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Address presented at the GATA Gold Rush 2011.
London, England, August 6, 2011.
Click here to download
this article and the appendix (the brochure delivered at the conference) in
PDF format.
Why not re-monetize the silver dollar?
Re-monetization could put the silver dollar and its subsidiary silver coinage
into circulation in parallel with
FRNs – “Federal Reserve Notes”.
There are several reasons that make this action
possible, and only one that might be considered as an unimportant material
obstacle.
In favor:
The silver dollar is the money that is still the
Constitutional “coin of the realm”, defined by Act of Congress as
371.25 grains of pure silver. (The Troy ounce contains 480 grains.)
The silver dollar is familiar or at least known to
almost all Americans.
A considerable quantity of these silver dollars is owned by Americans.
The silver dollar is a cherished symbol of a great
past.
The monetized silver dollar would ignite a desire to
save such as America has perhaps never seen before. The very first thing that
must be done, to encourage people to save, is to give them something worth saving. As the US
government gallops toward the abyss of bankruptcy by unlimited spending, the
American people desperately require a refuge for their savings!
In this writer’s opinion, a large majority of
the American people can see themselves as owners of silver money and, if a
poll were taken, one can imagine that most Americans would express themselves
in favor of silver money. Not so with gold, towards which the American people
have little emotional attachment: gold is seen as the money of the
élite. William Jennings Bryan exploited this fundamental attitude of
the American people with his “Cross of Gold” speech. (Note: this
should not be taken as disparaging gold; it is simply the statement of an
opinion about the attitude of Americans regarding gold.)
Against:
The silver dollar bears a value stamped upon it:
“One Dollar”.
***
The branch of government which the Constitution has
designated as the agency “to coin money [and] regulate the value
thereof” is the Treasury.
If the Treasury were to monetize the silver dollar
coin by attributing to it a monetary value in terms of FRNs - “Federal
Reserve Notes” - the public would very probably ignore the inscription
of “One Dollar” upon the coin and accept it as legal tender money for the
amount of the Treasury quote given to it. It would not be necessary to
explain that twice, to anyone owning a silver dollar coin! In a short time,
people would regard the term “One Dollar” as the name of a coin, rather than
as a numeric indicator of legal tender value.
Determining the value of the silver dollar falls
quite nicely into the Constitutional mandate to the Treasury: “To coin
money [and] regulate the
value thereof…”
How would the Treasury go about determining a quote
to regulate the value of the
silver dollar? Let bureaucrats and lawyers write books about how
it should be done; here it is in a few words:
Suppose the price of silver bullion is $35 per
ounce.
The silver dollar contains 77.34166% of a Troy
ounce.
$35 X .7734166 = $27.07, the value of the silver in
the silver dollar.
The Treasury will quote the silver dollar’s
value in FRNs, with a margin of 15%, and round the figure to the next highest
multiple of four:
$27.07 X 1.15 = $31.13, rounded up to $32.
The silver dollar as a legal tender coin worth $32
FRNs. The American public would eagerly
purchase these silver dollars, worth $32 FRN dollars, and which could be used
for all transactions without any haggling. The silver dollar worth $32 FRNs
could even be deposited for that value in banks, if anyone had a mind to do
such a thing.
If the price of silver rose to $37.61, the margin of
profit of the Treasury, or seigniorage as it is formally known, would be
reduced to 10%; at that point, a new and higher quote would be issued, to
restore the 15% profit of the Treasury:
$37.61 X .7734166 = $29.09 value of silver in the
silver dollar X 1.15 = $33.45, rounded up to $36 FRNs - 36 being the next
highest multiple of four.
Why “the next highest multiple of four”?
Because by doing so, the result would be the
re-monetization of the entire silver currency system of the United States as
it existed up until the Sixties of the last century.
In the last example, the silver half-dollars would
automatically be worth $18 FRNs, the quarter-dollars would be worth $9 FRNs, and the dimes would be worth one-tenth of the silver
dollar: $3.60 FRNs.
As pointed out in many articles at www.plata.com.mx,
in the section in English, the last quote of the Treasury would remain firm
and not subject to reduction, just as if the value in FRNs had been
re-stamped upon the coin. The Treasury quote would simply take the place of a
stamped quote, which cannot be reduced. The Treasury quote would only be
raised, to follow the rising price of silver. In this way, the silver dollar
would be a coin that would remain in use permanently.
This program would return the silver dollar and its
subsidiary silver coinage of half-dollars, quarters and dimes to the American
people in such a way as never to disappear again: all rises in the price of
silver would be matched with rises in the quoted monetary value of the silver
dollar and by derivation, of its subsidiary coinage: the silver half-dollar,
the quarter and the dime.
This program would not cost the Federal Government
– or the taxpayers that support it – one single cent! And yet, it
would constitute the greatest gift to the American people that any US
Congress could possibly invent, next only in importance to the return of the
Gold Standard. The restoration of the silver currency of the United States to
circulation, in parallel with the fiat FRN, can be considered the prelude to
the revived Gold Standard.
