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An American Looks @ Money
Good morning and welcome to the September 12th edition of Hump Day! For most of society today, money is far different than it was, say, 50 years ago. Maybe everything is, but this morning I’d like to begin a series about an American’s look at money. What it was and where it might be headed. So, before we jump into today’s musings, refill that cup and grab a seat. The Who greets us this morning with their 1971 hit, Behind Blue Eyes.
Gold is down -$2.90 this morning at 1195.20, and down -$4.70 on the month.
Silver is currently down -$0.03 at $14.09, and it’s down -0.48 for the month.
Platinum is up this morning +$2.00 at $792, and even for the month.
Precious metals found a way to drift higher yesterday, but in real terms there wasn’t much movement. At this point, I really don’t anticipate much change in spot prices until the Feds and ECB address interest rates.
Yesterday, after reading an interesting article on MarketWatch titled “America moves closer to being a cashless society,” I thought it might be a good time to look at money in America. So let’s start this series with a look at the past 54 years in America. Those most important moments in time that have impacted our understanding and perception of the dollar. So, let’s follow Sherman and Mr. Peabody into their Wayback machine and stop in 1964.
A quick look at money in 1964 finds a cardboard Diners Club Charge Card and the first plastic American Express Charge Card with over 1 million users and 85,000 merchants. There were three types of paper currency circulating in the United States: Federal Reserve Notes, United States Notes, and Silver Certificates. What’s the difference? Well, Federal Reserve Notes are issued by the Federal Reserve to its Banks for distribution and backed by the assets of the Federal Reserve banks (private institutions). United States Notes or Legal Tender Notes were issued by the United States Treasury and backed by the government. And finally, Silver Certificates were issued by the U.S. Treasury and were redeemable for their face value of silver dollar coins. Which brings us to United States coinage? In 1964, silver dimes, quarters, and half dollars were being struck by U.S. Mints with silver value equal to their denomination. The monetary system seemed to be working well, so what happened? Why did we make Silver Certificates obsolete and remove silver from our coinage?
To understand why the U.S. had to break its relationship with silver, you have to go back to The Silver Purchase Act of 1946 which established the United States as the largest purchaser of silver in the world. The government bought silver directly from domestic refineries at the price of $.905 per troy ounce which was $.035 above equilibrium or spot price. By 1964, silver spot had increased to $1.29 per troy ounce which effectively dried up the silver availability because the government price was still $.905 per troy ounce. And to top this, consumers could purchase silver certificates at face value, redeem them for silver, and sell the silver at a profit of $.385 per ounce!
So, with the Coinage Act of 1965, the composition of America’s coinage radically changed for the first time since 1792 and thus began our march towards fiat money and then to a cashless society. Tomorrow we’ll look at more changes in the 1970’s and beyond.
Well, I’ll let that be it for today. Go out there and make a difference! See ya later!
*Disclaimer: Precious Metal Musings™ is written for entertainment and news purposes only and should not be used in making purchases and/or sales of precious metals.