Why are silver and gold certs no longer valid?

I've never understood how the government was able to legally retroactively stop honoring their silver certificates legally. The wording on the bills is pretty clear as to what they are valid for. Does anyone know how the justified no longer honoring them even after dropping the metal standard?

 

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They are no longer valid because the government wasn't issuing anymore silver coinage to exchange itfor

 

I could be wrong but they are still considered valid at face value, they simply cannot be exchange for precious metal coins directly.

You can spend a small size silver cert today, they still turn up in circulation from time to time. You just can't get a silver coin for them.

 

Think about it, if the notes are valid at face value (which they are, because the U.S. Treasury allows them to be redeemable at face value, they just currently do not distinguish between the old U.S. Notes, Gold and Silver Certificates, and Federal Reserve Notes that we now use) then of course the notes can be exchanged for precious metals coins directly. That would be considered a cash transaction for the purchase of gold bullion like any other. The gold/silver certificates are no longer valid at the original exchange represented by these notes, say a $20 paper note for a $20 gold coin (.9675 ounce of gold) or bullion at a bank or from the Treasury because our currency is no longer backed by precious metals. Why, it's directly linked to the gold recall in 1933 and silver backing by 1968.

NUMBERS' site, uspapermoney.info has some nice information about how the backing changes effected notes' designs in the section, Elimination of Gold Backing.

Were one to go shopping for precious metals with gold or silver certificates, one would need a whole bunch of them, and a bullion dealer willing to accept the notes, whose face value covers the going rate of gold (approx. spot is at $1,600/oz.). Though realistically, that's not going to happen, because who has 80+ $20 gold certs laying around and is willing to exchange their face value for an ounce of gold, when likely the numismatic value of those notes far surpasses the value of an ounce of gold. Even if said notes are horribly worn, they tend to command more than face value.

 

edited nobody was asking if they could be used to buy bullion... quit being so pedantic. Likely an impossible task, but give it a try, for all of us...

 

Grow some skin already and stop crying every time someone else posts another perspective in the same thread where you've decided to land.

You said, "they simply cannot be exchange(d) for precious metal coins directly." so you pretty much DID bring up bullion.

 

You have all missed the question he asked. He wanted to know how they justified eliminating the redemption.

The simple answer is they DIDN'T justify it. They are the government and they simply announced the change. As of such and such a date they will no longer be exchangeable for precious metal but can be exchanged for other lawful money. Meaning other government paper. They wrote the law that created them and made them exchangeable, and they wrote a new law that made them no longer exchangeable.

 

I don't know I wouldn't mind taking a $5 silver cert down to the federal reserve bank in my town and get 5 silver eagles in exchange (they say one dollar right?! Right?!). I know this would obviously ruin them the government, but I don't know I sort of view the silver and gold certificates as a kind of contract, "I'll give you this as a voucher to take to the bank for silver". If I sign a provision-less contract with someone and it I can no longer honor that contract without a loss I'm still required to honor it unless it specifically states this contract is null when the government decides to stop making silver coins. When the fed was created it should have taken those bills back exchanged them and destroyed them like they do with high denominations when somebody is dumb enough to take one to a bank. That's kind of my frame of mind I knew you could still spend them as dollars if you wanted to.

 

You should know that whether government or private sector, contracts expire, offers, policies and such things as Terms and Conditions change all the time. We see these things stated all the time. Legislation is often reviewed and amended. Treaties are written, altered, broken and sometimes abandoned. Courts are filled with cases of contested contracts, such as people trying to settle debts with creditors they can't pay and seeking settlement deals for less than the terms of the original debt incurred under the terms they supposedly agreed to pay for in their contract with the creditor.

It's all part of business, and the business landscape changes so as not to stagnate, allow opportunity and to be effective in any current context. If you think you can take the contracts of the past in the current context and apply them effectively, then march yourself down to those institutions and see how far you get with that plan. Like I said, the notes of the past are not currently distinguished in the same way as they were in the past by Treasury, though they remain redeemable as legal tender at their stated face value. While it may seem unlikely, that could certainly change again in the future. At that time we will know and use our currency under different terms, most likely writ by law to govern its use.

I'm not really sure what else you are trying to express, other than the pretty common idea amongst many numismatic collectors/enthusiast who favor the past financial structure and concept of a currency system backed by precious metals, a gold standard, and that you liked how the paper system then fit in at the time. Know also that that contract changed rapidly from Series to Series of notes, which reflected changes in the economies of those eras directly linked to government rule and actions it wrote/passed into law. To know all those changes is in part to understand economic history of the US and the dynamics of what brought about all the subtle and not so subtle changes to paper money designs over the years. There's tons written about it from every possible angle, and it's fascinating to learn about.

