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The History of a Lost Art – Mercury Gilding

The History of a Lost Art - Mercury Gilding

Throughout history, mankind has lusted after the incomparably rich color of gold.  But gold’s high value has traditionally limited gold jewelry, tableware and decorations to the very wealthiest members of society.  During ancient times though, ingenious alchemists developed a way around this problem – gold plating.  Gold plating, also called gilding, is a process where gold is either mechanically or chemically adhered to another substance, usually a less expensive metal.

One very special kind of gilding process, however, was far superior to all the others.  It was called mercury gilding and it produced the most beautiful gilt objects known to man.  Mercury gilding, as the name implies, involved mixing pure gold together with liquid mercury to form a paste-like amalgam.  This gold-mercury amalgam was then brushed onto the surface of a silver, copper, brass or bronze object.

Once the item had been covered with the amalgam, it was heated in a furnace until the mercury vaporized.  Because mercury’s boiling point is so low (674°F or 357°C), the mercury is driven off by the heat, leaving the gold from the amalgam strongly bonded to the surface of the object.  As a final step, the freshly gilt item was burnished or polished using an agate tool.  This gave a bright, high purity gold finish that was both beautiful and durable.

Mercury gilding, also known as fire gilding, has been known since ancient times.  The ancient Greek, Roman, Persian and Chinese civilizations all used mercury gilding extensively for jewelry, statues and other objet d’art.  But there was an alternative ancient gilding method that used gold leaf.  In this process sheets of gold leaf were carefully adhered to a clean metal surface and then burnished, permanently bonding the gold leaf to the underlying metal.  However, gold leaf gilding was very thin compared to mercury gilding and also inferior in other ways.

For example, mercury gilding gave a very even, uniform coating of gold over an entire object.  In addition, the heating process in fire gilding actually diffused gold into the surface of the underlying metal, making the gold layer particularly tough and long wearing.  Finally, mercury gilding left a much thicker layer of gold versus gold leaf.  If desired, the fire gilding process could be repeated several times, increasing the gold thickness even more.

Due to these advantages, mercury gilding was the preferred method of gilding for over 2000 years.  The process of fire gilding was steadily refined over the centuries until it had evolved into a high art form in Europe by the Italian Renaissance.  Later, the French aristocracy’s love of opulent gold decoration, along with the rise of the lavish, baroque-inspired Louis XIV style, naturally propelled France into a commanding position in the art of fire gilding.

In fact, the French loved gilding so much that they bequeathed two different terms for it to the English language: vermeil and ormolu.  Vermeil refers to gold-plating over a solid silver alloy base while ormolu is fire gilding over a copper alloy object.  The term vermeil is still in popular usage today, usually in reference to jewelry.

As dazzling as mercury gilding was, it had one major drawback.  Mercury is a toxic heavy metal that causes terrible neurological symptoms after prolonged exposure, followed by death.  In fact, the Victorian saying “mad as a hatter” specifically referred to mercury poisoning.  This is because hat makers were routinely exposed to mercury nitrate in the hat making process until the late 19th century.

Gilders suffered a similar occupational hazard, with few surviving much beyond the age of 40.  Although poisoning from liquid mercury at room temperature was unlikely, the fire gilding process required that the gold-infused amalgam be heated until the mercury evaporated.  The resulting mercury vapor was easily inhaled, leading to chronic and debilitating health problems for gilders.

Eventually a more technologically advanced type of gold plating, called electroplating, was discovered. The concept of electroplating was first published by an Italian scientist, Luigi Brugnatelli, in 1805.  However, it was not commercially viable until an improved process was developed in Britain by George and Henry Elkington in 1840.

This new electroplating method of gilding was much cheaper, easier and safer than the old mercury gilding process, even if the results were somewhat inferior.  As a result, gold electroplating rapidly displaced the superior fire gilding process starting in the 1840s.  By the end of France’s 2nd Empire in 1870, the traditional method of mercury gilding was effectively obsolete.

Amazingly enough, it is still possible for antique collectors and investors to purchase exquisite mercury gilt antiques from the 18th and early 19th century for relatively modest sums.  Even antiques made in the mid 19th century, between 1840 and 1870, have a fair chance of being fire gilt, especially if French in origin.  The fact that these glittering works of art have so effortlessly survived the centuries is a testament to the considerable craftsmanship and fortitude that went into their production.

