Physical Gold and Silver Promote Peace
As fiat currencies rise and fall, gold and silver stand apart—offering a historical lesson in monetary stability and its role in fostering peaceful trade.
One condition that promotes harmony and cooperation among people is a stable value of the medium of exchange. Let me give you two examples of how the opposite can discourage peaceful commerce.
During Bolivia’s era of high inflation in the 1980s, it was illegal to conduct transactions other than in that nation’s peso boliviano. However, the U.S. dollar became the effective store of value for people to protect their financial well-being. For a time, customers would go to a store to learn the current peso boliviano price of merchandise they wished to purchase. They would then go out into the street to exchange their U.S. dollars to get the needed pesos bolivianos to make payment. The merchant would immediately send an employee back to the street to convert the pesos bolivianos back into U.S. dollars. On Jan. 1, 1987, the government replaced the peso boliviano with the boliviano at the rate of 1,000,000 pesos bolivianos for one of the new bolivianos.
An acquaintance of mine attended a conference in Zimbabwe during the first decade of this century. He checked into the hotel a day early. On his way to use the swimming pool, he asked the bartender how much a beer would cost and was told, “One hundred million dollars.” After swimming and on the way back to his room, he stopped at the bar to order a beer and was informed the price had increased to one hundred fifty million Zimbabwe dollars. That currency collapsed in January 2009, at which time the Zimbabwe one hundred trillion-dollar note would pay for a local bus fare.
Before U.S. President Richard Nixon closed the gold exchange window on August 15, 1971, foreign central banks could turn in $35 of U.S. paper dollars and receive an ounce of gold. On August 15, 1971, the price of gold closed at $43.15 per troy ounce. Stated another way, on that day, the U.S. dollar was worth 0.023175 of an ounce of gold. With gold’s price last week topping $4,300, that meant that the U.S. dollar’s value had fallen to 0.00023256 of an ounce of gold, a decline of almost exactly 99 percent!
In contrast to the track record of all fiat (paper) currencies, which historically have average mean and median lifespans before collapse of twenty-five to forty years, physical gold has a six-thousand-year track record, and silver has been used for commerce for four thousand years and never failed.
Yes, governments have debased the weights and purities of gold and silver coins, or “clipped” metal from around the rims to steal part of the metal content. However, stable gold and silver coinage have facilitated commerce, promoting peaceful trade and cooperation between people and nations. The relatively stable gold and silver content of America’s coinage for most of its history was one of the conditions that sparked the amazing economic growth of the nation.
Fluctuating and mostly dropping values of fiat currencies have been a huge obstacle in conducting peaceful international commerce over recent decades.
There are no circulating gold or silver coins in commerce anywhere in the world today, though real estate transactions in Vietnam must be settled in gold. Despite that, tens to hundreds of millions of people around the globe own bullion-priced physical gold coins or ingots to help protect their financial condition. Even global central banks, combined, now hold record amounts of gold in their reserves. Looking to the future, the monetary usage of physical gold and silver will continue to promote peace between people and nations.
Last column’s numismatic trivia question.
Last time I asked—When the Roosevelt Dime debuted in 1946, a year after President Franklin Roosevelt’s death, some people speculated that the initials “JS” in the field just below Roosevelt’s neck were a tribute to Soviet leader Joseph Stalin, a world leader whom Roosevelt had cooperated with in fighting World War II. What is the actual meaning of those initials? The JS stood for Roosevelt Dime designer John R. Sinnock, the eighth Chief Engraver of the United States Mint from 1925 until his death in 1947.
This week’s trivia question
Here is this week’s question. Why did the U.S. Mint cease striking 40 percent silver half-dollars for circulation after 1969? Come back next week for the answer.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, the 2017 Exemplary Service Award, the 2012 Harry Forman National Dealer of the Year Award, and the 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild, Professional Numismatists Guild, National Coin & Bullion Association, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan, and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. He now volunteers with the National Coin & Bullion Association as its Industry Issues Advisor. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries, "Things You ‘Know’ That Just Aren’t So,” and “Important News You Need To Know,” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).
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