Silver Money: Why does it matter?
Many of you like myself may not have been aware of the history of silver and gold coins in the United States. I was surprised to learn that, “The United States adopted a silver standard based on the Spanish milled dollar in 1785. This was codified in the 1792 Mint and Coinage Act, and by the federal government's use of the Bank of the United States to hold its reserves, as well as establishing a fixed ratio of gold to the US dollar. This was, in effect, a derivative silver standard, since the bank was not required to keep silver to back all of its currency.”- “Silver Standard” Wikipedia, 2022
This makes a lot of sense to me because silver and gold have a real value whereas paper or other common metals they make coins with these days are not worth the material they are made with. A silver dollar used to be a one ounce coin made of silver that was worth one dollar. A one ounce twenty dollar gold coin from the late 19th century was worth $20 dollars at the time. It was important to our founding fathers that we had a stable monetary system and making the money equal to the actual value of the coin would do that.
In order for the U.S. to help pay for World War I and World War II. They needed to take control of the banking system and print money. So they created the Federal Reserve Bank and standardized the currency but they still had the sense to tie the value of the currency to gold. After 1964, they stopped making coins made with silver and in 1971, President Richard Nixon announced that the U.S. currency will no longer be backed by gold. Since then, the dollar has lost most of its buying power, but the same amount of gold and silver is still worth as much or more for the goods and services now that could be purchased back then.
Under President Reagan, the U.S. brought back the minting of silver and gold coins called silver and gold eagles starting in 1986. In 1934, it was illegal to buy and own gold coins and in 1965 they stopped using silver in currency so there was not much available for Americans to invest their money into precious metals. And with the backing of the U.S. government, they could ensure that when buying silver and gold eagle coins that they are legitimate.
SInce 1986, the silver eagle coins have been minted every year. They have also become more valuable than the actual silver they are made with because of their rareness, quality and collectibility. Right now, a 1999 MS70 silver eagle is worth as much as $16,000 because of its rarity and quality. Not all of them are that much but they all increase in value over time. Not just because of the price of silver but also of its demand in collectibility.
If you were to buy one MS70(best grade) silver eagle coin every month since the silver eagle program started in 1986, you would have about 1.2 million dollars. The initial investment of $100 per coin would have about a 2677% return on investment or a 74% simple annual rate of return! Talk about a missed opportunity!
After making this incredible discovery that existed right out in the open to the world, I decided I don’t want to sit on the sidelines anymore. So I am buying one MS70 silver eagle coin each month. Also, if we were still on the gold and silver standard, I could see why collecting silver and gold may not be that great of an investment. But, because we are at where we are at with our current monetary system, it makes a lot of sense to use that to our advantage.