Sterling Silverware – The Original Savings Account

Sterling Silverware - The Original Savings Account

Silver is a fascinating substance.  It is a highly reflective white metal that is wonderfully malleable and ductile.  It is also an excellent conductor of both heat and electricity.  In many ways, silver is the quintessential metal, possessing all the beneficial attributes common to metals without the undesirable propensity to oxide or corrode found in base metals.

So it isn’t surprising that silver has been used as money for thousands of years by mankind.  However, pure silver is too soft for coinage, silverware or jewelry.  Therefore, it is usually alloyed with other metals to improve its strength and hardness.  The most famous of these silver alloys is sterling silver, an alloy of 92.5% silver and 7.5% base metal – usually copper.

I’m going to use the term sterling silver in this article as a catchall for solid silver, even though other silver alloys have also been used.  In silverware, these other alloys have varied from German 12 loth silver, which is 75% fine, up to French 1st quality, an alloy of 95% silver that is purer than sterling.  In any case, the differences between these various silver alloys are largely academic.  They all look and behave very much alike in practice.

Although coins are the best known form of silver as money, sterling silverware gradually developed into a monetary alternative in medieval Europe.  For many centuries, sterling flatware and hollowware were effectively used as a primitive savings account.  This tradition began with the European aristocracy and was eventually adopted by the wealthy merchant class.

Sterling silverware was faithfully passed down from parent to child within rich households over successive generations.  As a secure, tangible form of wealth in a very uncertain world, it is no surprise the wealthy favored sterling silverware.  But it also served a very important second purpose.  Silver possesses bactericidal properties – the ability to kill many harmful microbes on contact – that made it ideal for tableware.

This is where sayings like “born with a silver spoon in his mouth” originated.  The wealthy and powerful naturally gravitated towards sterling silverware because it afforded a degree of protection against disease.  In contrast, the lower classes had to use cheaper wooden tableware that conferred no such benefit.

This European preference for sterling silverware was also passed down to their American colonists.  Most colonists in the 18th century considered a well-appointed silver cabinet to be an absolute necessity for a well-to-do household.  This was particularly the case because silver and gold coins were often in short supply in colonial America.  Consequently, sterling silverware was widely viewed as an alternative savings account.

Sterling silver’s reign as another form of savings persisted until the 1860s.  That is the decade when Nevada’s famous Comstock Lode was commercially exploited, flooding the global market with cheap silver.  As a result, most European governments reacted by officially demonetizing silver.  This meant an individual could no longer bring raw silver (or silverware) to a national mint and have it converted directly into money.

The final step in silver’s demonetization occurred about 100 years later, in the 1960s.  From the 1860s until the 1960s, many nations had continued to use silver in their fiduciary coinage.  Fiduciary coinage is when the bullion value of the metal used in a coin is less than its face value.  Fiduciary coinage is, in other words, token coinage.

As the spot price of silver began to rise in the 1960s, many countries found that the bullion value of their fiduciary silver coins began to exceed their stated face value, thus leading to widespread hoarding.  Most countries quickly removed silver from their coinage, replacing it with base metal.  For example, the U.S. changed over in 1964 while Switzerland and Canada followed suit in 1967.

This global demonetization had a devastating effect on sterling silverware.  Once considered a surrogate for money, silver soon became just another commodity.  This, in conjunction with changing lifestyles, led to a broad decline in the use of silver flatware.  Sterling silverware is now widely viewed as completely out of step with today’s informal living and appropriate only for formal occasions.  This is a complete falsehood, but it does grant intelligent collectors, investors and average people a rarely seen investment opportunity.

Right now it is possible to acquire fine antique sterling silverware for unbelievably low prices.  For example, I recently came across a beautiful set of six French silver-gilt teaspoons that were made in Paris during the Belle Époque era, circa 1900.  They are classically styled and eminently usable, even though they are more than a century old.

And the asking price is only $200, not much more than the average monthly cell phone or cable bill.  This heirloom quality sterling silverware will not only last for hundreds of years to come, but will almost certainly appreciate in value as well.  Sterling silverware, the original savings account, is still a great place to stash your extra cash.

