Thread: What if silver was put back into circulation?

What would that do to the economy?

I was thinking. According to coinflation today, a silver quarter is worth app. $5.40. What if the US started minting a $5 silver coin, a little smaller than a quarter, and flooded the market with them? Would this be a good thing or a bad thing?

post it to the bullion section where they can kick that around adnusium

If the US made silver coins for circulation again, people would hoard them and not spend them. TC

Originally Posted by Pilkenton

What would that do to the economy?

I was thinking. According to coinflation today, a silver quarter is worth app. $5.40. What if the US started minting a $5 silver coin, a little smaller than a quarter, and flooded the market with them? Would this be a good thing or a bad thing?

I would think there would be no effect because, as stated by TopCatCoin, people would hoard them.

The same would happen if gold coins were re-introduced as well.

It would basically wreak havoc with commerce since Gresham's law would kick in.

Lets walk through it. The mint coins a coin with lets say $4.50 worth of silver and has a face value of $5. The instant silver pops up over $5 the coins start disappearing. If the mint is relying on this coin to facilatate commerce, now we have a drastic shortage of coins to conduct business.

I would read about the experience Mexico had in the late 40's through the 90's. Continuously they tried to reset the Peso to silver to provide stability to the peso. They tried over and over as anyone with a Mexican type set will quickly see. Each time it never worked as the peso continued to go down versus silver, so these coins are almost always found AU/BU, meaning they circulated little. Since they circulated little, they did no good for commerce, so this experiment failed.

Its a great idea with the best of intentions, its just the mint cannot dictate monetary policy, and cannot stabilize a currency on its own. All the mint should have to worry about is to provide enough coinage so as to not be a burden on commerce.

It would be a waste of time thing.

Originally Posted by BUncirculated

I would think there would be no effect because, as stated by TopCatCoin, people would hoard them.

The same would happen if gold coins were re-introduced as well.

Only if these were above and beyond other coins already needed. My post #5 is assuming such a coinage was done as an integral part of the currency, such as being made to replace the 5 dollar bill. If it was just "extra" coins, I agree it would basically be another type of ASE and almost never circulate.

The Kennedy half wasn't beyond other coins and they disappeared as fast as they hit the street.

Heck they still do !

Originally Posted by GDJMSP

The Kennedy half wasn't beyond other coins and they disappeared as fast as they hit the street.

Heck they still do !

But they upped quarter production to compensate. That is an easy replacement. Replace the $5 bill with a coin, but then have the coin disappear due to Gresham's law, and its harder to overcome it. It can be overcome, but would cost businesses money in time, and would cause the mint to massive increase production of $1 and/or $2 coins to compensate. IF it were integrated into our coin/currency system, (big If I grant you), then I would see disruptions whenever silver markets spiked. If it were like another half dollar, or made while $5 bills were still being produced, it would simply be another ASE and 99.9% of all Americans would not even know the US made them.

Basic point being there is nothing the mint alone, in the composition of its coins, can do to stabilize the USD. Nothing. Any attempt and big bad Mr. Gresham will kick in the teeth.

When silver went up, the coins would either get smaller or they would reduce the purity. Silver wears much faster than steel, chrome, and nickel alloys so they would have to be replaced more often. If they started minting coins with, say, .300 or .500 silver instead of .900 or .920, then things may be OK for a while, but Mexico tried that and it was a bust. It would still be nice to hear the "ring" of a silver coin when it hit the bar to pay for a cold one, but anyone less than 60 has missed that pleasure. If the US started to mint $1 and $2 coins like Canada, all cash registers would run out of slots for the change, like they did here in Canada .. that's what took the 50 cent piece essentially out of circulation here in Canada .. .no cash register slots. Now that they have done away with the penny here, they have a little more room, but they are talking about a $5 coin so that's that.

I think it would be neat, but with the historic wildly fluctuating price of silver it would have to be a $5 bi-metal coin, very small, or way less than 90% silver so that silver would have to hit some outrageous amount before they were worth more than melt.

I'm sure some would get hoarded as mentioned - maybe most. Heck, to 99.9% of the world a clad Ike is worth just $1 and where the heck are they all?

We have a perfect example of what would happen if we re-introduced a silver coin in normal currency. Look what's happening with pre-1961 pennies, and it takes tons of pennies at the current price of copper to amount to anything worthwhile.

Now just imagine the same thing happens to a coin that is easier to identify, or even possible to ask for rolls of at the bank, and is much more valuable per pound than pennies.

Yeah, we're not going back to real money any time soon.

I like the idea, but not as a $5 as that is too small a denomination for today's silver prices. I's like to see new 40% silver; $50 and $100 coins. The $50 smaller than today's 50c, maybe just a bit bigger than a quarter, and the $100 a bit bigger than the $50. Do the $5 (and a $1) in copper, smaller than the current small dollars. To have any staying power and to last in circulation for a decade or more, the real value needs to be about 1/2 or less of the face value. Given average inflation of 3 to 4% over time.

Could the mint actually acquire enough silver to even do this? They seem to have enough trouble just doing ASE's

Originally Posted by onejinx

Could the mint actually acquire enough silver to even do this? They seem to have enough trouble just doing ASE's

No - not likely and it would put a huge pressure on Industry if they did.

Ruben