In Praise of Junk Silver

     

It’s doomsday plus a few weeks. Say you need to bribe the border guards at the state line but they seem to have all the wristwatches and free range eggs they can use. Hah! There’s nothing like a few good ol’ silver coins to become their number one tourist, let this man through. Or your gas station’s not accepting Visa and the ATMs have gone dark from sea to shining sea and you’ve got a hard to get reservation at a fallout-free retreat. Hah! Dazzle ’em with the sheen of silver my friend, fill ‘er up and happy motoring to you.

Or you gotta do some emergency shopping but hackers insist your bank records have gone missing and your bank agrees and meanwhile Bernanke Bucks are sinking faster than a head-shot carp. Hah! With junk silver just step over to the VIP express aisle and take what you need, take two while you’re at it and here, let me help you with that. Or you’re down to your last few rounds and you’ve gotta hit the freedom trail like now, and there are a dozen shooting galleries between you and your little blue heaven but your ammo vendor ain’t taking paper. Hah! With silver you can top off from his private stock, the nickel plated ones that chamber slick as butter, and y’all come back now.

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All this is by way of saying silver is the common man’s hedge against the consequences of well informed, highly educated stupidity. This time it’s likely to manifest itself as a general repudiation of paper promises, including currency. Let’s get to the plain facts. Junk silver means silver coins with no collector premium for rarity. They’re culls, valued only for their silver content, called melt value, not that anybody actually melts them. [Updated values here, second table down] Just as a guide, with silver at $29 to $30 per troy ounce, a silver dime goes for a bit over two bucks, so for any junk silver coin you can figure face value times twenty, plus a cup of cappuccino. For the moment.

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Annoying data: there are 14.58 troy ounces per avoir pound, that would be the regular kitchen-type pound, a troy ounce being 480 grains, the avoir ounce being 437.5 grains. The grain is identical in both systems. Rule of thumb: the troy ounce is about 10% heavier than the avoir ounce, but the troy pound is only 12 troy ounces and therefore lighter than the avoir pound, which is 16 avoir ounces. Coin silver is 90% silver, 10% copper. Finally, Indiana Jones is .812 Roy Chapman Andrews.

Dimes and halves are favored. For every ten ounces current wisdom says do five ounces in halves, five in dimes. You’ll have more dimes than halves, five-to-one, natch. Quarters are somewhat less favored. Not for any actual, sensible, defensible reason. It’s just the way it is. Could be the tyranny of even numbers. The silver dollar’s place seems to have been taken by the one ounce silver eagle. It’s too bad, the silver dollar is the embodiment of the ancient and original definition of a dollar, namely "three hundred and seventy-one grains and four sixteenths parts of a grain" of fine silver alloyed with copper to the tenth part. It’s genuine Constitutional money. Get one and treasure it. And while you’re doing so, reflect on today’s paper dollar being equal to 1/29th of an ounce of silver, and how did that happen.

Oh, you do know that only dimes (originally dismes), quarters, halves and dollars (originally eagles) minted in 1964 or before are silver, don’t you? Those made in 1965 and after are not junk silver, they’re junk junk, they’re money only because "they" say they are and people have to pretend to believe them. They’re of no intrinsic value, or near enough, unless you need to shim a table leg.

Nickels dated 2010 and before are an alloy containing 25% nickel, currently valued at 6¢. They may be the small change of the future. Pennies dated 1982 and before contain 95% copper, they’re going for around 2.5¢ at present. Now for the dreaded minutia. Nickels (originally half-dismes, silver, then debased) made from 1942 through 1945 are 35% silver, currently fetching about a buck and a half. Eisenhower collector grade silver dollars are 40% silver, the ones made for circulation are worth about 25¢. 1965 through 1970 Kennedy half dollars are 40% silver. Naturally there is even more minute minutia, there always is, but none of this is going to mean much in a post-cataclysm world so it isn’t worth remembering unless you’re planning to go into the metal separation trade, post-doomsday.

Only about 5% of all silver ever mined still remains, it gets consumed more or less irretrievably in many manufacturing processes. Consequently, "above ground" silver is actually more rare than gold, and by a lot. However, in-ground silver is generally estimated to be about 17 times that of gold, close to the price ratio of gold to silver over the centuries. However-however, silver tends to be found in close company with some bad stuff, notably mercury, making extraction and refining problematic. On the other-other hand, many a copper mine also yields silver. Incidentally, if the historic 1:16 ratio of gold to silver were to reappear, silver would be at $87 now or gold would be at $480. Guess which number gets the most mention.