The Chinese Antiques Market and Japan’s Cautionary Lesson

The Chinese Antiques Market and Japan's Cautionary Lesson

The Chinese economy has been booming for the better part of 20 years now.  From ignominious beginnings in the 1980s, China has evolved into the manufacturing powerhouse of the world.  One consequence of this development is that a large number of consumer goods available in the West are made in China.  Another is that Chinese GDP has skyrocketed, increasing from about $1.2 trillion in 2000 to around $11.2 trillion in 2016.  As the Chinese economy has flourished, its stock, bond and property markets have also boomed.

For now, the money is flowing like water.  And one of the things wealthy Chinese love to spend their money on is fine art and antiques.  However, they tend to be fairly particular about the type of antiques they buy.  Specifically, they have gone on a spending spree for Chinese antiques.

For most of the 19th and early 20th centuries, China was under the influence (or occupation) of the great Western powers.  This era is referred to as the “Century of Humiliation” in China.  It spanned the period from the start of the First Opium War against the British in 1839 to the final defeat of the occupying Japanese forces at the end of World War II in 1945.  Many Chinese are deeply sensitive about the indignities suffered under foreign imperialism during this time.

One side effect of the Century of Humiliation is that large quantities of fine Chinese antiques and art were exported wholesale from the country.  The British, French, Germans, Americans and Japanese all variously looted or purchased some of China’s finest art works during this time.  These included superb Chinese ceramics, bronzes, jade carvings and lacquerware from the Tang, Song, Ming and Qing dynasties, among others.

Now that the Chinese economy is the second largest on the globe, rich Chinese are reclaiming their national heritage by buying back many of these Chinese antiques from abroad.  For instance, a 17th century Chinese porcelain moonflask sold at Christie’s auction house in 2011 for a stunning $2.65 million.  In the same year a Chinese scroll painting looted from the Forbidden City during the Boxer Rebellion sold at auction for a jaw-dropping $31 million.  An unassuming late 15th century Ming dynasty ceramic cup decorated with chickens sold at Sotheby’s in 2014 for an almost unbelievable $36.2 million dollars.  All of these works were repatriated back to a resurgent China.

Demand for fine Chinese antiques is even more frenetic than it would have been otherwise because of China’s Cultural Revolution between 1966 and 1976.  During this dark time in Chinese history, Mao’s communist government attempted to stamp out traditional Chinese values, philosophy and culture, especially anything connected to the pre-1911 imperial era.  Not only was collecting antiques impossible for Chinese during the Cultural Revolution, but innumerable pieces were mercilessly burned, defaced, shattered or otherwise destroyed during this shameful period in Chinese history.  As a result, modern Chinese antique collectors are desperately buying the only traditional Chinese art that survived the Cultural Revolution unscathed – art from abroad.

Demand for Chinese antiques from the nation’s nouveau riche is so high that China recently surpassed the U.S. to become the world’s largest antiques market.  Right now China appears to be an unstoppable art juggernaut.  But while it might be fashionable to predict eternal Chinese dominance in both the economic and antiques sphere, the sad saga of Japan sounds a cautionary note for those willing to listen.

In the 1980s, Japan experienced its own economic miracle.  At that time, the island nation was a major global exporter, delivering massive volumes of advanced consumer electronics and vehicles to countries all over the world.  By the mid 1980s, this corporate success had morphed into a bubble of epic proportions.

The Nikkei stock index more than quintupled between 1980 and 1990.  Japanese real estate also skyrocketed in value.  The grounds of the Imperial Palace in Tokyo were reputedly worth more than the entire state of California.  A high denomination, 10,000 yen banknote laid on the sidewalk in Tokyo’s posh Ginza neighborhood was worth less than the ground it covered.

Japan quickly became legendary as a land of financial excess.  Rich Japanese housewives drank tea infused with gold leaf.  Japanese salarymen spent lavish sums of money on food, alcohol and entertainment in Tokyo’s most exclusive nightclubs.  Japan’s corporate titans used their great wealth to purchase trophy properties abroad, like Pebble Beach golf course in California and Rockefeller Center in New York City.

