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<p>[QUOTE=&quot;johnmilton, post: 5390255, member: 101855&quot;]What we see today is far from unprecedented. My collecting experience goes back to the Imperial Romans. The denarius was a thick silver coin during the days of the republic and the first couple of centuries after the emperors took charge. During that time it was quietly debased, but change was not easily detected for most people.</p><p><br /></p><p>By the 200s the denarius was being replaced by the autoninianus, which was worth two denarii. It was rapidly being debased from a coin with some silver, to a silver wash to and all bronze coin. Diocletian tried to fix things with the argenteus but that didn’t last for too long.</p><p><br /></p><p>In Great Britain, the penny was silver coin, which eventually because one of the most reliable silver coins in Europe, but it was made smaller and debased after a while. It finally became a bronze coin that get smaller and smaller.</p><p><br /></p><p>The gold coins were last to suffer debasement in both Rome and England. The reason was they were the currency of the nobility and the wealthy. The government had to protect their interests to retain power.</p><p><br /></p><p>Today our money isn’t even paper any more. It is a series of computer based accounts that are moved from entity to another. The Federal Reserve now creates money by buying bonds from the Federal Government. The gold ads talk about the government “printing money on a wholesale basis” but it isn’t really printing it anymore. It is just creating it.</p><p><br /></p><p>Is all of this bad? Not necessarily. As long as the money supply grows with the size of the economy, there is no problem. Requiring it to be tied to precious metals only limits that supply, and that is not necessarily a good thing. An economy can be choked by a liquidity crisis as well, which happened during the Panic of 1893. The free silver advocates were partially right. The economy could have used more money. The trouble was they didn’t put any limits upon how much they wanted to create.</p><p><br /></p><p>The problem is setting the money supply at the right level. It’s not what the money is made of.</p><p><br /></p><p>Economists call belief that the value of money is established by the value of the metal that is in it, &quot;the commodity theory of money.&quot; It is has been disproven many times in history, but many people continue to believe in it. When was the last time you spent an American Silver Eagle, which as &quot;One Dollar&quot; struck on it, as a dollar? You didn&#039;t because it&#039;s worth more like $20. Increasing the melt value of the coinage would only drive it out of circulation.[/QUOTE]</p><p><br /></p>

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