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 Replies: 40 / Views: 11,194 |
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Valued Member
United States
477 Posts |
In reference to investing in gold and silver for economic collapse of USD
What's the longest a paper currency lasted before it was eventually worth zero?
China has been around for a couple thousand years as a country, while the United states has been around for only a couple hundred...
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Pillar of the Community
United States
1454 Posts |
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Pillar of the Community
United States
808 Posts |
Agreed, the British Pound (Sterling) is one of the oldest surviving fiat currencies in world history. As the former "world reserve currency", I see the Pound's performance and steady debasement as the proverbial "canary in the coal mine" for what might be in store for the US.
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Bedrock of the Community
Australia
21788 Posts |
 , The British Pound has never be demonetised to the best of my knowledge. |
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Moderator
 Australia
16859 Posts |
Your question is difficult to answer, partly because very few currencies actually fall to being "worth zero", but mainly because it is only since the 20th century that fiat currency has become normal and widely accepted by the public at large, worldwide. Prior to that, most paper money had at least a pretence of being redeemable in something more physical, and once the promises were either broken or no longer believed, the fiat currencies met with stiff resistance from an unwilling public. Examples: - China, the inventors of paper currency. While the notes bore promises to exchange for a certain amount of valuables (cash coins, gold, silver, silk, etc) in practice it was impossible to do so. First introduced around 1100 AD, they never really got off the ground until the Yuan (Mongol) Dynasty, which issued very few cash coins and resorted to paper notes. Although Marco Polo praised the Great Khan's ability to control the economy in this way, the temptation to just keep the printing presses going and print more and more money was too great, and the world's first hyperinflation ensued. Government edicts enforcing compulsory acceptance of the notes and fixing prices of the commodities proved futile, even on pain of death. The Yuan/Ming note system lasted from about 1280 to 1455, when the Ming Dynasty finally abolished it, switching back to the old-fashioned copper cash coinage. - Sweden, the first country to issue paper money in Europe. Of particular interest are the notes redeemable in copper plate money. Since Sweden had no silver to turn into coin but had plenty of copper, large slab-like ingot-coins (plate money) were made and held by the Bank, with the Bank writing paper money intended to circulate in their place. But people preferred to actually own a slab of copper, however inconvenient it was to use, rather than trust a promise on a piece of paper. The note system failed after just a few years. - Revolutionary France. They issued banknotes that were ostensibly backed by land, seized by the State from the Church. But again, the costs of funding their continuing revolution and lack of actual silver and gold coin (since most of the wealthy aristocrats had either fled or were killed) meant they just kept printing more and more money. Again, the system lasted just a few years (1790-1796). Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
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Pillar of the Community
United States
7840 Posts |
Did you have to put much effort into your answer Sap? WOW! I will chalk this one up to "I had no idea"!
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Pillar of the Community
United States
863 Posts |
WOW
Imagine going into a bank and demanding to cash in your money for land
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Valued Member
 United States
477 Posts |
I'm just trying to figure out that if we don't break the record (whatever it may be) how many years does the USD have before breaking it?
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Pillar of the Community
United States
1454 Posts |
Roughly another century and counting. I don't think we're going to make it.
Or in other words:
"Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world"
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Valued Member
United States
477 Posts |
Could you beat the system and use what your currency is backed by to by that item?
Like in 1950 could you beat the system by purchasing silver bullion using silver quarters?
Haven't all items that currencies are backed by eventually gone up in value as currencies come off these items by which they are backed?
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Pillar of the Community
United States
808 Posts |
I wouldn't say you're beating the system. However, buying silver (for example) using fiat currency would give you a "hedge" against future debasement of that same currency. This "store of wealth" effect isn't a cheat or gimmic or scheme. Rather, it's an economically sound and time tested way of defending against inflation and the hazards of bad monetary policy.
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Moderator
Australia
16859 Posts |
Quote:
Could you beat the system and use what your currency is backed by to by that item?
