Should We Return To The Silver Standard? I Have An Idea!

The reality is this - suppose silver standard does come back.

If it does come back, implications of the silver standard based upon volatile price is not good. When silver prices are low and the mint strikes plenty of "coins" - sure, that's a good thing. But not the other way around. They just vanish.

Besides, how do you know what you have is the real deal when you have super high quality counterfeits coming from China that has the same weight and looks similar to the real deal?

No thanks. If I want something tangible, I'm much happier having handshakes.

jbuck: Perhaps, but but far be it for me to know all of it.

No. People would only take from circulation that is all people would be worried about. Not the greatest idea.

The main problem with this concept is there simply isn't enough silver to go around anymore. The old "silver standards" were only maintainable by the government (and/or by all world governments via international agreements) decreeing a fixed "buy" and "sell" price for silver. In the case of your example, that sell price would be $50/ounce; the "buy" price would presumably be slightly less than this. Even discounting the argument that the modern financial system needs a bigger money supply than physical silver could possibly supply, the cold equation is that we aren't mining silver anywhere near as fast as we're reproducing. And by "we" I mean the planet as a whole.

But just taking the United States into consideration, the main problem with this scheme is, where's the silver going to come from? The US doesn't mine enough of it, and the few silver mines still operating within its territory aren't government-owned. If the government has to import or purchase billions of ounces of silver to make it work, what are they going to buy the silver with? No-one will take the old worthless paper dollars once the silver scheme is being considered.


I'm afraid they won't. Let's apply basic Gresham's Law logic. Suppose you need to buy $5 worth of groceries. You have a $5 coin containing 1/5 of an ounce of silver, and you also have a $5 paper note containing no silver whatsoever, and only a dubious promise to maybe exchange it for silver in the future. Which will you keep, and which will you spend on groceries? You'll keep the coin and spend the note, of course. So the coins will not circulate, as long as the paper notes continue to exist.


Sorry, but that will never work. The whole point of a "silver standard" is that the standard doesn't change. Changing the silver content changes the standard, and therefore does change the coin. The higher silver content coins, whether new or old, would be hoarded and melted, leaving just the debased ones circulating over and over until they're worn thin. Gresham's Law again.

The only way a government could make such a scheme work in this day and age is by withdrawing all the old coins, melting them down and re-issuing the silver in coins made to the new standard. And doing this too often would be expensive, making the maintaining of the currency system unprofitable. Issuing coinage is supposed to be revenue-making for a government, via seigniorage; once it becomes loss-making, they simply stop making the coins. That's what scared the world's governments into dropping silver from the coinage, during the wild price fluctuations of the 1960s and 1970s.

I think the us could return to a metal standard. Unlike Mexico, US currency is much more popular world wide, and is a reserve currency. Precious metals on the other hand would become pegged in the US. US currency would become the precious metal of the rest of the world. The problem is that the US would lose the ability to control the "value" of it's currency. Save we had $5 silver 1/10 once coin. Silver instantly becomes $50 an ounce, because that's what we say it is. Now if silver is currently $28 on the world market when we do this, the world will sell us silver hand over foot, until it equalizes.

Gold was pegged at $35 a once for decades by us. Only when we went of the standard was it allowed to float.

Now, there is some bad that comes with this. If the rest of the world stays on a fiat system, our money will become more and more expensive as we would lose the ability to inflate our currency easily or debase it easily. It could be done, but we'd need to add precious metal to inflate it, and change coinage each time we'd want to debase it. We did it before(Think Seated Liberty coins with arrows).

The biggest problem we'd face is our currency becoming too expensive for the rest of the world. example, the euro is roughly worth $1.25. We decide to go on a silver standard pegged at $50 an ounce when silver is at $28(current situation) The US dollar would nearly double in value overnight. Europeans would have to pay twice as much for US exports than they do now. The Euro would be like .60 to the new US dollar. Our exports would suffer and would get worse as other fiat systems inflated. We'd be able to import things cheaply, but that would worsen the issue we have now actually producing products here. We wouldn't be able to sell to the world and it'd be way cheaper to import instead of producing here. Jobs would disappear.

We'd need other countries to come on the standard with us to have trading partners.

I knew he would know.

Correct nod