I find it a little sad that I never lived in a time with Real Money.

[CSdot]

We have all seen the charts showing how the great world empire over time started with gold, silver and copper coinage, but after a couple hundred years they each slowly reduced the precious metal content to the point that their coinage was basically worthless. Soon thereafter the empires collapse, so a new empire can step in to take its place.

 

In the US we have seen that exact scenario play out over the past 239 years. The US started with Real Money (meaning gold, silver and copper coinage), but the precious metal content was reduced. At first the reduction was slow, with coins displaying arrows, or with the coins being made smaller. In 1933 the ax fell on gold, with silver going away in 1964. Copper was the next victim in 1982, leaving us with a fully debased monetary supply.

 

Being someone who was born after 1964, I find it a little sad that I never lived in a time with real circulating gold and silver money.

 

Do you envision a scenario where the US rights its financial ship and goes back to minting real money? Assuming it does not, will the next great world empire start out with real money, or will they start with debased or even digital or paper money?

[wdrob]

 

Do you envision a scenario where the US rights its financial ship and goes back to minting real money?

 

"Right its financial ship." Yes, possibly. "Go back to minting real money". I can't see that ever happening. If you think a gold dollar from 1854 was small, it would be incredibly small today.

 

Even silver would be impractical. A silver dimes melt value, right now, is about $1.40. A silver dime today would need to be nearly 15 times smaller than a dime to equal the value of silver.

 

Chances are that I misunderstood your point though.

 

 

[RWB]

For practical purposes, the times when precious metal currency circulated in the US and the present are no different in how most people approach using it. Few gave much consideration to the silver coins they handled - that was normal. (There were internal inequalities to having multiple kinds of “dollar” in the 19th and early 20th centuries.)

 

The oddity for the US was that we stayed on .900 silver and .900 gold longer than all other major nations. When Britain reduced the fineness of their silver coins, the US stayed with .900 silver for the next 45 years. The US also maintained the full gold exchange standard 15 years longer than others.

 

The end for both gold and silver as circulating currency came with increases in the market value of the metal. By 1918 gold was undervalued by nearly 50%. In the early 1960s the US did not have the means to counter worldwide silver speculation and industrial use. Copper has followed a similar path as has nickel.

 

 

[CSdot]

Do you envision a scenario where the US rights its financial ship and goes back to minting real money?

 

"Right its financial ship." Yes, possibly. "Go back to minting real money". I can't see that ever happening. If you think a gold dollar from 1854 was small, it would be incredibly small today.

 

Even silver would be impractical. A silver dimes melt value, right now, is about $1.40. A silver dime today would need to be nearly 15 times smaller than a dime to equal the value of silver.

 

Chances are that I misunderstood your point though.

 

 

You are correct that the monetary system would have to be adjusted if we ever wanted to go back to using gold and silver. It would take moving the decimal point over two places.

[Walkerfan]

Do you envision a scenario where the US rights its financial ship and goes back to minting real money?

 

"Right its financial ship." Yes, possibly. "Go back to minting real money". I can't see that ever happening. If you think a gold dollar from 1854 was small, it would be incredibly small today.

 

Even silver would be impractical. A silver dimes melt value, right now, is about $1.40. A silver dime today would need to be nearly 15 times smaller than a dime to equal the value of silver.

 

This. I would be happy if the government just paid off it's debt. We'll never be able to go back to the gold and silver standard, as prices are MUCH too high.

[BillJones]

The fact that there is no longer any gold or silver in our circulating currency has nothing to with an impending economic collapse. Money is like the motor oil you put in your car's engine. If there is too little of it in circulation, the parts will rub and against each other, reduce efficiency and if the situation is not corrected in a timely matter the engine with break down. If there is too much of it, the pressure will build inside the engine, the seals will let go and the engine will explode. If the oil levels are just right, things will run smoothly. The trouble is with the economy knowing what the money supply should be is a controversial issue. It does not matter if the money is made of gold, silver, copper, paper or even accounting entries on computer storage spaces. If the level is right, the economy will have a chance to run smoothly.

 

The trouble is today is that our national debt is running too high, and the excessive infusion of additional money by the Federal Reserve Banking System, the so-called "QE II," poses a great danger to us in the medium to long run. Too many people are unemployed and not producing anything, and too many of them think that their idle status is an acceptable way of life. This is the true threat to our long term economic survival and health as a nation. Going back to a gold or silver standard will not fix that.

 

I was born in 1949 so for the first years of my economic consciousness I was very accustomed to using silver coins. Nobody thought much of anything about it. When the clad coinage was introduced in 1965, some "old conservatives" lamented its passing, but there was no general outcry.

