The Scholarly Silver Shield

Check this out, I am sure many of  you will get a kick out of this…


I wanted to share the views of 91 undergraduate students concerning a quotation from “The Silver Shield and the Silver Bullet”.  A quotation was used as the basis for a final exam question.  These are final year students taking their second investments class, and their responses are documented below.

Philip O.
Senior Lecturer in Finance

Question 5 (10 marks)
The following quote was taken from the internet.  Its author is Silver Shield (Chris Duane) who is not rich and who has never taken a finance class in his life.

“An average Roman soldier was paid one Denarius for each day of service. Each Denarius was 1/10th of an ounce or about $2.70 a day which is equivalent to the world’s average daily pay. That valuation lasted for hundreds of years for basic labor. So now when you hear, “brother can you spare a (silver)dime?” you know that it meant a day’s wages. Later, skilled craftsman pushed that wage to almost an ounce a day. Our [U.S] Constitution actually defines a real “dollar” as a coin containing 371.25 grains (troy) of fine silver or 0.77 ounce of silver. My hero, Henry Ford pushed that wage to an unbelievable $5 a day or 3.6 ounces a day which was seen as excessive at the time. Today an average worker makes let’s say $100 a day. If there was some economic reality in the system, like real money, a 1/10th of an ounce would equal a day’s wages of $100. Therefore an ounce of silver should be about $1,000 an ounce, a far cry from today’s price of $27.
You could buy about 16 years of hard manual labor for about $10,000 with a bag of 5,000 90% silver dimes. I know college kids with $10,000 dollars available with their credit cards. If they were smart, they would blow their money on a bag of silver instead of beer, pizza and spring break. For $200,000, parents could buy 320 years of hard manual labor in silver dimes or you could send your kid to college to get drunk and find themselves…
Some other historical reference points include Jesus being sold out by Judas Iscariot for 30 Shekels or 15 ounces of silver. Can you imagine selling out your friend, much less Jesus Christ, for $400 bucks? What if we had $1,000 ounce silver? For $15,000, there are a lot of people who would do the deed. (Isn’t that the price hit men charge in movies?) It is also interesting to note that was the same value for a slave at the time. Plots of land were bought in the bible anywhere from 50 ounces to 200 ounces of silver. Good luck finding average properties for $1,250 to $5,000 a piece. But again, what if silver was $1,000 an ounce? Finding properties from $50,000 to $200,000 is a snap. So the purpose of this exercise is to see the ratio between a known silver amount and a known asset. When you take away the manipulated measuring stick of the dollar, the only way to compare an assets value is to compare assets to other assets. So right now it may cost you 2,000 to 8,000 ounces of silver to buy a plot of land. If we have a reversion to the mean, and our debt/money system collapses, you should be able to pick up land for 50 to 200 ounces. I really think that this is even too high, so let us keep digging with this theme.”

a. What is your current personal portfolio allocation to silver? (a free ½ mark)

b. What does modern portfolio theory (CAPM) recommend for your portfolio allocation to silver? Explain the reasoning behind modern portfolio theory’s position.

c. How does the information presented by Silver Shield affect your future allocation to silver? Describe your reasoning. Be specific to make your arguments stronger. For example, a weak argument is “that was 2000 years ago, this is today”. If you explain why this information is not relevant, that reasoning strengthens your argument.

Solutions and Responses:
Although this quotation is only a small proportion of Silver Shield’s lengthy “Silver Shield and the Silver Bullet” article, it brings up some interesting investment issues in a context that is not directly discussed in the textbook.  95 students sat the test and 91 managed to answer the question.

Twenty-five (25) reported owning some amount of silver, ranging from 1 ounce to $100 million (sic), but normally less than 20% of their portfolio. Many confessed to being too poor to have a portfolio.

Only 15 students identified that the CAPM implies that everyone should hold the market portfolio. Because of the benefits of diversification, the market portfolio has the highest Sharpe ratio of any portfolio: combinations of the market portfolio and the risk-free dominate all other portfolios. Therefore, CAPM says that investors should invest in silver in the same proportion as the market portfolio: weight in silver= (market value of all silver)/(market value of all investments).


