I've been thinking about this topic a lot this morning and figured this would be a good place to post this since silver coinage is often brought up as an alternative to using the Goldback. When I say silver coinage I'm talking about the system of dimes, quarters, and half dollars that made up U.S. coins up until 1964.

There's been a large contingent of the population that would love to see a return to the gold standard including the issuance of silver coins but there are extreme barriers to this ever happening. To understand this, you have to understand the economic model in which constitutional (junk) silver was created in the first place.

Basically, the government would buy 3-4 cents worth of silver and mint it into a dime which was worth 10 cents at a profit. This is the same model used in U.S quarters today. What killed silver coins nearly 10 years ahead of the Gold standard dying was the fact that silver became more expensive than the face value. It was costing \~9 cents worth of silver to make a silver coin with a fixed face value. The U.S. Mint had to discontinue the coins or face losing massive amounts of money or creating infinite money loops where people could melt down official silver coins to profit on the content. 

What the government did instead was debase the coinage by reducing, then abandoning the silver content altogether. 

So why can't the U.S. mint simply bring silver coinage back? Well, there's a couple reasons that aren't talked about a lot, not even in sound money circles.

* The biggest reason is because the economic model of having a face value that is higher than the melt value no longer works on silver coins. Inflation is too high. The coins would simply have to get discontinued again or debased after a few short years. Coinage makes up a fraction of the total money supply so having sound money coinage doesn't really fix the overall inflation picture.
* The existing junk silver coins from the 1960s and earlier are kind of in the way. Why would you buy a new silver dollar with 30% of the value as silver when you could buy a dime with 100% of the value as spot silver and close to the same size/value? Basically, the costs of producing all of the existing silver coins were borne by another generation. They would make gen 2 look like less of a deal.
* The potential demand on silver by a government the size of the U.S for coinage would throw the tiny market for silver out of whack and immediately break what they were trying to do. There simply isn't enough silver for mass circulation. 

This problem has kept small silver coinage from being reinstated for over 60 years. The Goldback more or less leapfrogs the issue by making gold small enough to be used instead of silver coinage. This was never a viable option before. The Goldback also solves the issue with counterfeits that is plaguing junk silver now. 

Anyway, what do you guys think? Will the government issue small silver coins again? (Not talking about U.S Silver Eagles)







The surprising reason silver coinage died and why we can't just make it again.