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Gold is handier if you’re dealing in commerce by the truckload or buying large parcels of land, but silver is the coinage of everyday exchange and always has been. Even the Medieval penny was a silver coin, 240 to the Tower Pound, replaced in the 1600s by a copper version. It’s just as well, the weight of the silver penny had been declining for a couple of centuries. Perhaps our pathetic penny is a fitting endpoint for this debasement, being copper plated zinc, the lowest of the low, down in the pot metal class, the sort of coin a defeated country would issue in the final phase of a war. Trolley tokens were classier. These things will corrode to nothing by internal galvanic action alone, and fittingly so.

The price for physical silver is alleged to be severely suppressed by selling multiple claims on it, at a ratio said to be about 100 to 1, then driving down the exchange price with market manipulations for even these dubious instruments. The various exchange quotations are said to set the price of silver when in fact they set the price for more or less irredeemable promises that pretty much nobody believes in the first place. If one purpose of any market is price discovery, silver exchanges have that much less claim to the name. They deal in ETFs and ETNs and CEFs, today’s so-called paper silver, abstract and fiendishly intricate deriviatives they choose to call products, conjured with but a condescending nod to the metal itself. People get rich doing this, and they’ll stay rich until that ahah moment when the worth of their paper departs dramatically and inversely to that of the physical stuff. Such is the dominant narrative among the silver monetarists.

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There was a time when paper silver was unquestionably on the up and up. Until 1965, US currency consisted largely of silver certificates, i.e., bearer instruments redeemable in silver from Treasury’s member banks. This service on behalf of the customer and the Treasury was a central condition of their charter. Redeemed silver certificates were withdrawn from circulation and returned to the Treasury to be destroyed. It’s why they carried serial numbers. Federal reserve notes also carry serial numbers, perhaps its a quality control device to facilitate recalls of defective product. More likely it’s a play for the awe of authority found chiefly among the plebeian, their target customer.

Proponents of silver as money have a novel way of looking at things. They say the value of silver is not that which is measured but that which measures, it’s the wind gauge not the wind, because silver is not a claim on something else, it’s not a contract, there is no counterparty, it merely is. It pays no interest but neither does it depend on a future event to bring its value into being. Silver resolves debt rather than passing it on. In other words, silver is money real and true. It reveals the value of the dollar, not the other way ’round. The idea is a sort of Einstein mind experiment, how things look different when riding a beam of light rather than watching it go by. It’s a worthwhile mental exercise of a quiet evening.

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For the activist Austrian and Marxist alike, Max Keiser’s and Mike Krieger’s campaign to "bring down JP Morgan" by purchasing silver may provide some malevolent warmth, but be warned, the convolutions can induce involuntary weeping. According to the MKs, JP Morgan has a 3.x billion ounce short position in silver, worse, it’s a naked short in that they don’t actually own 3.x billion ounces. JPM’s purpose is to suppress silver prices in order to prop up fiat currencies, which they do own. Therefore buying silver forces JP Morgan to cover their short position. Which they can’t. Bailouts begin, fiat withers, feedback loop ensues, JPM’s collapse follows, the People triumph. After examining their flow chart and finding an action box labeled: 5% OF THE EARTH’S POPULATION BUYS ONE OUNCE, Remus is going long JP Morgan. And that’s before getting to: THE PEOPLE TRIUMPH.

Anyway, there’s a downside to having physical silver. Counterfeits, for one. It’s a small but nagging problem. They’re very good and getting better, often faking silver eagles or their international equivalents, but more commonly it’s bogus rare coins struck from genuine coin silver. Counterfeiting junk silver presents the additional problems of simulating random wear and patina, diminishing the already smaller profit, but perhaps economy of scale will change this. Keep an eye.

Storage is another. A few thousand dollars in melt value is no particular problem, it’s not substantially bigger than a grapefruit, but have much more and thoughts turn to bank safekeeping. Oops, scams abound here as well, say where the bank suddenly needs thirty days to find your silver, then they can’t because drat! they’ve leased it out, not that they’ll tell you outright, perhaps also having pledged it elsewhere several times over, so they compensate you with federal reserve notes in lieu of what was formerly your hedge against federal reserve notes. They can do this, you see, it’s in the 2-point type on page 90 of your contract under "To Serve You Better." It’s a rule in life, "for your convenience" means it’s the nasty stuff.

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December 16, 2010