Bite the Silver

Bite the Silver


President Ronald Reagan’s great line with regard to détente was, “Trust but Verify,” delivered with a handsome former “B Movie” actor’s attractive grin. Good as the Reagan Administration was at this double-checking, the collapse of the Soviet Union had more to do with General Secretary Gorbachev’s perestroika and glasnost topped by attempts at prohibition in a hard drinking nation.

These “innovations” revealed, alas, that the USSR was being held together with putty, scotch tape and the willpower of some bulky and stony-faced gentlemen in overcoats. It was an edifice that evidently did not bear much shaking.

The end of the USSR and its hegemony over its satellites, owed very little, as it is now known, to smart US footwork through highly complicated SALT and START negotiations. In fact, Reagan readily admitted being taken by surprise at the sudden fall. So much for the “Iron Curtain”, a term popularised by none other than Winston Churchill. It came down, in the end with a classic TS Eliot style whimper.

Watching how Wall Street, Main Street, practically every Western street have crumbled over the last year; and how oblivious of ethical consideration the once mighty players seem to be, brazening it out over their undeserved entitlements; maybe TS Eliot was on to something. It might well be the very nature of all endings that Eliot grasped. And if he did, it was the gift of his very own, very special, muse. He realised, and told us all, that, in effect, endings, unlike beginnings, tend to be anti-climactic.

But whimpers apart, these days, in matters financial, people can’t be blamed for being a tad paranoid.

Everything of value seems to be melting like so much ice-cream. Fraudsters in expensive suits lurk behind every corporate pillar and wall of plate glass. Madoff jokes are more painful than funny. And seeing our own Ramalinga Raju stare into the camera with his unremarkable, everyman gaze fills one with dread and despair. We are blind and under prescient. It’s as if we wouldn’t be able to recognise a crook if he had both his hands in our pockets!

We need to drag out Reagan’s old trust and verify line and wear it as a motto, a mantra, a protective talisman, a prophylactic. But is that just us? No. The universal search for authenticity, for truth, has grown almost comic in its intensity.

President Obama, reacting to the considerable public outrage, says he will institute checks and balances and Congressional oversight so that such financial excesses cannot take place in future. This, even as he gets Treasury Secretary Tim Geithner to unveil plans to help private entities buy up to a trillion dollars of “toxic assets” on the balance sheets of America’s leading banks.

Of course, the privates have to put up some money, even if it’s just 7 per cent of the dough to qualify for “assistance”. And while it may be hard to imagine this of burnt sub-prime assets now, who’s to say that these brutally “marked to market” assets won’t bounce back hard once the economy starts growing again?

That is precisely what happened in India after the Unit-64 debacle. But here, it was the Government itself that bought the beaten down assets and made the eventual profits. Value, like authenticity, tends to fluctuate over time and tide.

Meanwhile, Prime Minister Gordon Brown of the UK says, despite his entire career spent in the originally Left leaning Labour Party, that laissez faire is, for now, dead. He knows that’s what people, badly done by, want to hear

Not that Brown wants to go back to a pre-Thatcherite orgy of Nationalisation. That kind of Old Labour, the Labour Unionist kind, the rhetoric dripping with Socialism and a fine disregard for market economics, cannot survive a day in today’s globalised world.

But authentic value did have a simple and clear cut meaning once. It dealt with the bullion worth of precious metals like silver and gold. People didn’t like paper currencies in those times, let alone the fanciness of “derivatives”, “options” and other financial instruments of today that have so much to answer for.

Dhirubhai Ambani, the apocryphal story goes, made his first fortune of a few lakhs of rupees arbitraging the differential in value between the price in London’s Silver Bullion market and the old Imadi Rials, from the reign of Imam Yahya of Yemen, 1904-1948, planchetted on the vastly trusted Maria Theresa Thaler (MTT). Dhirubhai was working a humble job at a petrol pump in Aden at the time. He bought and melted down as many of the coins as he could, and that was how Dhirubhai organised his first nest egg to go into business for himself.

The MTT, a large silver bullion coin, some 28 grams in weight, with an unvaried 833.33/1000 silver content and a portrait of the buxom Empress on the front and the Habsburg Double Eagle on the back, is probably the world’s most long-lived and trusted coin. It has been used in world trade continuously since it was first minted in 1741. It was named after Empress Maria Theresa, who ruled Austria, Hungary, and Bohemia from 1740 to 1780.

Since 1780, when Maria Theresa died, the coin has always been dated 1780. It has been struck in mints at Birmingham, Bombay, Brussels, London, Paris, Rome and Utrecht, in addition to the Habsburg mints in Günzburg, Hall, Karlsburg, Kremnica, Milan, Prague and Vienna. Some 389 million were minted till 2000, though in 1946, the Vienna Mint rescinded any rights of foreign governments to issue the MTT but went on to strike a further 49 million of the coin themselves.

The MTT was preferred coin in large parts of North Africa, Somalia, Ethiopia, Kenya, Tanzania, Mozambique and throughout the Arab world. It was also one of the first coins used in the US and probably contributed, along with the Spanish eight-bit dollar, to the choice and nomenclature of the “dollar” as the main unit of currency.

This devotion to an enduring coin may seem quaint today in the midst of a shattered world economy and the long abandoned Gold Standard in favour of Sovereign Guarantees on paper currency, and the vagaries of trade in the international currency markets. But that doesn’t stop the price of gold and silver going up in troubled times.

(1,051 words)

Tuesday, 24th March 2009
Gautam Mukherjee

Published in print in The Pioneer on April 1st 2009, OP-ED Leader entitled "Sparkling in the dark" and online at www.dailypioneer.com. Also archived there under Columnists.