Opening the mint to gold and silver - then and now From the archive. Some people think that one of the fundamental institutions of the 19th century should be restored; I will single out Great Britain as the great leader embracing this institution. This institution was the free minting of gold practiced by Great Britain in its heyday of growth, world economic and financial power. Under this system, any owner of gold bullion could take his bullion to the Royal Mint and have it minted into coins containing the same amount of gold as provided to the Mint by the owner of the bullion delivered. This was done at no cost to the owner of bullion as a government service to the economy. Thus, the owner of gold bullion converted his bullion directly into money which could be saved, invested or spent at will. The new gold was turned into money and increased the money supply because gold was money. Another idea has been floated, regarding doing the same with silver: “Opening the Mint to Silver” is the same idea as free coinage of gold, outlined above, but applied to silver. As I said above, some people suppose that re-instituting this practice of centuries prior to the 1800’s, which was indeed entirely wholesome and beneficial in its time, would produce the same wonderful results today; supposedly, this institution would be the central institution capable of restoring stability, growth, savings and true and lasting prosperity. Much as I should like to agree with this proposition, I have my doubts about the possibility of obtaining the marvelous results expected of it. Free coinage of silver considered Let me start with silver, which I have considered first due to my interest in monetizing a silver coin, the Mexican “Libertad” silver ounce. First we must think of what sort of “free coinage” we are thinking of. Would we propose the free coinage of a coin with a face value, or with no face value? If we propose the free coinage of a coin with a face value, then the face value must be superior or equal to the intrinsic value of silver. No one is going to take silver bullion to the U.S. Mint, for instance, and have it turned into silver coins with a face value that is less than the bullion value of the silver in the coins! If the face value is equal to the intrinsic value of the silver, then within a week’s time it would probably be on its way back to the refinery, the price of silver having gone up in the meantime and made the melted coins worth more than the coins themselves. Now, if the face value is superior to the bullion value of the silver in the coins, then the miners who are taking their silver to the Mint are obtaining a State subsidy of their mining operations. This is objectionable. Alternatively, if we are proposing the free coinage of a coin with no face value, then the situation is different. There is no subsidy at all involved; if there is a cost for minting, it could reasonably be attributed to social and economic policy for the benefit of the community in general. It would be an acceptable State expenditure, indeed, a quite legitimate function of the Treasury. However, the miner having turned his silver bullion into coins with no face value – or with a face value far below the intrinsic value, which negates the coin’s monetary function - is now faced with the problem of what to do with them. The coins are valuable, indeed, but – what is their value? They can be designated as “legal tender”, they are a product of the Treasury, but the problem does not go away – what is the value of these coins? Each individual would have a different idea regarding the value of these coins with no face value! And the ideas of each individual would change hourly, according to the quoted price of silver on the international exchanges. Each transaction with these coins would necessitate a process of haggling about the correct value of the coins. Some people, but most definitely not all people, would wish to save these coins, and under present conditions, they would most likely be doing something wise and prudent; however, they would be speculating on a rise in the price of silver, either long-term or short-term, according to the views of each individual saver. Speculators are a small portion of the total population, especially among the less-affluent savers who are the most interested in silver as a means of saving. The fact is that silver coins with no face value, or with a face value so low as to be meaningless as in the case of the American Silver Eagle 1 oz. coin, are generally available in quantities sufficient to cover the needs of American speculators on the price of silver, who wish to speculate by purchasing Silver Eagles. For this reason, if the US Mint or any other Mint were open to “free coinage of silver”, there would probably not be a great increase in the amount of such silver being minted. Such miners who turned in large amounts of silver to be minted, would be well and truly stuck with them and have a great deal of trouble in placing them among the public, which in the U.S. for instance, is already largely satisfied with the production of Silver Eagles by the U.S. Mint.
Posted on: Fri, 05 Sep 2014 17:01:17 +0000
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