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May 02, 2008

Comments

AC

Well, ok, I do have one question based upon Mr. Price's presentation, well two maybe.

1) Is issuing a silver form of currency, while disallowing a central bank to lower the quoted value, enough to prevent the Fed from "creating money." In other words, I'm a little incredulous that such a simple measure would be enough to stop the Theft Juggernaut (the Fed).

2) How would doing what Mr. Price proposes really insulate silver currency from inflation and deflation. If the real value fluctuates, while its quoted price remains the same, then it seems to me you're still going to have fluctuations in money supply and thus a fluctuation of value relevant to amount of money in circulation: when the silver value is low, high margins will create an overabundance of spending and minting, but when it's high, there will be a shortage of both minting, and a contraction in the money supply because of low mint-margins and consumers who expect an increase in the quoted price. Anyway, isn't this still vulnerable to Adam Smith's "bad money" principles?

Anyway, some clarification on that would be great.

Jim Fleming

AC:
Let's do question 2 first: I am sure that silver would not be insulated from fluctuations by such a proposal. But, perhaps it is helpful to think of silver as a reference point for a fiat currency. This may sound simplistic, but here goes: An ounce of silver will always be worth an ounce of silver. Current fluctuations in the DOLLAR VALUE of an ounce of silver (or any precious metal) are more a commentary on the value of the dollar than on the metal.

I do think Mr. Price's proposal achieves something healthy for a society that relates to Adam Smith's principle: Silver libertads would become the preferred currency for saving. Who would save money in fiat (which erodes in value) when they could save in silver coin (which retains value)?

As to question 1, watch all three of the video clips, if you haven't already. I am not sure whether similar measures in America would stop the fiat presses, but they would introduce an alternative currency that has intrinsic value and legal tender value. No matter how many Federal Reserve Notes were printed, a holder of a silver coin would always be a jump ahead of the presses. Whenever the dollar denominated intrinsic worth of a coin kisses its melt value, it would be re-valued upwards. I think this is a pretty nifty feature in the Price proposal.

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