Specie Coinage is Not Dead
Sound money policies are the bottom line for any specie currency.
Fiat money dominates modern economics. Specie is dead—or is it? Could there be a place for some limited form of physical specie currency in today’s society? There is some evidence specie may be attempting a comeback in some form in places where specie rather than fiat currency really could or does matter.
The United States “temporarily suspended” the last vestiges of our specie currency in 1971. Sources indicate that between 1913, when the Federal Reserve Bank was established through 2023, the dollar's purchasing power declined by 98 percent. An Aug. 17, 2023, Money Metals Exchange article stated, “It [is] a cinch for the government to issue this fiat currency as legal tender with reckless abandon,” continuing, “As we live in an age of inflation, specie money reminds us that a more stable and sound monetary system once existed – and is possible for us to return to once more.”
While a total return to specie may be wishful thinking, there are chinks in the fiat currency armor. Between 1992 and 1995, Mexico attempted to circulate specie coins. These are ringed bimetal 10-, 20-, and 50-peso coins with a .925 fine silver central plug. While the intentions were good unfortunately the public hoarded the coins and for that reason, the economic experiment failed.
In 2009, Bernard von NotHaus, former owner of the Royal Hawaiian Mint, was arrested for violating federal criminal law 18 U.S. Code Sec. 486. This law prohibits making coins “intended for use as current money.” The prosecution’s argument was that this statute gives the federal government the exclusive power to produce currency. Von NotHaus had been minting and marketing his .900 fine silver one-ounce Liberty dollars. The FBI claimed von NotHaus’ organization National Organization for the Repeal of the Federal Reserve and Internal Revenue Code was attempting to circulate Liberty dollars as a way to undermine U.S. currency.
Following the conviction, the U.S. attorney’s office released a statement reading, “Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism.” The government seized about $7 million in gold, silver, and other property from von NotHaus.
If von NotHaus was guilty of domestic terrorism, how could it be that, at the time this article was written, the state of Louisiana had passed legislation that would establish gold and silver as part of the currency acceptable in the state?
Introduced by State Representative Raymond Crews, the bill initially prohibited gold and silver-backed transactions that involved foreign nations or enemies of the state but gave the state treasurer the right to issue specie coins and establish a currency “as determined practicable.” The bill would have provided criteria for valuing currency and allowed the treasurer to establish fees for issuing and depositing gold and silver Louisiana currency. As a result of this legislation, on May 31, Louisiana Governor Jeff Landry signed a law reaffirming that gold and silver are legal tender.
According to Money Metals, “This bill provides symbolic support to Louisiana citizens making this choice, and it is a modest step toward establishing sound money policies in the state.”
Sound money policies are the bottom line for any specie currency. When a currency is merely a certificate representing something physical on hand through which that currency is backed, you can’t issue currency as you need it or as a drunken sailor. You are limited by what assets are backing that currency to what you can issue.
Today, specie have become desirable, especially in uncertain economic times. In July 2016, reports originating in Mosul, Iraq, announced a gold composition dinar coin being issued by the terrorist group ISIS that was introduced in a serious attempt to replace the U.S. dollar. Activists in Deir-ez-Zor, Syria, reported oil traders in ISIL-occupied oil fields being forced to purchase oil using these gold dinars.
A German jihadi terrorist group claimed the 1-, 2- and 5-dinar gold coins would “bring about the collapse of the U.S. dollar” and the “demise of the United States.” ISIS viewed bank notes as “oppressive” while claiming their gold coins would bring the United States “to her knees.”
ISIS claimed the .875 fine, 4.25-gram gold coins would liberate the Islamic world from the “satanic global economic system.” Police in Turkey later seized an ISIS makeshift mint, effectively ending the threatened “collapse of the U.S. dollar.”
A word of caution that came from this was an April 2016 paper by Islamic Ideology Council Chairman Maulana Muhammad Khan Sheerani, in which Sheerani warns, “The current system of economy based on paper currency is not durable because there is nothing concrete in paper currency,” adding, “We must bring back the circulation of gold and silver.”
Nowhere could this warning have been taken more seriously than in inflation-riddled Zimbabwe. In 2014, Zimbabwe attempted to re-introduce a domestic currency following ruinous inflation. Fiat money coins were issued in 1, 5, 10, 25, and 50 cents bond and 1- and 2-dollar bond denominations in 2016, only to be met with skepticism by the public. In early 2024, the African nation introduced a new “structured currency” backed by gold, foreign [specie] currencies, and precious minerals. During the time of the announcement, annual inflation had risen by 47.6 percent in February, followed by 55.3 percent in March.
The Zim Gold currency includes serial numbered Mosi-oa-Tunya .9167 fine gold coins meant to be purchased using domestic Zimbabwe dollars. The coins are priced based on the international spot price of gold plus modest production costs. The coins can be traded, converted into local currency, used in commerce, or pledged as security against loans. The objective of issuing gold coins for circulation rather than issuing them to be marketed to collectors or speculators is to lower domestic demand for U.S. dollars. Zimbabwe has been selling gold coins in an attempt to control inflation since 2022.
Another area of the world in financial crisis is Gaza, where the terrorist group Hamas and Israel are currently at each other’s throats while the impoverished locals suffer the consequences. Israel has controlled Gaza for more than 70 years. Palestinians have no currency of their own and use the euro, U.S. dollar, Israeli shekel, and Jordanian dinar in their daily lives. As in many parts of the Middle East, mistrust of banks means many people prefer to keep their savings in gold. In 2023, Gaza dentist Ahmed Hamdan began issuing his own .875 fine gold half-gram to 10-gram coins.
According to Hamdan, “The idea stemmed from the community’s need to own gold amid the difficult living conditions the people live in. We have made gold available to people of all categories, gold that even the poor and those with low income can get some.”
Gaza Economy Ministry head Osama Nofal countered, “It [Hamdan’s coins] mustn’t be interpreted as if it were a future currency. It is no more than a way of saving.”
At the time of the introduction of the Zimbabwe gold coins, Labor and Economic Development Research Institute of Zimbabwe Senior Researcher and Economist Prosper Chitambara pointed out, “Most people may not have money to buy this since most citizens are literally living from hand to mouth.” If specie coins are to be used in circulation, their purchasing power remains as a moving target.”
We may see a significant decline in the use of physical fiat money at some point in the future, but it does not appear there will ever be a decline in the demand for specie.
Among the current questions circulating specie issues is why does specie have to be in coin format? Why not issue specie-backed bank notes? Such notes could be redeemed in gold or silver in some limited quantity. You obviously couldn’t redeem a 50-dollar bill for a one-ounce 50-dollar Gold American Eagle coin. The redemptions could be based on the spot price of the metal at the time of redemption and would be paid out in gram wafers or something similar that represents the value of the notes rather than being redeemed in coins with meaningless denominations due to the appreciation and fluctuations in the metals that back them.
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