Thursday, August 18, 2016

The Curious Problem of Gold and Silver Coins as Legal U.S. Tender

May 31, 2009 by · Leave a Comment 

Tim Iacono submits:

The idea that gold and silver coins are still legal tender in the U.S. has always struck me as one of the more intriguing aspects of our monetary system, a system that appears to teeter a bit more each and every year, its fate sure to be the same as all prior fiat money systems throughout history – they never end well.

The notion that a quarter or a dime from the 1950s or early-1960s that contains 90 percent silver might be worth ten times its face value seems like more of an oddity than anything else since the values are so small.

A dime being worth more than a dollar really isn’t that big a deal until you get a whole bag full of them. Then you can sell these coins with a face value of $1,000 for more than $10,000 (maybe $11,000 by the end of the day given how metal prices are soaring).

The name “junk silver” really doesn’t do these coins justice as the real “junk” is clearly what followed silver quarters and silver dimes, the citizenry promptly removing them from circulation after the government discontinued them – something about bad money forcing out good money as Gresham once said.

But, gold presents a whole new set of math.

Currently about 63 times as valuable as silver by the ounce (roughly $960 an ounce versus $15 an ounce), the U.S. Mint continues to produce these coins with dollar values printed right on their face.

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