The many varied answers are placed into 4 categories below.

1. Did Silver Ownership affect the Answer? Did the Quotation affect Future Silver Investment Intentions?
The owning of silver did not correspond to any difference in total score received and silver ownership and a correct solution to the part (b) question were independent events. Two (2) responses were in complete agreement with the quotation and said that modern financial markets were manipulated and that silver would do well when the system melted down. Five (5) said they would definitely add some silver to their portfolios, and 3 would look for more information and think about it.

2. Comments about the Author
Some of the class had seen a youtube video by Silver Shield during an intermission in the class (along with about 20 other videos from varied sources during the semester). Only 5 repeated the information on Silver Shield from the introduction to the quote (which may not be true as it was made up) and said that the writer was not credible because he was either not rich or had not taken a finance class. One stated that the author suffered from an overconfidence bias found in finance behavioral studies, while 6 said that the data selected was biased to fit his views and much information was left out. Only one response said that Silver Shield does not explain why the silver price has fallen.
Interestingly, virtually all students ignored the beer at college comments in the article, with only 3 students tangentially mentioning this in a humorous manner, and one of these responses was that “silver is a good investment as compared to waste the money on food”.

3. Finance Explanations
The safest way to answer this question was to follow the textbook, and students were told that the exam was graded according to the textbook’s views and not the instructor’s. It was easy to say that the information concerning silver relates to past prices and that this information should already be incorporated into current prices. The vast majority of studies of weak-form market efficiency (using past prices/technical analysis) show that you cannot make risk-adjusted returns from this type of information. Twelve (12) answers took this approach with varying levels of explanation. Also, 6 talked about the problem of fundamental risk, where the market can remain mispriced once mispricing is incorporated, and one quoted Keynes that markets can stay irrational longer than you can stay solvent.

Four (4) responses turned the fall in silver against the article’s premise and said that the trend is down and “why fight the trend until it changes?”

Seven (7) thought that future forecasts of economic conditions should be used instead of analyzing past prices. Fifteen (15) responses talked in some way about silver being a future hedge against the market collapse mentioned in the quotation. These were often thoughtful answers that stated a small fraction of wealth should be allocated to silver, and some mentioned how your allocation should vary depending on your assessment of the chance of a monetary collapse. On the other hand, 8 responses stated that the monetary collapse had an almost zero chance of occurring, and that silver should not be added to portfolios.

Three (3) stated that silver may not become money again even if a monetary collapse occurs and 7 said, “why bother with silver? Gold is better”, with three (3) also mentioning that gold is being used by central banks. One (1) stated that the government will simply introduce a new currency and silver will still be worthless. Along these lines, another stated that “money is not defined from what it is made from”. Two (2) stated that governments use paper, so there will not be a monetary role for silver. Three (3) said that silver may not be liquid in a monetary collapse.

Thirteen (13) stated that silver has lost value because it is no longer a medium of exchange and has become just another commodity, although it was often not clearly expressed; for example, 6 said silver now has “other uses to back then”. Along these lines, 5 argued that Roman soldiers didn’t have as many alternative investments as we do today and that explains why silver was valuable 2000 years ago.
Four (4) argued that there exist better alternatives to silver in modern times such as credit cards and bank debits, and the same number mentioned storage costs or the chance of theft of silver.

A thoughtful reason based on Merton’s Intertemporal CAPM explained that the fall in silver over the centuries was caused by a negative risk premium due to silver being a hedge against inflation or against economic depression (6 responses).

4. Economic Explanations of Silver’s Price Decline
Economic analysis was used to explain why silver had declined in the past and why the ratios were not relevant. There were 7 general statements about changes in supply and demand causing the change in the relative silver price without explaining any particular reasons. 6 stated that the supply of silver had increased dramatically, which 3 attributed to technological innovations in mining technology. Only one response said the silver supply had decreased. While stating that the supply of silver had increased, two simultaneously stated that the supply of land had not increased, to explain the silver-land price ratio.  The silver-land price ratio received a lot of space in the answers. Some stated that the decrease in the silver-land price ratio was due to population increases that put more pressure on land prices than silver prices (10). One innovative answer stated that the decrease in the ratio of the silver price to the land price was due to silver mining creating holes which increased the scarcity of land.

