”. Nowadays, it is a famous historical town. Around the town you can visit very beautiful Štiavnické lakes.
Kremnica was called “gold town”, for its mining history. It is very bueutiful historical town, with historical buildings. The town is a centre of artists. Levoča is well known as and old historical town. In the city you can find the wooden works of the woodcarver master Paul.