Silver’s Long Lost Monetary Role – Let’s Make Some Real Money! by XC Skater
All over the euro zone, merchants and vending machines accept euros, whether they were struck in Latvia or in Spain. No-one cares for the face design. We recognize size, weight, reed style and color. Now let’s extrapolate this to a global scale. The twist: we’ll create coins which are actually worth their weight in metal. Like in the old days, and better. Real money appeals to all, not just the highly exclusive club of bullion buyers.
Imagine, a currency of coins with functionality just like the coins and bills in your wallet today, but accepted globally, and not subject to fiat inflation, on the contrary: even inherently deflationary. A truly “hard” global currency. “It isn’t hard to do”.
Forgotten real money of yesteryear
Precious metal currency used to exist globally, issued on a national or regional level. During the 1960’s though, the world’s treasuries removed most of the remaining silver coins from circulation, replacingthem with visually similar fiat placeholders struck from low cost base metals. Over the decades and centuries preceding, silver contents in coinage had shrunk ever smaller in relation to their denominations in dollars, francs, pounds, guilders, lire, or schillings. That’s fiat inflation versus silver weight visually happening in any coin album stretching the last century and a half.
A popular example: http://en.wikipedia.org/wiki/Half_dollar_(United_States_coin)
Obviously, the nominal value of a silver coin needed to be greater than its silver content. Otherwise, despite laws prohibiting this, subjects would melt currency down and sell its metals for fresh money with a greater precious metal content. Then melt, sell, and repeat again, like a cow milking the farmer.
While never 100% backed by the actual value of its silver content, such coins offered perfectly trustworthy means of payment, and still do today. Coins with significant precious metal content, still in existence after their demonetization and for instance the silver peak of 1980, are known as “junk silver”.
While never actually 100% backed by intrinsic silver value, coins such as that Half Dollar offered a perfectly trust-worthy form of payment, and still do. Those who hold them, even well-worn specimens, are not easily persuaded to part with them at a sale price below its fiat silver content.
21st century currencies: inflation exploring entirely new dimensions
Bitcoin taught us the forgotten lesson that anything can be currency. Sticks, rocks, pig tusks, or promises printed on numbered paper. And now, these unique strings of hard-to-compute 1’s and 0’s service only the purpose of being unique while all but random. Digitally imagined into existence on-board someone’s PC. Globally accepted. Quasi anonymous.
The main flaw in the long-term value proposition of crypto currencies is its lack of hard asset backing or insufficient anonymity, but the simple fact that anyone can start their own. Mere years later and 1000+ exactly such crypto currencies have already seen the light. Their relative value seems to be set in a popularity pageant where unscheduled new participants keep materializing on stage. All promising the same things.
The first few million units of a crypto currency are typically designed to be low-cost to mine. This to enable its founders to get rich quick. A pure pyramid scheme, but with more joining in at the top than at the bottom. And no-one is falling for it anymore, for now.
GRAMs: open sourced intrinsically backed coins, for everyone to spend or hold
Bullion is great for long term compact storage, but rather useless for daily payments for goods and services.
The typically used .999 pure troy ounce unit is a highly contra-productive unit of measure to sell the public on precious metals. A .999 troy ounce of silver is too bulky for use in wallets, delicate for wear, hardly a scale in the world that doesn’t need manual conversion to verify it, and above all: it has failed to get participation of the general public despite multiple global stock crashes since the demonetization of silver and gold.
My proposal is for a 21st century honest-to-weight transaction currency. A standard appealing to savers, stackers, prudent consumers and retailers alike. Fresh inspiration for collectors, designers, brands and mints. Creating a whole new, or rather re-imagining a forgotten demand category for precious metals.
Combining the tried and true aspects of government issued precious metal coinage with contemporary technology and global standardization.
To be established open source, no central benefactor or issuing entity. Produced decentralized to global circulation demand. Not an entirely new concept, I am aware, but it needs to actually be DONE now. This decade. It’s half a century overdue.
While I used to promote the idea under the name of “OpenCoin” for being open source above anything else, it’s not too catchy or original. Lately I like to call it the Tri-Metal GRAM Standard. Gold Grams, Silver Grams, and Copper or Titanium, Grams. Simple, clear, honest, non-discriminative. Non-inflationary. Just as money should be.
Who would issue these coins, and how to determine their value?
Conforming to the established standard, mint houses all over the world will be free to strike Grams to demand, or for their own stock as they see fit. They will do so in the designs of their (customers’) choice.
The denomination is the gross weight of the coin, in grams, and its metal name.
Example: 10 Silver Grams. It would have 8.0 grams of pure silver content, but represent purchase power of 10 grams of silver at spot. Floating fiat exchange rates per central spot price, as today’s troy ounce denominated coins and rounds also have.
The three metals then:
- A semi-precious metal such as for instance copper or titanium. For the small change in your wallet.
- Silver for everyday consumer purchases, alloys chosen for durability, ring and shine
- Gold (or the rarer platinum) for larger purchases and lowest risk wealth storage (lowest premiums)
The 2.0 grams of well-specified non-silver used in the 10 Silver Grams coin, is for the mint house or commissioning entity to take their cut out of. This way minting Grams can be profitable when done efficiently. The street value after all is the gross weight expressed as Silver Grams. The sub-.999 alloys will ensure coins survive many years in active circulation before they cease to conform to the standard.
