Siliver stanard wiki

I was wondering about metal standards in monetary value. I don't fully understand this, could some one nutshell it a bit for me? Give me some links to spider off on?

The United States adopted a silver standard based on the "Spanish milled dollar" in 1785. This was codified in the 1792 Mint and Coinage Act, and by the Federal Government's use of the "Bank of the United States" to hold its reserves, as well as establishing a fixed ratio of gold to the US dollar. This was, in effect, a derivative silver standard, since the bank was not required to keep silver to back all of its currency. This began a long series of attempts for America to create a bimetallic standard for the US Dollar, which would continue until the 1920s. Gold and silver coins were legal tender, including the Spanish real. Because of the huge debt taken on by the US Federal Government to finance the Revolutionary War, silver coins struck by the government left circulation, and in 1806 President Jefferson suspended the minting of silver coins.

The US Treasury was put on a strict hard money standard, doing business only in gold or silver coin as part of the Independent Treasury Act of 1848, which legally separated the accounts of the Federal Government from the banking system. However the fixed rate of gold to silver overvalued silver in relation to the demand for gold to trade or borrow from England. Following Gresham's law, silver poured into the US, which traded with other silver nations, and gold moved out. In 1853 the US reduced the silver weight of coins, to keep them in circulation, and in 1857 removed legal tender status from foreign coinage.

In 1857, the final crisis of the free banking era of international finance began, as American banks suspended payment in silver, rippling through the very young international financial system of central banks. In 1861 the US government suspended payment in gold and silver, effectively ending the attempts to form a silver standard basis for the dollar. Through the 1860-1871 period, various attempts to resurrect bi-metallic standards were made, including one based on the gold and silver franc; however, with the rapid influx of silver from new deposits, the expectation of scarcity of silver ended.

The combination that produced economic stability was restriction of supply of new notes, a government monopoly on the issuance of notes directly and indirectly, a central bank, and a single unit of value. As notes devalued, or silver ceased to circulate as a store of value, or there was a depression, governments demanding specie as payment drained the circulating medium out of the economy. At the same time there was a dramatically expanded need for credit, and large banks were being chartered in various states, including those in Japan by 1872. The need for stability in monetary affairs would produce a rapid acceptance of the gold standard in the period that followed.

The Coinage Act of 1873, enacted by the United States Congress in 1873, embraced the gold standard and de-monetized silver. Western mining interests and others who wanted silver in circulation labeled this measure the "Crime of '73". For about five years, gold was the only metallic standard in the United States until passage of the Bland-Allison Act on February 28, 1878 requiring the US Treasury to purchase domestic silver bullion to be minted into legal tender coins co-existent with gold coins. Silver Certificate Series 1878 was issued to join the gold certificates already in circulation.

By acts of Congress in 1933, the domestic economy was taken off the gold standard, and the Treasury Department was reempowered to issue paper currency redeemable in silver dollars and bullion, thereby divorcing the domestic economy from bimetallism and leaving it on the silver standard, although international settlements were still in gold.[6]

This meant that for every ounce of silver in the U.S. Treasury's vaults, the U.S. government (not the Federal Reserve) could continue to issue money against it. These silver certificates bore the name of the U. S. Treasury, not the Federal Reserve; they were shredded upon redemption since the redeemed silver was no longer in the Treasury. With the world market price of silver having been in excess of $1.29 per troy ounce since 1960, Congress repealed the legal foundation for Silver Certificates on June 4, 1963; but President John F. Kennedy responded with Executive Order 11110 that the Treasury should continue to "issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury". This Series 1958 introduced an additional $4.29 billion worth of United States Notes into circulation, consisting of $2.00 and $5.00 bills; and although they were never issued, $10.00 and $20.00 notes were in the process of being printed when Kennedy was murdered in 1963. It is said that Pres. Kennedy and his Treasury Sec., C. Douglas Dillon, a Republican, had reservations about the merits of the Federal Reserve System; and for certain reasons wanted Treasury's silver certificates to circulate in competition with the Federal Reserve notes which had already flooded the world in the Marshall Plan, in the Cold War, and in importation of foreign goods. But the Treasury was being emptied of silver rapidly; in March 1964 issuance of the Series 1958 Silver Certificate was stopped and redemption in silver dollars was suspended; 24 June 1968 was the last day for redemption in silver bullion.

Finally, on 15 August 1971, President Richard M. Nixon announced[7] that the United States would no longer redeem currency for gold or any other precious metal, forming the final step in abandoning the gold and silver standards.

en.wikipedia.org...

[edit on 8-2-2010 by Lophe]

reply to post by Lophe

was wondering about metal standards in monetary value. I don't fully
understand this, could some one nutshell it a bit for me?

