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[mmayr]

Additional Thoughts on Silver

I asked my friend Pater Tenebrarum at the Acting Man Austrian Blog for some comments on proposal to reintroduce silver coins as currency. Pater responded ...
At first glance, giving the coins a higher monetary than bullion value might seem a bit strange, but right now we have money with no value at all except the legally determined face value.

With silver coins you'd at least have coinage that not only has a face value, but also a commodity value. Obviously if one wants the money to be used in payment, the silver in it must not be worth more than the face.

Hugo is correct that one can not have silver and gold currency at a fixed ratio. In principle, a dual monetary system with silver and gold, but no fixed relationship between them seems feasible to me.

Unfortunately, the proposal probably won't fly because the government is not interested in making money honest. Just think about the size of the federal debt. It's over $15 trillion and growing at over $1 trillion per year.

If this debt were to be redenominated in silver and/or gold, the government would be forced to stop spending. It won't stop that until the market forces it to. So Hugo is right; it's only going to happen once the current system crashes and burns.

That does not mean that his proposal wouldn't be feasibly in principle - it certainly would be.
A crisis has not hit the US yet but what about Greece?

I received Pater's response before Syriza, led by Alexis Tsipras caused a deadlock in the last Greek election.

Would a radical left party be open to a metal-backed currency?

The idea may seem far-fetched but there is certainly everything to gain and nothing to lose by trying.

Having sensible discussions is always worthwhile if for no reason than to plant seeds of ideas that may sprout at some unknown time in the future.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com