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August 8, 1893 : The Repeal of the Silver Act

- History of Silver -

Thanks for your response. Let me deal with a few of the points that you raised: "You're saying that commodity-based currencies are doomed to failure due to the very real possibility of supply/demand dynamics. I say that paper money fails due to human miss-management and greed." You are almost completely correct. Commodity based currencies are also subject to massive fluctuations in value due to government mismanagement. We need only think of FDR revaluing gold, making it 66% more expensive overnight. But history is chock-a-block full of other such examples. Regardless of what is used as money, government has always managed to find a way to destroy its value and that is every bit as much true for gold as it is for paper. That is why the need for a law along the lines i have suggested is a necessary prerequisite if our next attempt at a monetary system is also not to wind up on the scrap heap of history. Without it, regardless of what we choose to represent the new currency, it too will fail.

You also made the claim that "At no time in history was any man left holding a gold coin that was considered worthless." i regret to tell you that your assertion is false. With the collapse of the Western Roman Empire, Europe entered into what we call the Dark Ages. There would not be so much as a single coin minted for 600 years. Money ceased to exist. There was no use for a gold coin and so you could not use one to buy anything. You might be able to trade it for something you needed if you could find anyone willing to take it, but those were hard-scrabble times and so finding someone who would accept it in trade when you could not eat it, wear it or drink it would not have been easy. After all, decorative items were not in high demand.....Japan experienced a similar 600 year period during which the concept of money was lost and no coin would be minted throughout that period. A bag full of gold coins, if one had one, would not get you a cup of tea in that no one had any use for the coins. And that is as it should be, for coins have no real secondary use if not being used as money. So, contrary to your claim, history does tell us that the value of gold collapsed to the point that they held no more value than the Zim dollars you have and perhaps less, for there would have been far fewer folks back then who collected worthless objects for their curiosity value.

In closing let me state in very clear terms that i am not championing the current paper money regime. It has proven a disaster just as every other attempt at having something represent currency has proven a disaster worthy of its place in the hall of shame. My point is that with all things being equal, paper is superior to gold or silver simply because, unlike those things, it is not subject to wild fluctuations in value. Even with the sort of law i have suggested, a monetary system based on precious metals will eventually fail because of market dynamics. But one based on virtually worthless paper would be immune to such forces. And that makes paper the superior choice for what will follow.

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Beginning of the headline :President Cleveland Message on the Repeal of the Sherman Silver Purchase Act (August 8, 1893) The existence of an alarming and extraordinary business situation, involving the welfare and prosperity of all our people, has constrained me to call together in extra session the people's representatives in Congress, to the end that through a wise and patriotic exercise of the legislative duty, with which they solely are charged, present evils may be mitigated and dangers threatening the future may be averted... Read More

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