Also, as I shared earlier, those gold (and some silver) certs are worth much more than their original face values said they were as paper vouchers when commodities were valued at those rates in earlier eras. In the hands of collectors, trading them for numismatic premiums, they are worth as much as gold is today, or more, or they'll get you a fair share of gold for the premiums such notes trade for today. :thumb:

 

They just pass a new law. They do it all the time.

 

<<I've never understood how the government was able to legally retroactively stop honoring their silver certificates legally. The wording on the bills is pretty clear as to what they are valid for. Does anyone know how the justified no longer honoring them even after dropping the metal standard?>>

Because paper money is an instrument of the authorizing laws, not the other way around. They simply express what the laws say.

By the early 1960s, the bullion value of silver had exceeded the Treasury's monetary value ($1.29 per ounce). It was financial suicide for them to continue issuing silver certificates at a loss. So Congress amended the laws by rescinding the 1934 Silver Purchase Act, and the Treasury stopped issuing silver certificates, and eventually stopped redeeming for silver the certificates outstanding.

 

Ok, this nonsense stops here. Both of you ! I am sure that both of you would feel insulted if I told you how alike your temperament and manners are.

Nope, you won't .Neither of you will continue as I am tired of it, and according to the reports on this thread, so are others. Go read the rules. and Go read post #9.

So lets try to have a happy weekend !

Jim

 

The government went from a "Gold and Silver standard" to the Federal Reserve system. In other words, form a strong values to "Words Only". As long as they were able to keep the gold and silver at a base rate, then it was a solid standard. Now it is nothing, except honoring the so call value.:devil::devil: Is our government great?

 

Speaking as someone who really is not familiar with the details, I'm a bit curious. Doesn't the silver certificate state something like "...redeemable for a dollar's worth of silver" ? If so, why couldn't the government simply continue to redeem them (for whatever purpose the OP had in mind), for a dollar's worth of silver? Or is it written somewhere that a dollar = an ounce?

Dave

 

I just looked at the one silver cert I own and it says "one dollar in silver payable to the bearer on demand"

 

Right, so if you wanted to exchange that for silver, wouldn't you expect a dollar's worth of silver? ie, 1/25th of an ounce (or whatever)?

 

Theoretically yes but that's not the way the law was written and I think for the right reason. Can you imagine trying to trade silver certificates for silver today with the prices changing by the minute and having to pay out 1/25th an ounce of silver.

 

The Treasury valued its monetary silver at $1.29 per ounce. For every ounce they acquired, they minted $1.29 worth of silver dollars that they held in reserve for $1.29 in silver certificates. The 1934 Gold Reserve Act ended the requirement that they mint silver dollars, and from then-on the Treasury simply stored their silver as bullion.

The Treasury never really paid $1.29 for their silver, but actually paid quite close to the going market rate at the time. This often meant they purchased silver for 50 or 60 cents per ounce. The balance to $1.29 they booked as seignorage, essentially a fancy word for inflation.

For much of the time the Treasury issued silver as money, they were the only demand for domestic production of the metal. They essentially made the market. By the 1950s, industrial and scientific advances had discovered greater uses for silver in fields such as electronics and photography. The was a marked increase in the demand for silver and a rapid ascent in the metal's price. Eventually that price exceeded $1.29, which meant the Treasury was losing money by paying $1.33 per ounce, for instance, and booking it as $1.29.

The Treasury was also losing money because the public was redeeming silver certificates for silver dollars, and then selling the dollars for bullion and making a profit. They realized they could do the same thing by selling their silver stocks on the market for a profit. They ceased issuing silver certificates in 1964, stopped redeeming them for silver dollars in 1967, and instead redeemed then for silver granules. In 1968, they stopped all together redeeming silver certificates for silver and started redeeming them for Federal Reserve notes and United States notes.

 

Attributed to Voltaire.

 

The word "dollar" is mentioned twice in the Constitution, in Article I, section 9 and the 7th Amendment. As a noun, it has to have a meaning, just "cat" or "apple" has a meaning. When the Constitution was written, the dollar was the Spanish Milled Dollar, also known as a "Piece of Eight." In 1792, for the currency act, the weight of the circulating Spanish Milled Dollars was found to average 371.25 grains (.77344 Troy ounce). This is what the "dollar" is. To be anything else, the Constitution would have to be amended. The old silver dollars contained 371.25 grains of fine silver that could be traded for the silver certificates, is a dollar. Nothing else is.