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<p>[QUOTE=&quot;calcol, post: 4401398, member: 77639&quot;]Many of us are old enough to remember when $1 silver certificates were a common type of dollar bill ... as opposed to federal reserve notes, which are the only bills printed today.&nbsp; Back in the day, these could actually be exchanged for silver coins.&nbsp; I did it more than once.&nbsp; So would it be possible to return to those halcyon days of yesteryear if only our lazy, spineless, spendthrift politicians would gird their loins and stir themselves to responsible action?</p><p><br /></p><p>Short answer:&nbsp; No way, unless the denominations far exceed their silver melt value.</p><p><br /></p><p>The days when monetary systems of nations could be based on a commodity (silver in this case) are gone and can&#039;t come back short of an apocalypse ... worse than covid-19.&nbsp; There&#039;s not enough silver to do it.&nbsp; About 30% of transactions in the US are still cash.&nbsp; Cash may eventually become irrelevant, but not for a while. The M1 money supply is about $4 trillion (disregarding the recent covid-19-related spike).&nbsp; At the current silver price of $15/oz, it would require 267 billion oz to back it up.&nbsp; There is 3-4 billion oz in silver bullion in the world.&nbsp; There&#039;s actually less silver bullion around than gold bullion. There&#039;s more silver in jewelry, tableware, and industrial applications (especially electronics) than in bullion.&nbsp; Some of the latter could be shifted to bullion and coins, but not much.&nbsp; The amount of silver in the world that is known to be in minable ores is about 16.3 billion oz (560 kilotons).&nbsp; The US cash economy alone is way bigger than what could be backed with all the silver in the world.&nbsp;&nbsp; Population and economic growth have left silver in the dust&nbsp; ... it&#039;s an economic pipsqueak in the world economy.&nbsp; It&#039;s essential industrially but not at all as a medium of exchange or for backing currency.</p><p><br /></p><p>It can be argued that if the US Treasury started buying large amounts of silver, the price would rise.&nbsp; This is no doubt true.&nbsp; And at an increased price, the mass of silver required to back the dollar would be less.&nbsp; How much is hard to say.&nbsp; But even if silver reached its record price of $49 per oz, there would still not enough to back M1.&nbsp; The source of money to buy the silver has to be considered.&nbsp; Basically, it would have to come from revenue or borrowing.&nbsp; The US Treasury could not just issue silver certificates to buy it.&nbsp; Doing so would increase M1, and the existing M1 would still not be backed by silver.&nbsp; There&#039;s no easy way around it ... the moolah for silver would have to be from increased taxes or borrowing.&nbsp; Finally, a greatly increased price of silver could be ruinous for commercial and industrial users of the metal.&nbsp; Greatest impact would be in the electronics industry, but others like the jewelry industry would be hit hard.</p><p><br /></p><p>It can also be argued that it is not necessary to back all of M1 with silver.&nbsp; Only enough needs to be backed so that the treasury doesn&#039;t run out when folks start exchanging their bills or checking accounts for&nbsp; silvery metal.&nbsp; How much is enough?&nbsp; Hard to say, but it would need to be a substantial percentage.&nbsp; If folks know there is a very limited amount compared to the cash that&#039;s out there, they&#039;ll want to get theirs while the getting&#039;s good.&nbsp; And there is not enough silver available to have more than a limited amount.&nbsp; So the system would collapse before it could really get underway.</p><p><br /></p><p>If it were even possible to base the US dollar on silver again, it&#039;s value would be very much at the mercy of the major silver-producing nations.&nbsp; The US ranks only ninth in silver production and produces only 3% of the world&#039;s silver. A dollar based on silver could be manipulated easily by the major silver-producing nations ... Mexico, Peru, China and Russia.&nbsp; Could the US step-up silver production?&nbsp; Yes, a bit, but not much.&nbsp; The US is fifth in silver ore reserves with only 4.5% of world reserves.&nbsp; Any step-up in US production would still leave it far behind the biggest producers at their current level of production.</p><p><br /></p><p>So, sadly, a return to &quot;hard&quot; money in the form of silver would not be possible even if politicians were willing.&nbsp; Of course, coins could be made with a tiny bit of silver with a melt value much lower than the denominations of the coins.&nbsp;&nbsp; But what would be the point?&nbsp; It wouldn&#039;t drive up the cost of making one coin much, but could cost tens of millions annually for coins in aggregate.&nbsp; But there wouldn&#039;t be much silver value in the coins most individuals might possess at one time.&nbsp; Would a dollar coin with a penny&#039;s worth of silver really be that much more satisfying to own than one with no silver?&nbsp; Would it persuade folks to use dollar coins in place of bills?</p><p><br /></p><p>So how about gold?&nbsp; Similar arguments apply.&nbsp; Perhaps I&#039;ll do another post on gold.</p><p><br /></p><p>Bimetallism?&nbsp;&nbsp; Won&#039;t work.&nbsp;&nbsp; It was tried unsuccessfully in the US in the 19th century and other countries before that.&nbsp; It&#039;s impossible to control the value ratio of the two metals.&nbsp; The constantly changing ratio plays havoc with a monetary system based on bimetallism.</p><p><br /></p><p>Enjoy your old silver coins and newer silver bullion and commemorative coins ... I do, but forget the metal for buying groceries or paying the mortgage.</p><p><br /></p><p>Cal</p><p><br /></p><p>References:</p><p><br /></p><p>silver reserves, 2018 data: investingnews.com, 3 Jun 2019; their cited source is USGS.</p><p><br /></p><p>silver production, 2017 data:&nbsp; wikipedia.com 30 Nov 2018; their cited source is USGS.[/QUOTE]</p><p><br /></p>

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