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<p>[QUOTE=&quot;Numbers, post: 712944, member: 11668&quot;]I think part of the reason for the disagreement in this thread is that different people are talking about different things.</p><p>&nbsp;</p><p>Sure, it&#039;s possible for silver to circulate alongside paper.&nbsp; It did so in the U.S. from the 1870s through the 1960s.&nbsp; That &quot;Hunt brothers&quot; example wasn&#039;t hypothetical at all; it&#039;s the history of the U.S. silver dollar--which was worth $1 in melt value when it was first created, but closer to sixty cents in melt value by 1900 due to a drop in the price of silver.&nbsp; The coins continued to circulate at face value, just as Cloud proposes.&nbsp; We had fiat silver and fiat paper; one had higher intrinsic value than the other, but both had intrinsic value so far below face value that Gresham&#039;s Law never really kicked in during a period of eighty years or so.</p><p>&nbsp;</p><p>What broke the system was the price of silver rising to the point that the coins were intrinsically worth nearly face value.&nbsp; Once that happened, we had Gresham trouble, because suddenly one form of money looked a lot better than the other.&nbsp; The hoarding started well before the silver was actually worth *over* face value; it started when many people began to think there was a chance of the silver *becoming* worth over face value.</p><p>&nbsp;</p><p>The same would apply today.&nbsp; If we created one-ounce silver coins denominated $50, they&#039;d probably circulate just fine for the forseeable future.&nbsp; (Well, assuming anybody wanted a $50 coin, which they probably wouldn&#039;t judging by the way most of them don&#039;t want $1 coins, but that&#039;s a separate issue.)&nbsp; But if we created one-ounce silver coins denominated $20, they&#039;d probably get hoarded just like silver did circa 1962.&nbsp; And if we tried to create one-ounce silver coins denominated $10, nobody who got hold of one would ever spend it (well, nobody with a clue).</p><p>&nbsp;</p><p>So if all you want to do is make fiat coinage with slightly higher intrinsic value than today&#039;s fiat coinage, then yes, we could do this and it would &quot;work&quot;.&nbsp; The trouble is that I&#039;m not really seeing what&#039;s accomplished by such a plan: we&#039;ve raised the Mint&#039;s production costs, and gained...what exactly? a warm fuzzy feeling?</p><p>&nbsp;</p><p>On the other hand, if you want to make non-denominated silver coins that circulate at their bullion value, that would probably &quot;work&quot; too (well, as long as everyone was willing to put up with the resulting calculations at every transaction, but in this day and age the cash registers could probably connect to Kitco and automate that...).&nbsp; Indeed, we don&#039;t even need government action to create such a system--just ask your local merchant if he&#039;d be willing to trade you some goods for your silver rounds.&nbsp; So I don&#039;t think it&#039;d distort the markets much if the government started requiring merchants to accept such payments when offered.&nbsp; But again I don&#039;t see why such a government policy would be better than what we&#039;ve got now.</p><p>&nbsp;</p><p>Money can serve as a medium of exchange, and also as a store of value, yes.&nbsp; Under our current system, the two functions are somewhat separated: your medium of exchange pretty well has to be fiat paper if you&#039;re going to interact with the rest of society, while your store of value probably shouldn&#039;t be fiat paper if you&#039;re going to hold it for a long period of time.&nbsp; That&#039;s okay; just go buy some silver rounds if you&#039;re planning on burying your savings in your backyard.&nbsp; There&#039;s a transaction cost there, but it&#039;s pretty small if you&#039;re thinking long-term....&nbsp; And even under a system where silver bullion circulated alongside paper, that transaction cost wouldn&#039;t go away: banks would probably charge fees for changing silver into paper or vice versa, just as they now charge fees for exchanging currencies, even in countries where multiple currencies circulate.&nbsp; So what exactly is the benefit of the circulating silver?[/QUOTE]</p><p><br /></p>

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