A common economic rationale (13) was that inflation and the cost of living were not accounted for by Silver Shield’s ratio analysis. Although the mention of inflation was often where it ended as inflation appears to explain many economic oddities, some were more specific. For example, a Roman soldier could live on 1/10 ounce of silver, whereas that wouldn’t buy a lunch today (for example). There are two possibilities with a ratio, but some of these answers then went on to say that silver was only useful as an inflation hedge (4 responses).
Although labor productivity increase is hinted at in the quotation as being a reason for the increase in the silver wage (e.g. Henry Ford), only 4 responses said that real wages have increased due to new technologies and productivity.

With no explanation, 6 believed in using ratios and 5 did not believe in using ratios. For the disbelievers, statements such as “ridiculous” and “meaningless” were used as arguments.

Finally, one suggestion for market timers: buy silver just before the Olympic Games in 2012. This must be due, no doubt, to the giving of silver medals to the 2nd placed competitors.

13 comments to The Scholarly Silver Shield

  • Brian

    Have fun with those student loans! Hope the beer and tail was good cause all you got out of it was programing into the matrix.

    • Ant

      Brian: Id give you an ‘A+’ for that response!

      Chris D: You may not have a financial degree but you are educating more than the population total of most universities.

  • ryan

    It’s wonderful to have awareness occurring while the veil of illusion is wearing thin in front of us all. The reason money exists is mainly to limit our potential in creation. Nicolas Tesla was not able to give the world the free energy because he lacked what they call the “financing” to bring it about; that’s why we are still stuck with oil consumption. What a pity! The answer, do away with money and the world will flourish and thrive once again!

    • GoldSaver

      Ryan, interesting comment.


      How do you value work without money?
      How do you encourage individuals to strive and grow without a method of exchanging their productivity (the products of their mind and hands)?
      How do you measure the overall worth of a product or service to other members of any community greater than a family unit?
      What feedback mechanism would exist to the value or worth of production once money, and its ancillary, supply and demand, are removed from the equation?
      What method of exchange, other than money, can be used for trading production between individuals?

      • ryan


        Thank you for your questions. Those are all great questions. I’ll try my very best to address them then.

        Before I go into your questions, let me put up an example and let’s all think about that for a moment. when one gets a chance to travel around the world, from NY to South America to Europe to Mid-East down to African Continent back up to Asia and finally back to North America. One witnesses lots of different rich cultures, wonderful buildings, historical landmarks, awesome mountain ranges, beautiful oceans, tastes variety of foods, and all other types of human ingenuity demonstrated everywhere around this planet! And yet, we just simply put a price tag of $60 trillions dollars for all of this creation in our world as a so-called world GDP. Can we really do that? Can we just place a number next to all the value and wealth of this planet? Are these two really equal?

        In reality, we cannot use any dollar amount to measure our intrinsic value as human beings because dollar has no intrinsic value attached to it. So when you exchange something valuable for dollar, you in reality are not getting something back with equal value. We need materials to live in this world, but not dollar.

        There is unlimited potential in all of us, be it energy, creativity and what not. The world thrives only when we are free to realize those potentials in a way of creating things to better the whole. Of course, each individual has unique talents which are translated into creation of something useful with that talent. What we essentially are doing is to exchange your talent with my talent. Then it’s all taken care of because our material requirement to live is fulfilled by equal exchange of substance. I can trade my rice with your potatoes. We are all happy. The example given here is oversimplified. But that idea can be built into a workable system where rules can be put in place to govern this activity on a worldwide scale.

        Hope this is of help.

