On Counter-Earth, the antimatter planet, they have coins made of mony. The bust on the obverse is of Tommy James, of course.
And issuing debased coins was a common practice all over. The government would mix base metals in with the silver or gold, or mint coins that were smaller than the old coins, and then require everyone to take the debased coins as if they were of the same value as the old coins.
Of course, this causes inflation, because the new coins aren’t really worth the same as the old coins. People hoard the old coins and spend the new coins, bad money drives out good money as Gresham observed.
And the trouble with a bimetallic standard is that you’ve declared that two goods will always have the same value relative to each other. This is like declaring that a gallon of milk will always be worth a loaf of bread. The trouble comes when there’s a bad year of dairying and a shortage of milk, anyone with a loaf of bread can demand to exchange abundant bread for scarce milk. And the dairy farmers can’t raise prices because they are obligated to accept payment in a fixed amount of bread.
So if we declare that the government will always exchange gold for silver at 16:1 and vice versa, then whenever the value of gold or silver rises or falls it will be possible to arbitrage against the government. If gold is plentiful, you buy gold and exchange it for silver at 16:1. You exchange your cheap gold for the government’s valuable silver. And so silver flows out of the government banks and gold flows in, until the values equalize. And when gold is scarce, then the government is obligated to sell gold at below market value. So the value stays at 16:1, but each time the market value of the ratio would change, the goverment loses a lot of money and the arbitrageurs have made a lot of money.
Of course, the way to get around this are various restrictions on actually paying out the gold or silver. And the US coins where the silver value was below face value is an example.
It’s arguable that what we chose was not debased coinage per se, but inflation. Albeit gradually, we tacitly accepted that coins should be debased not only in content but in actual purchasing power as well. If a quarter were still made of silver we’d be able to buy a magazine with one, just as was once the case.
I’ve heard the argument that American’s involvement in Vietnam was financed by the inflation of that era; though that doesn’t seem to explain more or less similar inflation happening elsewhere in the Western industrialized countries.
THe prevalence of silver coins (in the USA) was due to two things:
-the huge production of silver 9from the western states of Nevada, Arizona, Idaho, New Mexico)in the years 1850-1930. The Federal government committed to buy the silver-there was a huge glut of it. Second, the USA needed silver to trade with China 9the Chinese republic used silver as its backing).
My question: why is silver so valuable today? Film photography (the major use of silver) is declining-so what keeps the price up?
That reminds me of an odd little fact. California was producing gold before it was a state. There was at least one local mint that produced coins using the California gold. The coins were originally designed to contain gold worth 102% of the face value, so that people would have faith and use them even though they had no government backing.
As the value of gold rose, they were melted down. Now they are rare. In fact, the mint relocated from San Francisco to Stockton for a short time, and there are now only two known coins with the Stockton imprint.
<<Rubs hands>> Oh, you poor little fools. I know EVERYTHING.
**Squink,**you forgot to mention plastic! Yes, during WWII, experimental coins of plastic were made, and some still exist! Have a thick wallet if you wanna get one.
The silver/gold ratio was set in 1873, at 16/1 (not 20/1). For political reasons far too obscure and/or disreputable for me to explore, the silver dollar has MORE silver than two half-dollars, four quarters, or ten dimes (those last three are proportional).
Back to the OP. The US made coins from silver for so long because we could. Coins had made from precious metal since there werecoins, so there was a lot of momentum for the practice. Lemur866put it as well or better than I could.
So, the next part: why so long? If you look at coin compositions from around the world, precious metal content goes down according to financial crises in the issuing country. After WWI, silver in British coins went from 92.5% to 50%; after WWII, it went to 0%. In France, it went from 83.5% (approx. 20K) to 0% after WWI. These are just a couple examples. In the US, Canada, Mexico, Switzerland, Australia, New Zealand, and South Africa, silver coins were kept in circulation until the 1960’s. Some of these were a bit of a joke; Mexico’s “silver” coins of the 60’s were 10%. Eventually, the price of silver was more than the face value of the coins, so bye-bye.
Odd side note: Mexico DID issue circulating silver coins in the early nineties. They’re gone now, inflation having worked its magic once again.
Are you sure? Did they really circulate?
samclem, they very certainly did circulate. I have several examples which I received in change in the late nineties. Ten and twenty pesos. The 10-peso has 1/6 ounce Troy (after discounting for the alloy) of Sterling, the 20-peso, obviously, 1/3 ounce Troy.
They missed lead coins.
Speaking of metals used in coins - of course there’s Mercury.
Haven’t you heard of Mercury dimes?
(Actual question asked by a Scout at a Coin Collecting merit badge class I taught.)
Talk about mad money.