“Money is Money, and Paper is Paper. All the invention of man cannot make them otherwise.”

With that line, Thomas Paine opened a devastating critique of paper money, clearly demonstrating that gold and silver are far superior.

Unfortunately, the powers that be didn’t listen to Paine. And neither did the investment world, because it’s managed to turn the market for gold and silver into its own paper markets. 

It’s not exactly the same as fiat money, but the impacts are similar. We’re seeing this manifest in the silver market today. 

In this episode of the Midweek Memo podcast, Mike Maharrey delves into the battle now raging between the paper silver futures market and the physical silver market and how it is driving the price. He also explains why he thinks the physical market will ultimately prevail. 

In this episode, Mike also gives a quick overview of the recent CPI report and tells you why you might consider taking investment advice from a 10-year-old. 

Mike opens the show with the Paine quote. 

“With those words, Thomas Paine went after what he saw as one of the greatest scams in history: governments claiming that paper is money. Through a series of devastating critiques, Paine delivered one of the most brutal takedowns of paper money ever written, systematically exposing every aspect of this fundamental fraud.”

Paine argued that paper fails because it is not limited by nature. 

“PAPER, considered as a material whereof to make money, has none of the requisite qualities in it. It is too plentiful, and too easily come at. It can be had anywhere, and for a trifle.”

Mike notes that, unfortunately, the powers that be didn’t listen to Paine.

“Or maybe they did and realized that the dream of big government is impossible with sound money. Governments need to be able to print money at will to support borrowing and spending. In a fiat system, the government can levy an inflation tax on the people. Since most people don’t notice it, at least not immediately, it is easier for the government to get away with this indirect form of taxation.”

The investment world also failed to heed Paine’s warning. 

“They have turned the gold and silver markets into paper. It’s not exactly the same as fiat, but the impacts are similar. We’re seeing this manifest in the silver market today.”

Mike points out that paper futures contracts have driven the silver market for years. 

“But with metal in short supply, physical demand is beginning to exert control.”

Mike explains the interaction between the paper and physical markets with the help of an interview with analyst David Morgan. He recently told Kitco News that physical demand is beginning to exert dominance over paper-based pricing mechanisms.

Mike points out that according to one analyst, there are about 356 paper ounces of silver for every ounce of physical silver. 

“This is no different than fractional reserve banking. As long as everybody is content to keep their money in the bank, the system hums along quietly. But when people lose faith in the bank and demand their dollars, you end up with bank runs. Similarly, when people demand physical silver, the paper system collapses.”

Mike highlights the most recent COMEX data to show how physical silver stocks are rapidly declining. Morgan told Kitco News that this indicates the global silver market is under stress.

“The physical market is taking control over whatever the paper price is.”

Mike also notes that there is about a $10 per ounce premium on silver in Shanghai, indicating tight supply there as well. He explains how various factors have created a displacement of metal, with silver flowing out of London and New York to the East. However, the problem can’t be solved simply by shifting metal from one center to another. 

“The fundamental problem is there isn’t enough metal.”

Morgan argues that in recent months, the paper paradigm regained control in January, leading to the recent price correction. 

“So, temporarily, even though the 1000-ounce bar market had basically taken control for weeks, perhaps months, and everybody was kind of cheering that understood what was really happening, it didn’t negate what was going on in the futures exchanges around the world. They go ahead of themselves.”

Morgan said that brought things back to reality, and that’s where we are today. 

“Now we are in a struggle between who’s going to win at this point, and it could go back and forth a couple of more times. Is it the paper pushers or the physical demand?”

Mike points out that all of this is taking place within an environment where silver demand has outstripped supply year after year. 

Based on preliminary data compiled by the Silver Institute, https://www.moneymetals.com/news/2026/02/12/silver-market-expected-to-run-sixth-straight-supply-deficit-this-year-004686">silver demand outstripped supply by about 95 million ounces last year, leading to the fifth straight market deficit. Including last year’s shortfall, the 5-year market deficit will climb above 800 million ounces, an entire year of mining output.

The Silver Institute projects a market deficit of around 67 million ounces in 2026, even with higher prices creating headwind for industrial demand.

“With the supply of metal limited, this battle between the paper and physical markets will likely continue, meaning more price volatility and big daily swings. However, it’s important to keep in mind this crucial fact — they can create paper to their heart’s content. They can’t create metal.”

Mike then pivots to the January CPI data.

“So, if you listened to the news last Friday, you know that the Consumer Price Index is cooling, but what about inflation? Well, just because prices aren’t rising as fast as they were doesn’t mean inflation is dead and gone.”

Mike argues that even though CPI has cooled, that doesn’t mean inflation is beaten. 

“The headline annual CPI fell to 2.4 percent. That’s getting close to the mythical 2 percent target. But think about it – the goal is to steal 2 percent of your purchasing power every year. That’s more than 10 percent of the value of your dollar eroding every five years. That’s the plan. So, there’s ALWAYS inflation.”

Mike points to the M2 money supply to emphasize his point. And he notes that every cooler-than-expected CPI print raises the likelihood of more inflationary policies from the Fed. 

“Now, if this is your first time listening to the show, you might be asking yourself, Mike, why are people still screaming for rate cuts if inflation is on the rise? And why would the Fed do it? Because, as I have been saying for months, the Fed is in https://www.moneymetals.com/news/2025/01/12/trump-vs-powell-and-a-catch-22-003748">a Catch-22. The Fed needs to cut interest rates and run quantitative easing to support the debt-riddled bubble economy. But it also needs higher rates to keep price inflation under control. Obviously, it can’t do both.”

Mike closes the show with one last question.

“Would you take investment advice from a 10-year-old girl?”

He explains why, in at least one case, maybe you should!  A Chinese girl bought gold with money gifted by her parents and turned a pretty profit.

He closes out the show with a call to action, urging listeners to follow the 10-year-old’s advice and get real money – gold and silver. He tells listeners they should call 800-800-1865 today!

Articles Mentioned in the Show

https://www.moneymetals.com/news/2026/02/16/cpi-is-cooling-but-what-about-inflation-004692">CPI Is Cooling, But What About Inflation?

https://mises.org/mises-daily/thomas-paine-paper-money" target=”_blank” rel=”noopener”>Thomas Paine on Paper Money