4T? What 4T?

[pbrower2a]

(06-03-2016, 08:57 PM)Kinser79 Wrote:

(06-02-2016, 10:01 AM)Mikebert Wrote: [Kinser]When the Dollar was defined as 3/4ths of a troy ounce of silver the dollar was worth exactly that.

No.  It was a GOLD standard, not a silver standard.  Didn't you even look at the link I gave?

I did, and yes there was a gold standard in place. The existence of the gold standard at the time is irrelevant, again you're seeing trees but not the forest.  That is a common problem for you, actually.  However, silver coinage has traditionally held the amount of silver that was worth the value of the coin, minus alloying for wear (which is expected and not general debasement).

A gold standard forces the stability of the money supply (unless new gold enters the supply) unless a country gets huge influxes of wealth. It has also preserved the mercantilist concern for balance-of-payments. If no new gold enters the economy under a gold standard, then both population growth and increases in productivity can prove deflationary.

 

Quote:The value of the silver in a silver dollar was LESS than a dollar.  It had to be so, or people would have melted down to coins to get the silver.

Quote:Actually no they wouldn't.  It is the same reason that people wouldn't melt down pre 1982 pennies to get the copper after a economic collapse and the use of those copper coins as a medium of exchange in the absence of other, better coins.  The reason is rather simple, a lump of silver of an undetermined purity is not fungible whereas a coin with the likeness of a ruler is known and fungible.

Money whether it is representational (IE paper and token coinage convertable into gold and/or silver) or otherwise must have various properties.

1.  It must be a store of value.  (That is why bananas are not money...they rot rather quickly)
2.  It must be easily divisible.  (in olden times silver pennies would be cut on a cross to make halfpence and farthings).
3.  It must be portable.
4.  It must be numeraire:  This means that goods and services can be valued easily in one term of measurement.
5.  It must serve as a medium of exchange.  Other people have to be willing to take it for goods and services, and in turn it is generally accepted for that purpose.

As such it would make more sense in a situation where the US Dollar ceases to exist to keep small copper (cents prior to 1982) and cupronickle (nickles currently) coinage in its state.  Furthermore, the existance of bullion coins break your theses that people would melt the coins to get the silver.  American Silver Eagles have a face value of 1 dollar but contain a troy ounce of fine silver (.999 purity) which is closer to 16 dollars in value.

Why would one not melt down those coins?  Simple.  When metal is in the form of a coin everyone knows its weight, its purity, its value.

Yes -- people like their specie in easily-identified forms (coin, cash, and numbers in a bank account). Coins have the advantage over raw bullion   due to standardization. Any deviation from that standard is easily detected. Thus counterfeits are detected easily. If the "gold" coin dissolves in sulfuric acid, then it is not gold. Even the clipping of coins for their silver or gold content is easily deterred by milling. Governments are the only entities that make really-good coins at modest cost other than the coinage metal itself. It's possible to make expensive medals or private coins, but making good counterfeits is out of the range of anyone's skills. Governments strike coins; counterfeiters cast theirs, and that difference is easy to detect.

An interesting material recently synthesized, titanium nitride, has a gold-like color... and it is useful as a tool material due to its hardness. It would be difficult to turn into a coin, but it might be an attractive coating.





It's fairly resistant to chemical attack, but its hardness would be a dead giveaway on a 'gold' coin. Gold is soft. (I saw some 'gold' drill bits and questioned why anyone would plate a drill bit in gold; the gold would wear away. The coating is of titanium nitride, which does not wear away easily.

Quote:

Quote:  Since the ratio of silver to gold tended to rise over time, under a gold standard this would likely remain the case.

Not always.  Britain went to a gold standard because the ratio of gold to silver fell and gold was pushing silver out circulation.

Silver and gold are available in proportional quantities most of the time. Gold often comes out of copper and iron mines as a trace element that can usually be separated profitably. But this said, the once-profitable copper mines of Michigan produced no gold or silver, and the South African gold mines generally do not produce silver or copper.

Quote:  As I wrote this was the crux of the issue the free silver folks had.  The gold standard was flawed because the supply of gold rose too slowly, since silver grew more rapidly it was preferred to gold for a growing economy.

No the free silver crowd wanted to inflate the economy with silver.  It just so happened that a large deposit of silver had been recently discovered.  Ever hear of the Comstock Lode?

 
They also wanted to undo the deflationary tendencies that gave America the worst economic meltdown between the Civil War and the Great Depression. Deflation was hurting debtors badly and was limiting opportunities for people to get out of debt. Creditors associated with the gold standard often paid their workers iso little that they had to get their kids out of school and into the mines and factories to supplement the meager incomes of honest toil.

Quote:

Quote:  The too-restrictive gold standard penalized productive folks to the benefit of rentiers.  On the other side the bankers were opposed to a silver standard because they (rightly) saw it as inflationary, and so bad for holders of money, stocks* and bonds.

Not quite true.  Productive folks have never had a problem with deflationary pressures. If anything deflation assists in the accumulation of capital as liquid money appreciates in value over time. The problems with deflation arise with those who are indebted to others.  Debtors always seek to borrow gold (or silver) and pay back with paper whenever they can.  It is their class interest as debtors.

The class interest of debtors is to make their debts sting less and pay the debts off cheaply. The class interest
of creditors is to make debt as painful as possible and to use it as a tool of transforming a debt into peonage. When creditors get the chance they turn debtors into serfs and take away any all but the most heroic means of escape from bondage that even becomes hereditary. 

People are wise to avoid taking on pointless debt -- it is OK if it has a durable or productive asset behind it or can tap into some income stream. If it is for sustenance, then such suggests the depravity of the system. Better the welfare state than peonage -- unless one seeks to make people into peons.

Quote:*Until 1916 stocks were priced like bonds, and thought to be no different than the perpetual bonds (e.g. British Consols) developed in the 18th century that had been called government "stock".

Totally irrelevant.[/quote]

Concurrence. Preferred stock had bond-like features )it would get dividends first)  but only to a limit. Common stock has been the norm because few people want to invest in an entity with limited potential for growth.