Could circulating gold and silver coins even work anymore?

gecko109

Because of the constant fluctuations in the PM prices, would Gresham's law simply not allow a PM based coinage to succeed? Would the entire world have to agree on a single monetary unit and then set prices of goods and services locally? Furthermore, besides relative economic stability, is there any incentive for a government to give up its right of producing cash out of thin air? Imagine a world that had maybe 12 different denomination coins, and that was it. It might look something like this:

1- 1/20th oz silver (about $1)
2- 1/10th oz silver (about $2)
3- 1/4th oz silver (about $5)
4- 1/2 oz silver (about $10)
5- 1 oz silver (about $20)
6- 1/20th oz gold (about $50)
7- 1/10th oz gold (about $100)
8- 1/4th oz gold (about $250)
9- 1 oz gold (about $1,000)
10- 5 oz gold (about $5,000)
11- 10 oz gold (about $10,000)
12- 20 oz gold (about $20,000)


So you can see what each denomination's current purchasing power would be. I dont know how to get coins of less than $1 unless you used an alloy to do it, a silver 1/20th is a small coin as it is. If the world adopted this type of monetary system, governments could no longer play their shell games with the economy. Accountability would be nearly perfect, and inflation would be virtually non existant (think 1800-1913). This system would be perfect for stabilizing the global economy. All goods and services could be priced locally based on costs and availability. However, the only way this would work is if PM's became fixed. Silver at $20 and gold at $1,000. One thing that could screw up this system is the industrial needs for silver. At some point, the value of silver would HAVE to rise due to limited availability in the industries that rely on it. Gold would not be affected as much in that most applications that rely on gold could use other metals as substitutes. I didnt even include platinum because of the obvious heavy industrial use of the metal.

notlogical

I think I read somewhere that a dime (10 cents worth of silver) would be about 1 millimeter in diameter.

gecko109

Now thats a small coin!!!! I guess everything would have to be based off the 1/20th oz silver coin which would contain about $1 worth of metal. Then, all goods and services would have to be in whole numbers of $1. How would the sales tax on a $1 purchase be collected if the lowest denom coin was $1? I dont know....thats for you guys to help out!!! Any ideas? Im tryin to "change" the world!

fc

sure it would work. simply make the denomination more then the intrinsic value
of the metal. tada! they would circulate as it would make absolutely no sense
to hoard them when you can use them to buy bars of .999 fine silver and get
more silver for the money.

ttown

Maybe once they burnt most of the fiat. I doubt there enogh gold and silver to back all the paper that's out there. That's the main reason they went off the gold standard, they couldn't print what they didn't have to back it.

SaorAlba

Gold and silver could be replacing "money" as we currently know it in the not too distant future, but it will not be an act of the government.

Smittys

<< <i>Gold and silver could be replacing "money" as we currently know it in the not too distant future, but it will not be an act of the government. >>



A lot of people who buy from me have this mindset

Cladiator

I think the PM prices are too volatile to support a government sponsored precious metal coin circulation program. The prices move so much, so quickly there would be no way for the controlling agency to stay on top of it.

In the absence of a government however, gold and other precious metals would likely be very popular in a trade, barter situation. Although what would be incredibly more valuable in that situation would be goods that could actually be used instead of simply representing value, such as batteries, food, fuel, ammunintion, etc...

Blackhawk

I don't know if they'd circulate for long. I think that in this era of economic uncertainty, people would be hoarding them because of their precious metal content. The US had had that situation before.

SaorAlba

<< <i>I don't know if they'd circulate for long. I think that in this era of economic uncertainty, people would be hoarding them because of their precious metal content. The US had had that situation before. >>



Quite a few times actually, during the Revolution, the War of 1812, the Banking Crisis of the 1830's, the American Civil War, the 1873 Panic, the 1893 Panic etc.

fishcooker

They could dilute it down, so the coins are large enough to be useful. Make the dollar a 1/5th oz coin that is 25% silver, for example.

SaorAlba

Mexico did that with the Peso coins during the 20th century, they started out the size of a US $ dollar, then evolved by the 1950's into this 10% silver thing that was butt ugly and the size of a half dollar. The next coin was cupro-nickel and quickly became worth more in metal than it's face value, so that it kept getting downsized into some quarter sized coin by the 1980's before it lost all value finally.

LALASD4

I don't think there is enough gold and silver to replace all the world's money supply.

fc

<< <i>I don't think there is enough gold and silver to replace all the world's money supply. >>



only a small fraction of the world's money supply is paper/coins. most is 1s and 0s inside computers.
but i know what you are getting at... :-)

BECOKA

Now way it would work unless the government controlled PM pricing.

That's why the put $50 on the 1 ounce. If the market crashes and someone wants to cash in they don't lose money.

timcoin

How would we or the world's governments obtain the gold, exactly? If money is worthless, we can't exactly purchase it from the companies that own the mines. I guess governments could confiscate the land being mined, but not all geographical areas have gold or silver mines, so would those countries just be out of luck? Besides, who would ever accept an idea that would instantly add another economic disadvantge to those without easy access to a particular commodity, such as that created by oil? Sure, money backed by people's faith in their government can and do fail, and fortunes are lost (so ownership in something recognized worldwide as having value, such as gold, is a good idea). But even so, a country could never be poorer than if they were to base their money on anything other than their own citizens ability to make loans, pay debts, and provide goods and services.

MikeInFL

I think you need a history lesson if you think that a gold standard leads to economic stability and a lack of inflation.

SaorAlba

<< <i>Now way it would work unless the government controlled PM pricing.

That's why the put $50 on the 1 ounce. If the market crashes and someone wants to cash in they don't lose money. >>



Actually that makes the bullion piece a coin in the legal sense, and affords it protection from forgery etc. on a higher level than if it was just a medal etc.

SaorAlba

<< <i>I think you need a history lesson if you think that a gold standard leads to economic stability and a lack of inflation. >>



This was argued all through the 19th century, and was a determinate factor in several elections, including the 1896 election. After 1900 the uproar over the gold and silver standards died down.

cladking

First off you'd have to mak $100 about a quarter ounce of silver and $1000 a quarter
ounce of gold just to have a chance of success. The problem is that there isn't enough
of either metal in the world to back the currency if people wanted cash.

The problem would be particularly acute in silver since most of the above ground supply
is paper. Buying the necessary quantity of silver to replace the currency would be highly
problematical.

charley

I keep thinking about the beads thing when the american indian was first approached. History might indeed repeat itself. Respectfully, John Curlis

ambro51

I think this world today is MUCH more on the gold standard than ever before. Its just not mentioned.

A gold bar is recognized as monetary value anywhere.

You go to outer mongolia....and lay down a gold bar, you make a statement.
You go to New York and lay down a gold bar...you make a statement also.

Jcarney

<< <i> But even so, a country could never be poorer than if they were to base their money on anything other than their own citizens ability to make loans, pay debts, and provide goods and services. >>



Absolutely brilliantly stated. This is the one reason I'm not panicked about the current economic situation and believe the US will come out of this stronger than ever...just like we always do.