They didn’t limit themselves to just buying high profile foreign real estate, however.  The Japanese also indulged their taste for expensive Western art.  A Japanese insurance company bought a version of Vincent Van Gogh’s famous “Sunflowers” painting for $40 million in 1987.  They were later outshone by a Japanese billionaire who paid $82.5 million for another Van Gogh painting.  The sums of money involved were both surreal and utterly detached from reality.

And, predictably, the domestic Japanese antiques market also experienced a boom during the 1980s.  How could it not?  Both the stock market and real estate market were relentlessly rising.  Money was meant to be spent and the future looked bright.

Then the unthinkable happened; the Japanese bubble burst.  The economic malaise that followed is sometimes called “The Lost Decade”.  This is an odd epithet because Japan’s economy has been limping along for over 25 years now, which is substantially longer than just a decade.  Perhaps the Japanese engaged in wishful thinking when they originally named their economic disaster.

If Japan’s bubble experience in the 1980s sounds hauntingly familiar, it should.  Japan’s bubble is almost a carbon copy of the Chinese experience today.  While few people can spot the economic parallels between present day China and 1980s Japan, the similarities are glaringly obvious to those willing to look.  Unfortunately, none of this implies good things about the future direction of the Chinese stock, property, or antique market.

In Japan’s case, all three of those markets collapsed and then stagnated for decades.  As a result, Japanese antiques are currently some of the best values in the entire asset class.  I highly recommend you snatch up some of these bargains if you have the means and inclination.  However, while the situation has been great for bargain hunters that fancy Japanese antiques, it hasn’t been so great for people who bought Japanese antiques in the 1980s.

China, unfortunately, faces a very similar economic trajectory to post-bubble Japan.  Those multi-million dollar auction results for Chinese antiques today will eventually look just as excessive as Japan’s art buying spree of the 1980s.  Yes, the money is flowing like water right now in China.  But reality always catches up with a bubble. Of course, the good news is that you’ll be able to pick up some great Chinese antiques for cheap in about 20 years.

The World’s Strongest Currency during the 20th Century

The World's Strongest Currency during the 20th Century

Not all national currencies are created equal.  Some have endured relatively intact over the course of the last 100 years, while others have been devalued into irrelevance.  So what was the strongest currency of the 20th century?

Before we get to the answer, I think it is important to cover the methodologies I’ve used to produce my results.  All performance is measured relative to the U.S. dollar, with the 1920s to very early 1930s as the starting point.  All return calculations also take into account currency conversions and revaluations.

Reviewing a little bit of monetary history is also in order.  The 1920s and early 1930s was the last time the gold standard was widely used by many nations.  Although World War I (1914 – 1918) forced many European nations to temporarily abandon their currency pegs to gold, most reestablished some form of gold convertibility during the prosperous 1920s.

The Great Depression of the 1930s irrevocably changed gold’s relationship to money, however.  As the global economic crisis deepened, nation after nation was forced to permanently suspend its currency’s gold convertibility.  Great Britain, one of the leading economic and military powers of the time, abandoned the gold standard in 1931.  The United States broke its traditional peg of $20.67 per troy ounce of gold in 1933.  The last nation to surrender its gold standard in the face of the economic maelstrom was the Netherlands in late 1936.

Whatever impetus there may have been to reestablish national currency links to gold was permanently extinguished by the calamity of World War II.  Instead, the monetary ecosystem was realigned around the (slightly devalued) U.S. dollar.

This was the venerable Bretton Woods system.  Under this regime foreign currencies were pegged to the U.S. dollar, which was convertible into gold at $35 a troy ounce.  The U.S. dollar was not a true gold standard during this time, though, as only foreign central banks could redeem their dollars for gold.  Although the Bretton Woods system collapsed in 1971, it ushered in the dollar’s 70 year long (and counting) domination of the global monetary system.

But this leads us to our primary question.  What was the world’s strongest currency over the last 100 odd years?  Was any nation’s currency able to outperform the ubiquitous U.S. dollar during this period?  Drum roll please!

And the answer is…the Swiss franc!  Yes, the Swiss franc has been the strongest currency of the 20th century (and early 21st century) by far!  Relative to the U.S. dollar, the Swiss franc has appreciated by some 425% between the 1920s and 2017.  However, I should note that this performance was truly exceptional.