By paying the Treasury a premium of 15% over the
bullion price of silver, the American people would actually be subsidizing
the Treasury’s work of monetization. This cost would be a one-time cost
of obtaining real money of permanent value and utility, independent of the
Fed and the banking system.
The re-monetization of the silver currency of the
United States would create a new, vast market for physical silver and drive
the price of silver very much higher. Those who might not be able to afford
the purchase of monetized silver dollars could purchase half-dollars,
quarters or dimes, which would provide the same security: they too, would
rise with the rise in the price of silver. The rise in the price of silver
would affect gold, which would also rise in price.
In order to facilitate larger transactions in
silver, the Treasury could once again issue “Silver Certificates”
attesting to the existence of silver held in its vaults.
With regard to the present faux-silver coinage in
circulation, the American people are too intelligent to be deceived by it;
this coinage may remain in circulation until the Treasury issues new coins
for the purpose of making change in small transactions.
Though the restored silver currency may legally
circulate, in practice it will be saved in its entirety and only be used in
cases of emergency. Its “velocity of circulation” will be
effectively close to zero.
***
Dorothy wore silver
shoes, in L. Frank Baum’s classic book. Silver shoes on the
yellow brick road! Dorothy symbolized then and still does today, the American
people. Dorothy was unaware of the magic power of her silver shoes –
and the American people are still equally unaware of the magic power of the
re-monetized silver dollar: the power to recover America as the land of Hope
and Opportunity!
What are the obstacles to regaining the silver
dollar as money which can circulate in parallel with Federal Reserve Notes?
The main obstacle will be the weapon of fear
wielded by the entrenched interests of banking and the Federal
Reserve, the intellectual centre of the banking
cartel. These fiat money-mongers will rely on generating fear of the
consequences of silver money so that they can maintain their huge fraud of
fiat money FRNs; the Fed and the “Too Big to Fail” Banks are deathly
afraid of the competition of silver. They know that the slightest crack in
their monopoly of issuing fiat money will expose their scheme.
The Fed and the banking system will without doubt
claim that “silver money is very costly”, but they will certainly
not mention that the American people will fall over themselves to acquire it
and even pay a premium of 15% to the Treasury, for the blessing of owning
real money. Nor will the Fed and the banking system ever mention the gigantic
costs that the depreciating FRNs have inflicted upon American savers; nor
will they wish to recognize that the fiat FRN and the Fed are directly
responsible for the present financial and economic destruction of the once
great United States of America.
Another objection which will be put forward
forcefully is that what the American economy requires is more spending on the part of the
public. They will argue that more savings on the part of the
American people spells doom for the economy: “More drink for the
drunkard” is essential, according to the prevailing Keynesian thinking.
However, the humbug wizard has already been exposed
and the Fed has lost its prestige forever. Toto has drawn the curtain! The
State of Utah has already voiced its dissatisfaction with the present
monetary system, by legislating in favor of gold and silver as legal tender
money. If this project - monetizing the silver dollar by the Treasury’s
giving it a numeric monetary
value in FRNs, which immediately places it alongside the Federal Reserve Note
as money – if this project comes to the notice of the several States of
the Union, they together may force the issue.
The present policy is to “kick the can down
the road” and postpone the final reckoning. But, the end of the road is
already in sight! The condition is one of utter helplessness. The
re-monetization of the silver dollar is the first step toward regaining
health for the economy of America. Paper, fiat money will probably remain in
use for some time, but the presence of the monetized silver dollar will force
the Federal Reserve, the banking system and the US Government itself, to a
more prudent financial course. It will be possible to regain financial
health, because an alternative is available. Savings, the foundation of
prosperity, will bloom as Americans opt for massive voluntary austerity by
saving monetized silver dollars, half-dollars, quarters and dimes.
The banking system in the United States will be
anxious to receive the massive savings in silver of the American people as
deposits, but this will only be possible when the price of silver bullion has
stabilized. Thus, the American people will have the upper hand; they will
bend the banking system to their will by
refusing to deposit their silver in the banks and thus force the
banking system to reform itself to prudent monetary practice and desist from
inflating by expanding credit out of nothing. After a stabilization of the
banking system, the way would be open to a resumption of the Gold Standard.
Americans are today caught in a financial calamity
with no parallel in history. They are being told this every day by every
medium of communication. But they watch their crumbling economy in utter
paralysis, because there is no
alternative to which they may turn. The whole world is a mirror
of their plight.
The restoration of the silver currency of the United
States of America by the very simple procedure outlined here can provide the
life-saving alternative. There is, at present, no other practical proposal
for a viable action in the field of money. Perhaps
there can be no other practical proposal? Perhaps a return to silver money is
the only path out of the present crisis of civilization?
Let us hope that a political leader in the United
States understands this message. The popular appeal of silver is universal;
“silver shoes” will take that leader far – and the American
people will follow him on that road!
Hugo Salinas Price
President, Mexican Civic Association Pro
Silver
www.plata.com.mx/plata/
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