Like in 1950 could you beat the system by purchasing silver bullion using silver quarters? In 1950, the price of silver was 75 cents an ounce. In other words, you needed to hand over three silver quarters containing just over half an ounce of silver, to buy one ounce of silver. So yes, you could double the amount of silver you owned by doing that. The government could too, which is how the government made money out of making coinage: seigniorage, the difference between the cost of buying the raw metal and the face value placed on the coinage made from that metal. Quote:
Haven't all items that currencies are backed by eventually gone up in value as currencies come off these items by which they are backed? I believe you have cause and effect backwards, there. Governments around the world were forced to abandon the silver standard because silver became too expensive. The problem with setting anything as an official backing for notes is the need for that government to either have confidence in the stability of the price of that commodity or to be able to exercise some degree of control over the price of that commodity. In the 1960s, governments lost that confidence and that control. Pre-WWII, the government was the main buyer of silver since turning silver into coin was one of the few practical uses we had for the stuff. But post-WWII, the price of silver just kept going up and up because of rising demand from industry and photography, yet the supply remained constant; the silver mines couldn't keep up with the demand. The US government tried to keep the price of silver down by selling off its silver stockpile and thereby increasing supply, but it eventually ran out of silver to sell. Even if a government could afford to maintain an artificially low price for a commodity for an extended period, the increasing interconnectedness of world trade meant that no country with a free economy could consider itself a closed economy anymore. Any country that kept trying to issue circulating silver coins at artificially low prices would find their coins snaffled out of circulation; either hoarded by savvy locals who realized the artificially low local silver price was untenable in the long term, or the coins would be exported to another country with a more realistic silver price. This is exactly what happened in Australia in 1966 when our government rather foolishly issued a circulating 50 cent coin with more than 50 cents worth of silver in it. No-one knows for sure, but a large percentage of the total mintage ended up in the melting pots of Hong Kong. Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
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Valued Member
Canada
135 Posts |
Another thing to consider in an economy, is that for an economy to grow, it is fundamental to produce something, some kind of product.
The problem today is interest. There is a huge multi-billion dollar industry that just buys and trades debt.
This industry does not produce a product, it effectively prints money. In Canada we have vast amounts of land, yet ownership is tightly controlled. This raises property prices to a level where most need to borrow money to buy property.
This "interest" generated does not have significant enough of a "service" or "product" to justify the dollars.
So you end up with even more empty dollars in the economy, effectively flooding the market with more printed money.
When this catches up, you end up with a "crisis" we experienced in the housing market a few years back. I'm sure we have not seen the end of it either.
It's a very grey area as to who really controls what, the line is somewhat blurred where Government ends and Business begins these days.
"Like in 1950 could you beat the system by purchasing silver bullion using silver quarters?"
You can do that now. The only downside is your purchasing with somewhat inflated money these days, but if your patient it could possibly work out.
Silver is likely undervalued now, at least compared to gold.
In the 1950's then money was backed by metal, so a silver dollar was worth whatever silver was worth. You would not have been able to "beat the system" at that time.
However if you did have silver in the 1950's, and held on to it until after the mid sixties, you would have been in good shape.
So save your pennies. At the end of the day it's not what it's worth, it's the percentage that it "grows" vs inflation.
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Valued Member
United States
477 Posts |
So like realistically speaking, even if the economy of the United States economy got better, I think it's only getting worse, how much longer do we have? What's the record for longest a currency backed by nothing "toilet paper money" has lasted?
"According to one study, of 775 fiat currencies identified, 599 are no longer in circulation, and of those 1 in 5 has vanished due to hyperinflation. The average fiat currency has a life expectancy of 27 years before being replaced."
We've been using flat money sense 1971 and it's now 2012. The flat money of the United States Dollar has lasted 41 years. Were past due. In 2019 we will double the average value.
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Bedrock of the Community
United States
36845 Posts |
All great points. Also consider a nations debt. The USA can no longer pay that debt off and it continues to rise. The only way to do it now is to revalue the currency. Other nations have done that many times, look at some of the South American countries. The dollar is a house of cards right now.
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Valued Member
United States
477 Posts |
In hyperinflation Germany in 1923 the the exchange rate was 49,000 marks per US dollar. In 1923 the price of gold was roughly 21.32 dollars. so if you had invested in gold and sold one ounce of gold in Germany at the time you would have roughly 104,468 marks at your disposal. However in the later of the year this wouldn't even buy you two newspapers. Perhaps I'm better off purchasing material assets that have actual practical use to them. Simply investing in precious metals preparing for hyperinflation dosen't seem to cut it. Sure you could sell it (you probably would have to) and make a lot of money but that money would be essentially worthless due to hyperinflation. Saving precious metals for after collapse and a new currency is issued dosen't really make sense to me either. You most likely have to sell it (to the very few people who would want to buy it in a hyperinflation scenario) but assuming that you could save hoards of precious metals during hyperinflation and not sell it in the new currency is kind of hard to comprehend. You would be selling your precious metal in a different currency than you bought it. The new currency would have more purchasing power than the old.
So like if I went and bought 1 ounce of silver now for 30 dollars and then some how magically didn't have to sell it in a hyperinflation scenario and only got 5 dollars back in the new currency am I really making any money?
Anyways I think I'm going to have to side with that in a hyperinflation scenario I would most likely have to sell my precious metals for more worthless currency and not have the option of keeping it. I would probably have to sell practically everything I own I imagine.
Edited by greenprint
08/02/2012 11:25 am
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Replies: 40 / Views: 11,194 |
Posted 07/31/2012 11:46 pm