No other nation’s currency came close to being as strong as the Swiss franc.  This, undoubtedly, is at least partially attributable to the fact that Swiss law required the franc to have a minimum 40% gold backing.  This deference to the traditional gold standard was finally repealed by referendum in the year 2000.

The only other national currency that has been stronger than the U.S. dollar over the last century is the (now obsolete) Dutch guilder.  The Netherlands has been respected for its prudent, level-headed monetary management for centuries.  As a result, although not the strongest currency of the 20th century, the Dutch guilder appreciated against the U.S. dollar by about 22% between the 1920s and 2017.  The Dutch guilder was retired as a currency unit by the introduction of the euro in 1999.

With the exception of the Swiss franc and Dutch guilder, the U.S. dollar has been the world’s strongest currency since the early 20th century.  This is perhaps unsurprising considering the dollar’s excellent reputation for stability.  In addition, the U.S. dollar enjoys nearly universal acceptance for settling international transactions.  In my opinion, the U.S. dollar will continue to remain strong for the foreseeable future.

The British pound, on the other hand, has not held up nearly so well, depreciating by 74% versus the dollar.  Great Britain’s former colonies are a mixed bag.  The Australian dollar has lost some 69% of its value against the U.S. dollar since the 1920s.  The South African rand has been a real laggard, depreciating by almost 97%.  Only the Canadian dollar has done the Queen proud, devaluing by a mere 25% versus the U.S. dollar.

The Scandinavian countries deserve an honorable mention in the world’s strongest currency competition.  The Danish krone (-46%), Norwegian krone (-56%) and Swedish krona (-57%) all only lost about half of their value versus the U.S. dollar.  It isn’t easy keeping pace with the world’s reserve currency.

Not every currency can be in the running for the world’s strongest currency, though.  Let’s instead take a look at how some of the other major nations’ currencies managed versus the dollar.  And wow, do things turn ugly in a hurry.

The German mark was effectively wiped out twice during the 20th century.  The first of these currency extinction events was the infamous Weimar republic hyperinflation of the early 1920s.  A mere 20 years later, the German reichsmark collapsed in value at the end of World War II.

Life was also hard for anyone who dared to save in Russian rubles under the Soviet regime.  The Soviet authorities orchestrated a steady succession of devaluations taking place in 1922, 1923, 1924, 1947, 1961 and 1991.  Its successor state, the Russian Republic, maintained the tradition with a major currency collapse in 1998.  Needless to say, the Russian ruble has depreciated by about 100% compared to the U.S. dollar over the course of the 20th century.

The Japanese yen, although one of the world’s most important currencies today, hasn’t fared so well against the dollar historically.  Since the 1920s, the yen has lost about 98% of its value.  Most of this decline occurred during and immediately following World War II.  It seems the only thing worse for a nation’s currency than fighting an expensive war is losing one.

The French franc has also done rather poorly, losing around 96% of its value compared to the U.S. dollar since the 1920s.  Mexico, on the other hand, only slightly lags the French in the world’s strongest currency race.  The Mexican peso has plummeted by 99.99% versus the dollar, a hair’s breadth from joining the ignoble German mark and Russian ruble.  And we won’t even talk about the atrocious Venezuelan bolivar, which, ironically, used to be the strongest of the Latin American currencies during the mid 20th century.

While it is easy to view these currencies’ performance as laughably inferior, it is actually more the norm than the exception.  The U.S. dollar, in contrast, has been enormously resilient over the decades.  Of course, these measurements are all relative.

In reality, all fiat currencies – including the U.S. dollar – are inappropriate vehicles for long term savings.  As a point of comparison, since the 1920s silver has appreciated versus the U.S. dollar by over 2,800%.  Gold did even better, outperforming the world’s third strongest currency by nearly 6,000%.

This is one of the reasons I advocate investing in tangible assets such as fine art and antiques.  Unlike fiat currencies, which can be printed at the whim of corrupt or incompetent central bankers, rare and desirable art and antiques are strictly limited in supply.  The Swiss franc, Dutch guilder and U.S. dollar may have been the world’s strongest currencies over the course of the 20th century, but they still pale in comparison to investment grade tangible assets.