Precious metal coinage continues

In 1901 most coins, especially high value ones, contained gold or silver. Now gold and silver is just about only bullion coins. What would be necessary to keep precious metal in circulating coins until at least 2011?
 
In 1901 most coins, especially high value ones, contained gold or silver. Now gold and silver is just about only bullion coins. What would be necessary to keep precious metal in circulating coins until at least 2011?

Its not really possible as the global economy expands... currency floating and getting off of precious metal based monetary policy is inevitable

The government has a hard time even meeting demand for the silver and gold eagle bullion coins; god knows how difficult it would be to use even small amounts of precious medals in general circulation
 
Its not really possible as the global economy expands... currency floating and getting off of precious metal based monetary policy is inevitable

The government has a hard time even meeting demand for the silver and gold eagle bullion coins; god knows how difficult it would be to use even small amounts of precious medals in general circulation

Its not really possible as the global economy expands... currency floating and getting off of precious metal based monetary policy is inevitable

The government has a hard time even meeting demand for the silver and gold eagle bullion coins; god knows how difficult it would be to use even small amounts of precious medals in general circulation

True, it is difficult for a government to stay issue gold or silver coins, which requires adherence to a strict gold or bimetallic standard. But it is no more impossible than it is for a government to enforce a gold standard than it is to have any other sort of "fixed" currency exchange rate. A country like Portugal and Ireland, which use the Euro is in a situation not much different than they would be in with a gold standard. They must deal with a limited amount of hard currency (the Euro) which they cannot just print to meet government shortfalls. Now, the comparison is not perfect, since the ECB CAN print more Euros, but as an independent institution, the additional currency should be exogenous to the member states' monetary policy (like the discovery of new gold), at least theoretically.

I think the easiest way to keep countries on the Gold standard would be a few PODs during the Great Depression. First, GB, the first country to drop the Gold Standard would have suffer a longer, more prolonged slump, completely discrediting the idea of adopting an "easy money" policy to escape the great depression. Second, you need someone other than FDR to take office during the 1930's in the US who is ideologically committed to the Gold Standard (like John Nance Gardiner). The US, and the rest of the world would pull out the Depression, eventually. WWII would occur, and belligerent nations would temporarily get off the gold standard. In the Post-War, however, international community would agree to a new Gold Standard at Breton Woods, not the de facto one they adopted in which the US pegged the dollar to gold, and everyone else pegged to the dollar.

The butterflies from such an outcome would be vast. Countries on a gold standard cannot maintain either deficit spending nor trade deficits for long before chronic gold shortages force an economic contraction. Countries could adopt to this by either heavily restricting international trade, by limiting gold outflows by law (forcing trade to be done mostly on credit), or by avoiding deficit spending. Welfare state programs can still be implemented, but governments will find themselves in a financial straight jacket when revenues fall, a straight jacket they cannot escape by monetizing (inflating away) their debt.

What we would probably see today is Third World countries using their own non-bullion currency, or scrip, which would trade at a heavy discount on the world currency markets. Nominal prices worldwide would be heavily deflated compared to OTL, with wages nominally similar to what they were in the 1920's, though the purchasing power of gold backed currencies would be vastly higher. Countries like the US and GB would still issue paper money that could be redeemed for Gold, but redemption would likely be difficult, with withdrawal limitations on gold to limit bank runs.
 
I quite like the idea that the precious metals get used for coins of a higher value - eg a gold £10 coin, a platinum £50 coin

Best Regards
Grey Wolf
 
I quite like the idea that the precious metals get used for coins of a higher value - eg a gold £10 coin, a platinum £50 coin

Best Regards
Grey Wolf

Bimetalism was a painfully inefficient system in its heyday. I can only imagine how difficult tri-metalism would be to implement. The problem is that only one metal can fix the value of the others. Either the value of silver has to be denominated in Gold, or the value of gold denominated in silver. Assuming the government tries to maintain a fixed exchange rate, that will mean any time silver is scarce, people will trade in their gold for silver, making silver even more rare, or vice versa. Soon only one metal is at all available, while the other just gets horded.

For any sort of non-gold standard bullion coinage to work, you would need a transition from "currency as a unit of exchange" towards pure commodity money. That would mean that the value of each coin would "float" with the value of its commodity. So every prudent investor would check the commodities market in the morning to determine how much the coin in his pocket was worth. This would be a cumbersome, but probably workable system. Though the coins are more of a unit to be bartered with than "money" as we think of them today.
 