Money is paper

Why would you give away something useful like food for a useless piece of paper?

With a "metal standard" the premise is that your pieces of paper are IOU's for a fixed amount of metal. That metal is kept somewhere. So, for example, if you were to take a silver certificate to a bank, you could trade that paper certificate for a fixed amount of silver. Similarly, if you give that silver certificate to someone in trade for food, they can take it to a bank and also exchange it for silver. The amount of silver any certificate can be exchanged for is fixed at a "standard" rate, and does not change with the market. Again, the paper is an IOU, not a trade good. In this way, we can all buy food using lightweight, convenient pieces of paper instead of having to lug around hundreds of pounds of silver and gold.

Of course, it does beg the question why anyone would trade something useful like food for a useless chunk of silver of gold...but, well...it is what it is.

It may be helpful to keep in mind that our current fiat money is simply a development from previous systems in which all money was "backed" by metal, meaning you could exchange it for metal, as described above.

Step 1: People wanted metal, and would trade for it.
Step 2: People didn't want to carry metal around, so they started using paper IOU's and traded those instead of the metal, knowing they could always trade the paper back in for metal if they really wanted to.
Step 3: The system by which paper could be traded back for metal was removed, but people kept using the paper anyway.

Give me some links to spider off on?

Do you have specific questions?



[edit on 8-2-2010 by LordBucket]

reply to post by LordBucket


I already get what your saying. It's just I want a deeper understanding. I want to to go deep, the wiki i posted goes fairly deep, but I want more info pertaining to it. I really want to understand this graph better; en.wikipedia.org...:US_Histor.ical_Inflation_Ancient.svg. Why does it go all in the blue after 1950?

reply to post by Lophe

Why does it go all in the blue after 1950?

Fixed link: en.wikipedia.org/wiki/File:US_Historical_Inflation_Ancient.svg

It's a graph of inflation rates. Blue shows positive values, green shows negative values. Presumably after 1950, there have been no periods of negative inflation sufficient to register on the chart.

Translation: From 1950 to 2000, the value of the dollar has only decreased, it has never increased sufficiently to register on the chart.

Monetary metal standards however have inherent risks to them, especially for the reserve currencies like the United States Dollar and Euro. There are conflicting interests between the the country that issues the currency and the world at large when a currency is used in reserves. This is called the Triffin dilemma, and it is the real reason that President Kennedy issued silver certificates in the 1960s. It was to avoid a recession, not anything to do with a so-called "New World Order."

en.wikipedia.org...

The primary political concern regarding fiat currency comes from people who want less government control in the economy. In the United States, this usually comes in the form of Libertarians and Free Market Capitalists. Since the real power in fiat currency comes from the fact that it is what taxes are paid in, the government that issues the money has more symbolic control over it. A primary argument that is made against fiat currency is that the issuing government can stop backing the money and render it worthless. This is true, however it is a rather shallow point because a government that issues metal-backed currency can also just declare that they are no longer worth their precious metal, and are then just as equally worthless.

Many Libertarians I have talked to in the United States would like you to believe that the Dollar is less-powerful now than it was when it was backed with metal. The reverse is actually true. While inflation has over time decreased the real purchasing power of the Dollar, it has attained international use and power reaching truly unprecedented levels since the time of the Nixon Shock. It is now the de facto global currency, something that has never happened in the history of humanity before this.

reply to post by LordBucket


Why?

reply to post by LordBucket


Supposedly gold has very unique properties for use in electroplating or something, I forget but something to do with how electricity was generated in old times. You hear about gold pin connectors an awful lot. Plus, ancient pagans thought it represented the sun (which they worshipped).

Then silver, supposedly has crazy healing properties and thats why it was turned into jewellery/amulets. They would often say the amulet would ward off evil and disease but it was really the silver's properties.

Or so I hear!

Originally posted by LordBucket
reply to post by Lophe

 

Why does it go all in the blue after 1950?

Fixed link: en.wikipedia.org/wiki/File:US_Historical_Inflation_Ancient.svg

It's a graph of inflation rates. Blue shows positive values, green shows negative values. Presumably after 1950, there have been no periods of negative inflation sufficient to register on the chart.

Translation: From 1950 to 2000, the value of the dollar has only decreased, it has never increased sufficiently to register on the chart.

See here is the issue of people not understanding the real versus nominal value of currency! The fact that there has been a positive inflation rate for 50 years doesn't actually mean anything all by itself. A slight positive inflation rate is the ideal economic condition. With that inflation rate, there is an economic advantage to investments instead of stockpiling money.

reply to post by ProjectJimmy


I had read about Kennedy's order to reintroduce the silver standard. I have also read that based on the silver standard min wage should be something like 16$ and hour.

Thanks for your post it help put things in prospective, blue star for you.