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1 ounce fine silver one dollar coin

4 - The Benefits of Gold and Silver as Money

The emergence of gold and silver as media of exchange removed the problems of “indivisibility” and the “lack of coincidence of wants” which plagued the early society. A carpenter could now exchange his plough for a number of ounces of gold, and use that gold to buy eggs, bread, a suit, whatever he desired in any location.

Also, as exchanges were made in gold or silver money, members of society could compare the market worth of each good or service to every other good or service. If an egg exchanged for one ounce of gold, and a plough exchanged for sixty ounces of gold, then everyone could see that one plough was “worth” sixty eggs sets on the market. “These exchange-ratios are prices, and the money-commodity serves as a common denominator for all prices.”

Silver, being historically more abundant than gold has been found useful for small exchanges, while gold is more useful for larger transactions. At the time of writing (July 2009) it is still clear from the in the gold price of $950/oz or £570/oz, and the silver price of $13.50/oz or £8.50/oz that this relationship still holds.

Do Not Underestimate the Importance of Gold and Silver as Money

Gold and silver have been used as money for thousands of years and their influence is not lost today. The words gold and silver are synonymous with word money in 51 countries. The dollar began as the name of an ounce of silver coined by a Count named Schlick, in the sixteenth century. Count Schlick lived in Jaochimsthal. The Count’s coins earned a great reputation for their uniformity and fineness, and they were widely called “Joachim’s thalers,” “thaler,” and finally, “dollar.” The name of the U.K. monetary unit "pound" reflects the fact that it originally represented the value of one troy pound of sterling silver. In Spanish (plata) and French (argent) the words for “money” and “silver” can be interchanged. In Hebrew, the word kesepph means both silver and money. Many Africans and Asians refer to both silver and money as “argent”.

Gold, Silver and The United States Constitution

Interestingly, The United States Constitution contains guidance for future generations with respect to the use of gold and silver as money. The American War of Independence, which ended in 1783, was financed in large part simply by printing excess paper money. As a result the new country started its history with hyperinflation. The Founding Fathers understood the implications of excess money printing and were so appalled by the effects of the hyperinflation that the United States Constitution, written in 1787, explicitly forbade the issuance of fiat currency, stating (underline added for emphasis):

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility”.

It is something that current generations have forgotten under a flood of new paper money, but gold and silver are money - that is it, chosen above all other commodities over thousands of years of trial and error. After reading these Essentials you may still decide to call pieces of paper that the government prints “money”, but you will be forevermore be subject to the will of government to expropriate your wealth by printing more of those pieces of paper. It may take some time for this to sink in, but this is one of the core premises of this website.

"Government is the only institution that can take a valuable commodity like paper, and make it worthless by applying ink." Ludwig Von Mises, Economist

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