Anyone can mint as many Grams as they feel like. But it’s up to the issuer to source metals and find takers for the end product, competition is healthy. Perhaps a less appealing 10 grams coin will need to be priced at 9.7 grams to get takers. Then, proof or first strike editions might fetch as much as 13 grams worth. That’s all the mint’s problem and business opportunity. National mints currently have a bit of a monopoly on striking spendable cash, which the private mints should welcome to get in on.
Early adopters of Grams will be (speculative) stackers and collectors, and people who wish to travel with their PM portfolio in plastic form. Their role is to help build and test the infrastructure for less concerted consumers who’ll just be using it as circulating currency and not give much thought as to why grams are better than fiat.
As the purchase power of Grams is derived from the gross weight of a coin, not the pure precious metal content, the likelihood of them exiting circulation before being worn past acceptance is highly unlikely, as long as there is a somewhat functioning Gram market to liquidate them. In a normal market there are cheaper ways to obtain the tri metals than melting down Grams.
A currency that offers everything it could be expected to
Where our current method of wealth preservation through troy ounces of pure-as-can-be bullion lacks convenience, standardization and physical durability, Grams would fix all that and directly compete with plane fiat currency for transactional purposes.
– Children can learn about money and saving, and their Grams will never hyper inflate.
– Consumers will enjoy the practicality, and avoid the risk of overnight devaluation such has been seen in South America and Zimbabwe in recent years.
– Merchants can’t object to money which doesn’t rely on promises by bankers and politicians. There are no real downsides.
– Currency changers or Gram banks will find a way to skim a bit off the top facilitating long-distance transfers, much like Western Union franchises do with fiat. Commission will need to be much lower though, as there is no currency exchanged, just re-allocated.
– Mints can go crazy on this standard. No limit to possible demand if they offer appealing designs and strikes. They can even attract corporate orders for custom editions to be used in promotions. If they optimize their operations, the profits can be quite agreeable.
Inherently deflationary, especially with monetary base expansion
As the tri-metal currency gains momentum, more and more people use it to save, stack, spend and collect, in no particular order. Stockpiles of silver, whereverthey may be, will automatically becalled upon. If the supply side of the physical market doesn’t come up with tri-metals at spot, something will need to give way. Spot would have to rise, and if not, grams will start to outperform spot and become even more sought after. Digital ounces traded in the financial sector would lose support.
While increasing the volume of a fiat (or crypto-) currency in circulation reduces its purchase power per unit, the Gram tri-metals are much more finite in supply. Increase in purchase power is then expected, especially for the bottom two metals: copper or titanium and silver. Each arewidely used in numerous industrial, engineering and even medical applications, and in most cases cannot be substituted. Stockpiles are holding for now, but the nudge from a silver coin currency might break the death grip by the digital mega players. In struggling (destroyed) economies, Grams or a national variety to it, could help reinstate consumer confidence, and promote needed growth and recovery.
Solutions already exist to pay in gold or silver through a special debit card. The tri-metal standard could adopt a similar system or simply be adopted with an existing one. When making a large purchase with a gold coin, change could be returned in silver and copper/titanium, or put on a (dedicated or vendor issued) debit card in the desired metals and ratios. Of course local fiat could be returned as change as well. And vice versa. Total control of your cash portfolio.
Plastic integration, more so even than Bitcoin, provides a worry-free mode of international travel without having it physically on your person.
Most European countries enforce a ~19-25% sales tax on non-food goods. Silver is no longer considered a monetary asset and thus taxed as a non-food item, some exceptions still existing for silver bullion with legal tender status. The final loopholes for less than fully taxed silver are closing one by one.
Bitcoin does not enjoy sales tax, but any fiat profits realized need to be tax declared as investment profits. The tri-metal coin standard becoming a global currency and being little different from silver and gold coins in circulating until the 60’s, may well make a case for lifting sales taxes on this particular form of silver. It’s 100% money, in ways Bitcoin never was, and therefor should not be taxed.
Volunteer needed to light the fuse
It all starts with establishing the standard, preferably striking or even CNC’ing one or more of each size. Presenting it at conferences, bringing it to coin shows. Ideally launching one or all coins in first strike editions.
I hope to find an outspoken pro-metals economist, fund manager, silver guru or ballsy entrepreneur to take this project on with me. Or, steal the idea and cut me out, for all I care. Get it done, but get it done properly. Create “new” monetary demand of hundreds of millions of ounces, billions of Grams.
The only real financial risk would be for the design and minting costs. But this is nothing different from minting a new design of private rounds. I am looking at a 4 or 5-figure initial investment to start up a global currency. Easily earned back through bringing it into circulation. First as collectibles and investment vehicles, later as plain cash.
This is not some get-rich-quick scheme. You will only start making return on investment when Grams (or the commodities themselves) take off to the point of depleting tri-metal reserves, causing respective spot prices to rise. If you already own a million dollars in bullion, or run a few mines, you desperately want this demand to come online. So, let’s make it happen. Give the world back its real money.