Exactly as it happened in the US in the 19th Century where the government established a politically popular exchange rate between gold and silver which did not match reality and, as a result, Europeans were delighted to come in and use gold to purchase loads of silver which they could sell for a guaranteed profit the moment they returned home.

Meanwhile the US spent years wondering where the silver kept going...:rolleyes:
 
It wouldn't surprise me if there were significant industrial pressure to remove precious metal coinage from the market: consider the huge industrial applications for platinum as a catalytic material, for example, or for gold in the electronics industry, given its conductive properties. And a lot of the other quasi-precious metals (e.g., rhodium, palladium) have similar industrial applications.

Oh, sure, you can transmute some metals into others through nuclear reactions, but that's a fairly steep price to pay (figuratively and literally)--and I can't really see carrying around $10 neptunium or plutonium coins. :D
 
I quite like the idea that the precious metals get used for coins of a higher value - eg a gold £10 coin, a platinum £50 coin.


The idea sounds nice but utterly fails when scrutinized. Among the many problems with the idea is the fact that commodity prices are incredibly volatile and no nation wants it's currency exposed to that volatility. Look at the price of gold over the last 10 years for example.

During that period, gold's lowest price has been 255.95 USD/ounce and it's highest 1422.60 USD/ounce. That means a coin minted with £10 of gold in it at the low price would contain £55.58 of gold at the high price while still being officially worth the £10 engraved on it's face when it was struck. Anyone using the coin for a £10 purchase would be losing £45 of actual worth. What's more, people will be buying the £10 coins in order to melt them down for the £55.58 of gold in them and it will then cost the government £55.85 to replace what it claims is only £10 worth of coinage in the economy.

Counter-intuitively there are also major problems when gold's price drops. Between 1980 and 1983 gold lost over half it's value. In this case people will happily use the coins official valuation of £10 to purchase £10 of goods when the coin is really only worth £5.

Any nation worthy of the label "nation" basically manages it's domestic economy by controlling the amount of money within that economy and the speed at which is moves within that economy. Pinning your currency's actual worth to a commodity whose value you cannot control significantly weakens those two major levers.
 
I could see silver staying around longer. LBJ was going to re-release 45 million silver dollars for 1965 but this didn't go ahead and the US stopped making silver coins after 1964. Perhaps instead the US could only make dollars in silver and have smaller coin in base metals.
 

Dialga

Banned
The only way I could see bi- or tri-metallism continuing until today would have been a serious post-Apollo effort at colonizing and mining asteroids.

A "silver standard" might be viable today, but I'm not sure if it would be a good idea.
 
Multi-metal standards for money simply don't work in the long run. A single-metal standard could possibly survive, but it would require some major differences in the way governments run the money supply.

The standard would have to be one of the more common 'precious' metals, and the modern electronics industry makes some of those bad choices since they now have industrial uses. Offhand I can't think of a metal that doesn't have some practical use today, so your precious metal percentage will be VERY low.

While there are some benefits to a metal standard, the disadvantages appear to outweigh them. Once you're off a metal standard, your coins are going to be debased sooner or later.
 
If LBJ had issued new silver dollars then they would have been taken out of circulation long ago like the rest of the junk silver.

Look at the actual value of such coins today where the nickels issued 1942-1945 with 35% silver is worth $1.70 and the half dollars worth $11.00. Who would use them at their face value or even carry them for fear of using a quarter actually worth $5.50 in vending machine?

Coins close to the actual value of silver...dollar coins smaller than dimes don't seem very plausible and if you make them with an overwhelming percentage of base metals then what was the point? As it is the fluctuation in recent months would have involved an overall swing of 20%.


Don Lardo's post on value fluctuation simply raises another key point...and does it very well, Don.:)
 
I agree, the 1966 Australian 50 cent coin had 1/3 toz of silver in it, which is woth about $10 today. But what I was thinking is declining silver portions and larger demoniations until it became toally uneconomical. The US had gold $5, $10 and $20 coins in 1932, so perhaps they could increase the silver coin denomination every few years to $2, $5, $10 and drop the silver content in a tail-chasing arrangement. However this will only get you so far, maybe to 1980.
 

Cook

Banned
It’s pretty pointless. The value of the coinage is determined by international monetary exchanges on a floating market so why go wasting your precious metal reserves by diluting it and putting it into coins?
 
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