 

Government policies and general attitudes about working, saving and acting responsibly have a lot more to do about the health of nation that what goes into its money. The problems lie more with a matter of values than with whether or not you handle silver every day.

 

[Crazy Mtn Coins]

Well put!

[CSdot]

I can tell from the responses so far that I am on a forum with an intelligent crowd.

 

Like Bill, I worry that too much money has been infused into the economy too quickly in the form of the tranches of Quantitative Easing. While I have been a recipient of the Fed's beneficence through a recovered and higher stock market portfolio, and an economy that is still running, I fear that we might still experience a hangover.

 

The Fed is doing everything it can to maintain a productive functioning economy, but the path is a narrow one where we risk unusually high inflation due to all of the extra dollars on one side, and unwelcome deflation where incomes go down and long term debts stay constant on the other.

 

Neither inflation nor deflation will lead to gold and silver backed coinage in the short term, but if the Fed loses control of the economy, and the population loses trust in the monetary system, then gold and silver could make a come back. However, I don't see that happening.

[PerryHall]

I remember getting silver coins in change and spending them. Never gave it much thought since they were only worth face value at the time. Those days are long gone.

[RWB]

Think of the situation this way: The money that left the economy in 2007-2009 was gradually replaced thereafter through growth and bond purchases. (Bonds do not cycle through the economy in the same way as "printing money.") The purchases are not especially desirable, but that helps keep interest rates for businesses and individuals very low.

 

A substantial part of the "left money" was not real and never was. It resulted from pervasive mortgage fraud extending from the individual who claimed he made more money than he did, to appraisers over valuing properties, and bankers looking at quick profits from processing fraudulent documents. Add to this the orders from Congress to allow greater speculative margins by merchant and commercial banks, and the huge shadow world of hedge funds and off-market trading (centered in Atlanta).

 

The combination cost jobs, created empty homes and trickled down into the entire economy - except for the individuals and organizations most responsible. The rapidity of this loss forced the Treasury and Fed to take actions comparable to those of 1933-35. In both depressions excess speculation and high-risk ventures fed the initial mess. An unfortunate and very dangerous side effect has been a huge increase in the disparity between middle-class and wealthy individuals, and the shrinkage of middle-class employment. This is the greatest threat, in my poor opinion, to democracy and personal freedom: it effectively makes it very difficult for people to achieve the “American dream” of financial success. (One other philosophical correction: businesses create jobs, wealthy and high income individuals do not.)

 

You will note that unlike the 1920s-30s, no ordinary depositor of a US bank lost their money. (Prior to the FDIC and banking reform, depositors routinely lost all of the deposits when a bank failed. This is what "created" the mistrust of banks in many people's minds.)

 

[The above is a vast simplification, of course.]

 

[Nutmeg Coin]

False assumptions create questionable conclusions; those who think that that the late 1700s to 1933 were better eras because of "sound" or "real" money instead of "fake" money in 2014 have a limited grasp of economics. Very little of the gold minted from when the US started minting metal coins until they stopped backing paper with metal was handled on a day to day basis, most was shipped to bank to bank and later melted. There were many years in recent memory when silver was worth under $5 an ounce, and gold was under $260, not huge premiums over the face values of pre-65 silver or pre-34 gold considering inevitable inflation. Most of the population lived on farms and did OK not spending much money for a long, long time.

[DaveG]

Do you envision a scenario where the US rights its financial ship and goes back to minting real money? Assuming it does not, will the next great world empire start out with real money, or will they start with debased or even digital or paper money?

 

 

"Money" is pretty much all digital now, so I don't foresee a return to minting circulating precious metal coins.

[Afterword]

"The combination cost jobs, created empty homes and trickled down into the entire economy - except for the individuals and organizations most responsible. The rapidity of this loss forced the Treasury and Fed to take actions comparable to those of 1933-35. In both depressions excess speculation and high-risk ventures fed the initial mess. An unfortunate and very dangerous side effect has been a huge increase in the disparity between middle-class and wealthy individuals, and the shrinkage of middle-class employment. This is the greatest threat, in my poor opinion, to democracy and personal freedom: it effectively makes it very difficult for people to achieve the “American dream” of financial success. (One other philosophical correction: businesses create jobs, wealthy and high income individuals do not.)"

 

 

 

And it is going to happen again and again and again. You would have to change human nature at its most base level to make it stop.

 

The odds of that ever happening are not good.

[RWB]

I suggest that humans have the capacity to learn from their mistakes...although they rarely do.

[Afterword]

"I suggest that humans have the capacity to learn from their mistakes...although they rarely do."

 

 

 

True, but their capacity to forget what they have learned is boundless. They just have to be made comfortable and happy, and they will worry about little else beyond that comfort and happiness.

[RWB]

...kind of like bed bugs.