        • GoldSaver

          Ryan, I will take the liberty of distilling your response to a couple of sentences: “I exchange your talent with my talent. I can trade my rice with your potatoes”

          But, how many potatoes are your rice worth? What if I don’t need your rice? What if what I really need is lumber? And the woodsman does not need rice either, he needs a new ax. The smith may need rice, but how do you value your rice for his ax that you plan to trade to the woodsman for lumber that you will then trade with me for my potatoes?

          See the problem and the reason why every barter society has always adopted money?

          Money is a known method of exchange in which the value of other goods or services can be based. Money serves the function of providing a feedback mechanism to supply and demand, there is only one doctor in the village but 5 woodsmen or there is a bumper crop of rice but lumber is scarce.

          Money also serves as a storage of excess production to allow you to purchase wealth in the future. Lets say you produce plenty of rice but don’t want anymore of my potatoes? Do you throw away your rice? Money allows you to sell your rice and keep the stored surplus production (energy) for next year when you might need lumber for a new roof or potatoes.

          You say is the equal exchange of a substance. What about the dentist? He has no substances, he has services. Is his time not worth anything? And, more importantly, is his time not worth more than the street sweeper’s time?

          What you are confusing is money and currency. I have several articles on this website as to the meaning of money. It would help if you read them.

    • Son of Liberty

      Its not possible to “do away with money” any more than it is possible to “do away with toys” or “do away with tools”. Money is a natural invention that can come from anything.

      Also, Tesla’s problem might have been mitigated if he didn’t partner up with JP Morgan who had other investments that were antithetical to and threatened by Tesla’s work.

    • Mustafa Cohen

      do away with money and the world will flourish

      I thought so, too. But if you remove money, people will quickly come up with new money. Not because they are inherently bad, but because they were never taught other ways to live.

      The solution you are looking for is not getting rid of money, but staying away from people obsessed with collection and possession. Even if it means everyone you know.

      Look for those whose goals cannot be measured in money, and be prepared to never find them. Even if you are the only person on Earth with your views, never doubt that it’s you who is normal.

      You can’t change the world, but you can leave it behind.

      Take care.

  • Kyle

    Well so much for a college education! LOL! Glad I taught myself economics. Looks like these college grads will have to learn about money, value, and wealth the hard way.

  • Nate

    Ryan, I like where you’re trying to with this, but I don’t think it would ever work, and frankly I don’t think I want it to. I’m as sick of the system as anyone, but getting rid of something to be used by the general populace as money is not the way I want to go. I do however appreciate all view points, so thanks for sharing.

    • ryan


      You’re very welcome.

      Things will work if we intend to make it work. All things are possible in creation.

  • Travis

    Money itself is not bad, as long as it stays honest and true. It’s the manipulation of it and screwing around with the honest weights and measures of it that causes most of the problems.

    Or having debt rule the economy, as ours does. If every person, government, and corporation paid off all of their debts, there would be a grand total of 0 dollars in existence. As a matter of fact it would actually be negative as interest was owed on all the debt and there wouldn’t be any money left to pay it.

  • Dry Drunk


    How about this middle ground?

    I posted on zerohedge saying that in the future the US dollar is called the US gunmo. (see below).

    Why do we call it a dollar? The dollar is defined in the Constitution as 416 grains of standard silver. Why do we give our power to TPTB and call it a dollar, when it is gunmo?

    Confuscius said “when words lose their meaning, the people use their liberty”. But we choose this loss of liberty because we choose to move our mouths and type “US Dollar”. Change the word dollar to something else. Here’s a proposal for a new word (post from previous).
    Mo – any item that can be freely exchanged between individuals. Includes knowledge, skills, actions, and promises. Sharing freely of these mo items with disciplining love may lead to greater mojo. Items in the person’s possession, notably gold, are also viewed as Mo for conducting impersonal and personal exchanges.

    Mojo — the stock of Mo possessed by an individual that could potentially be exchanged.

    Gunmo — Putting a gun in front of Mo. False Mo brought about when otherwise free people are forced to exchange particular items by the power of the gun (for example, ancient legal tender laws), whose purpose is to finance the production of more guns and trigger wars. Gunmo provides ammo for wars.

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