"Nation's money no longer linked to precious metals gold, silver" and other headlines from the 1960s tell the tale of 90% silver dimes, quarters, half dollars, and dollars, and silver certificate paper money that could be exchanged for silver coins... and what happened to them both. At the time, in 1961, the market price for silver was pegged by the United States at just 91.5 cents per ounce (by selling from the U.S. strategic stockpile). Thus, even a whole troy ounce of pure silver was not selling for a dollar. Yet the silver in a dollar of silver coins was worth only about 66 cents. A silver dollar only has 0.77 troy ounces of pure silver, and a dollar composed of silver dimes/quarters/half dollars only has 0.72 troy ounces. Thus, the face value stamped on a dollar in silver coins exaggerated the intrinsic metal value of the coins. This meant there was no reason anyone would melt down the coinage or trade in their silver certificates for silver coins, because it would mean a loss (the paper dollar was worth more than the silver in the silver dollar). This is one example of fiat money we have not seen in a while. Observers might find it interesting that in 1961 President Kennedy first broached the idea of removing silver certificates from circulation, in order to free up some of the millions of silver stockpiled by the government. Then it could be used by industry, including the nascent space program. This marked the start of the upward pressure on the silver price; a price which had languished since 1873. As late as 1963 when silver certificates were starting to be withdrawn from circulation and ceased to be issued, newspapers remarked that the silver this freed up could be used to mint more silver coins! Why is this funny? It's funny because 1964 ended up being the last year 90% silver coins were minted for circulation. Only half dollars would retain any silver in 1965, and then just 40% instead of 90%. How would the public react? Not to worry, the experts assured everyone that the new silverless coins would still work in vending machines. Articles from 1965 caution against the folly of hoarding the old silver coins, because the Treasury predicts it can keep the price of silver at $1.29 per ounce by selling from its stockpile "indefinitely." 45 years later, they are long out of silver. And anyways the new Federal Reserve Notes that were issued to replace the retired Silver Certificates would still be backed by at least 25% gold. Then in 1967, just 2 short years later, the U.S. announced it no longer needed to keep the price of silver down by selling silver at $1.29. The price of silver rose. By 1968 silver was approaching a 100% gain on its 1965 price of $1.29. People were not allowed to melt down U.S. silver coins in the United States, but there was no law against smelting Canadian silver coins. Conveniently, Canada continued to mint its dimes, quarters, and half dollars in 80% silver. The author's father sent the author's mother into bank after bank in Canada in the early 1970s to change currency for rolls of silver Canadian dimes, which are still in his possession. Also, on June 23, 1968 the U.S. stopped giving people silver in exchange for silver certificates. In essence, a promise was broken to everyone in the world who still held such a certificate bearing the promise to pay one dollar in silver coin. The option to buy silver at $1.29 an ounce expired. The next year, in 1969, they decided to stop putting any silver in any of the coins. A clean break. The silver price kept heading higher. By 1974 the silver price was up past $5.70 per ounce. This meant silver coins from before 1965 were worth about four times (400%) their value in 1965. By 1974 the ban had been lifted on melting U.S. coins in the United States, and that's what people were doing. But even after this run, a national survey showed that just five percent of households reporting planning to buy any gold or silver in the next year, while more than 15% and 20% of the same sample reported ownership of common stocks, and U.S. Treasury Bonds. By 1980 as we all know the price made it to $50 for a few minutes in January. Some newspaper advertisements from on the way down, in February and March, 1980, when the price was right about where it is now ($27), are included. Appliance and furniture stores were selling refrigerators and couches at ridiculously low prices as long as customers paid in pre-1965 silver coins.
Visibility: 5582
Duration: 3m 33s
Rating: 40