Below, I’ve extracted important portions of an article entitled “Silver Money for Americans” by one of my favorite authors, Hugo Salinas Price.
Fiat money in the US is in an advanced stage of decomposition
Fiat money in the US is in an advanced stage of decomposition and when money rots, the whole social, economic and political structure of the nation rots with it. A return to sound money is urgent. More and more people are aware of the perilous road ahead if nothing is done. The problems facing the US are so gigantic in nature, that an all-round solution to them is impossible when analyzed in practical terms. A return to sound money is a return to gold and silver as currency. Gold is outstanding as money — but how to realize that goal? Silver is great for popular use — but again, how to regain it?
The only way open to regain a sound footing of real money for the US economy must be by establishing a process through which there will be a gradual and natural return to sound money. It is impossible to reform or improve the present monetary system of the US any other way. The US abandoned sound money in a series of gradual steps; the first metal out of the monetary system was gold, in 1933; the second metal out of the system was silver, in 1965. The return to sound money would follow those steps, in inverse order: silver would return first, because silver has always been the money of the people; gold would return last, silver having opened the way.
The US Government must recognize at some point that it is indispensable to the health and continuing existence of the US to restore silver coin into circulation.
The powers that be in the US Government must recognize at some point that it is indispensable to the health and continuing existence of the US as we have known it, to restore silver coin into circulation. At present, its policy is to ignore public discontent; the results of the coming elections will probably do little to change its policy. The discontent of the American people will increase until the government hears the rumble of distant drums. Perhaps then, it will be willing to turn to silver, to appease the population.
Silver went out of circulation because the monetary value of silver coins was engraved upon them. When the market price of silver rose, and the value engraved upon the coins was left behind and below the value of the silver in the coins, the coins became more valuable as bullion than as coins. The coins were melted down. The silver coinage disappeared. This gives us the clue to restoring silver into circulation: eliminate the engraved value.
What would be the monetary value of a silver coin with no engraved value?
In this case, what would be the monetary value of a silver coin with no engraved value? The answer is that — like a stock — its value would be a quoted value; however, unlike a stock, the quote would not be a market quote but a quote coming from the Treasury. The legal tender monetary value of the silver coin quoted by the Treasury would take the place of an engraved value. This monetary value would be increased to meet rises in the price of silver, but remain stable at its last quote, during falls in the price of silver.
Stocks prices fluctuate, but the monetary value of a silver coin cannot be allowed to fluctuate, because money must have a stable value. A silver coin, whose quoted monetary value goes up and down, remains a commodity. It cannot be used as money. The Treasury must issue a stable quote for the monetary value of the silver coin with no engraved value.
Should not the monetary value of the silver coin be reduced, when the price of silver falls? The answer is: No! During the Depression of the 30’s, the price of silver fell drastically. This did not affect the circulation of the beloved silver half-dollars, quarters and dimes. They continued to serve the American people. During that period, the Treasury received a larger profit from minting those coins, because the silver required to mint them cost the Treasury less, but the value — the engraved monetary value — of the coins remained the same. The rising value of silver, which will continue as long as the fiat monetary system is in operation, will allow Americans to save in a very simple medium which derives its value from its silver content and becomes more valuable when the price of silver rises. This is the greatest possible incentive to popular savings, so desperately needed in America today.
Silver Coins Maintains the Wealth of Nations, QE2 Destroys It
QE2 is supposed to “stimulate” the economy by putting more purchasing power in the hands of the public by creating more money. However, the effect is inverse, because increases in the money supply diminish the value of the dollars already in circulation and cause prices to rise. This is classic monetary inflation and this is what the Fed wants. The monetized silver coin will not be inflationary for two reasons. The first reason is that its “velocity of circulation” will be near zero, because these coins will go directly into savings (“Gresham’s Law”). People will use paper bills and bank deposits to pay their expenses, and retain silver as savings. The second reason is that the increases in the monetary value of the coin will reflect the increased value of a tangible asset. Purchasing power that increases because what you own – silver money – is worth more is completely different from increases in purchasing power because you have more money that the Fed has created out of nothing: such money will be falling in purchasing power and there is no reason to keep it for savings.
Can we know all the consequences of putting a silver coin into circulation in the United States? Certainly, we cannot. However, we know that it will be good for millions of Americans to be able to save silver money and prepare themselves for any adversity; to be able to save in order to have a secure basis for retirement and old age; to be able to save in order to have that precious thing called “peace of mind”. We also know that powerful interests will not be happy with this measure, because it will cause those interests losses and pain. The banks will not be happy — they want the public to deposit their savings with them; they will not be pleased with the idea that Americans can save excellently by saving their ounces at home.
