Disruptive Currency: Is Sound Money Too Loud?

Includes: GLD, SLV
by: Biz Bluetree

I'm not by stretch of anyone's imagination a fan of Bitcoin. Still can't wrap my head around it completely - the concept, yes - but much of the rest … hmm. But I am a fan of free markets so I say let Bitcoin flourish or flail where it will.

See, I may not agree with what you say, but I'll stand up for your right to say it.

Before you bail on me here, this is not a Bitcoin article. I'm not so sure Bitcoin will prove to be disruptive currency. Governments are already lined up to stigmatize it before it gets too hot. Because, if Bitcoin starts making real noise their muffled monopoly on our money would be revealed.

So let's look at silver and gold.

Most who read me know I have a personal relationship with silver, and gold to a degree, and that I don't wear T-shirts that say, "SAVE FIAT CURRENCIES". You'll also know too that I've proclaimed numerous times - both of silver and gold, "the metals are not just precious, they're real money."

I've made strong cases for both silver and gold in these articles as lively debate has ensued, if you care to look, "The Salvation Of Silver And Gold" and "Is Silver Good As Gold?".

But, it is my proclamation in the previous paragraph that has triggered most reader comments in the threads. From left to right; those in staunch agreement with me - to those who tease, taunt and patronize with quips like, "I can't buy a sandwich and a soda with a generic gold bar, unless I sell it for worthless, fiat monopoly money first. Kinda odd for real money, heh?"

The nerve.

Well, no. Under our system non-U. S. minted, or printed currency is prohibited by law for purchase of goods. So the premise is silly. You certainly can't use minted generic bars or rounds for commerce. They're illegal for that use in this U.S. of A.

However, if I owned a sandwich shop, I'd be happy to sell you a $7 sandwich and soda for one U.S. minted (1) ounce American Gold Eagle coin with a $50 denomination stamped on it, and happy to give you $43 fiat change. Or for that matter I'd be equally happy to sell you that $7 sandwich and soda for just one (1) ounce American Silver Eagle coin stamped with a $1 face value. I won't make the profit I did in the previous transaction, but I'll do that for you.

Is it a deal?

No deal you say? Why, because you'd have to purchase the $1 silver eagle coin from a dealer for $27? And you might have to wait up to three weeks or longer for delivery because the dealer is out of stock and waiting for his next allotment? Oh, then I understand your not wanting that sandwich and soda under these conditions …

I question, then, why the government can't stamp a fixed, more realistic denomination on the silver and gold coins so we can all use them? Is it just because keeping the price of silver and gold "stable" long enough to rely on a $50 coin today being worth the same tomorrow?

Pretty complicated stuff these laws of economics and supply and demand.

The Gold Standard Act of 1900 worked pretty well, that is until 1933 when Roosevelt did his confiscation thing. But then in 1946 Bretton Woods tried to pull it back together with a half mimicked effort. And it sort of worked, until 1971 when Nixon pulled his shocker.

I kind of miss the old days …

If all countries were on a fixed bimetallic monetary standard rather than having these hundreds of different competing fiat currency systems in place then the only real money would be the precious metals backing the currency. But what then would happen to the world's reserve currency, the U.S. dollar?

Even though a bimetallic monetary standard backing of our currency would make a lot of sense, not to mention make things a lot easier and less complicated than having all these different fiat currencies in existence set to different exchange rates; dollar/yuan, euro/yen, pound/peso - backed only by trust and promise, and, oh … quiet moves …

Wait, I think I get it.

Sound money may be too loud ... for some.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.