The Difference a Dollar Makes: Understanding the Paper to Metal Ratio (Part 2)

May 6, 2016 | Uncategorized

Click the link to read The Difference a Dollar Makes – (Part 1)

The paper dollar will never appreciate to an equal ratio of a silver metal dollar. Never again will the purchase price of a silver dollar or 1oz silver American Eagle coin ever be exactly $1 Federal Reserve Note.

The era of these two types of dollars trading at parity or even near parity are long gone. The last time you could have purchased or exchanged one silver dollar for one paper dollar was more than 50 years ago. It was 1961 to be exact.

During that period when silver based coins where the norm, all subsidiary silver coins (dimes, nickels, quarters and half dollars) where monies of high value. The value that came from having those coins in your possession wasn’t only the official status of being considered legal tender but it was the intrinsic value. The coins composition being 90% pure silver provided a precious and rare element for those that had an understanding of the historical aspect of money. A Federal Reserve Note or United States Silver Certificate in 1961 could be exchanged for a silver dollar simply by asking someone to make change or just an even swap as a dollar for a dollar. 

dollar2

The fiat paper notes or currency used in paper form during this time was an actual claim receipt for an actual silver dollar held in the Treasury. If you were to look carefully at the wording on the bottom of the certificate, it reads, Payable to the bearer on demand one silver dollar. It was a known fact that if you wanted actual money you would take the government up on their offer to return their paper and collect your physical hard money or coinage. The Federal Reserve Note and Silver Certificate was just a receipt for the money waiting for you at the Treasury of the United States.

In 2016 there are no more Silver Certificates to redeem in actual silver or silver coins. No longer does silver circulate as a normal method of doing business or as money for that matter. In order to acquire an American Silver Eagle coin issued by the U.S. Mint today, you have to purchase a coin as a commodity from the United States Mint.

Since the demonetization of silver from coins in 1965 the use of silver in subsidiary coins is a thing of the past. No longer does the coinage of the United States or any nation have any real intrinsic value only face value for what the coin can purchase at face value.

All coins now have a silver like appearance yet lack the substance. If you were to take a Federal Reserve Note to the United States Mint or a coin dealer (remember silver coins are no longer money, just a commodity) you would never be able to trick anyone in exchanging a note for an actual hard dollar. Why?

A Federal Reserve Note (fiat paper dollar) and a Silver Eagle (lawful dollar) are no longer a realistic comparison of value. One has appreciated in nominal price value (how many pieces of paper you can exchange it for) while the other has depreciated in actual value (how few goods and services it can obtain).

All dollars are not created equal and just because it says dollar printed or stamped on it doesn’t mean it has any real and lasting value. Just to illustrate how disconnected from reality the true price discovery of a Federal Reserve Note (fiat paper dollar) really is in terms of what it actually purchases. Let’s examine its perceived value compared to its running mate, a silver dollar since 1961.

silverchartIn 1961, one single Federal Reserve Note was exchangeable for one silver dollar evenly at par of 1 to 1. Today in 2016, it would take twenty or so individual $1 Federal Reserve Notes to purchase a similar coin stamped with a face value of $1 some 55 years later. So as of today early 2016, the silver dollar (Silver Eagle coin) has appreciated nearly 20 times in actual nominal value compared to a single Federal Reserve Note.

 

 

 

On the other side of this equation, the Federal Reserve Note has depreciated drastically in value in regards to its ability to purchase 1 ounce of silver. What used to be a 1:1 ratio as far as Federal Reserve Note for one silver dollar (now labeled American Silver Eagle) is now 20:1 or 1:20 ratio. (Note: figures arrived from the actual spot price of an ounce of silver as of today at $17.50 plus dealer premium of $2.50)

20to1

It now takes 20 pieces of paper to acquire the same substance that has remained constant the entire time. A silver coin today is roughly the same silver coin in 1961 just under a different name and classification. A similar silver that Abraham Lincoln would have had in his money bag and even of the same substance Judas Iscariot betrayed Jesus Christ for.

The substance or chemical element (Ag) has retained value in comparison to all nations’ paper currencies for centuries. Silver has been a true store of value despite its demonetization and price manipulation which has made it a difference maker in the past and will one day soon return to the primary status it once held as a true and honest dollar.

Despite the public’s awareness of silver as money, the true fate of the Federal Reserve Note will continue to become obvious as the paper to metal ration continues to widen in a not so favorable way for those who only have paper and not metal.

The majority of the marginal increase of the 20:1 paper to metal ratio has happened in the last seven years since the Panic of 2008 or great recession. It’s just a matter of time before these two different types of dollars lead to a lack of confidence in the monetary system and eventually expose the fraud in the issuance of paper for money.  Throughout history no paper currency has ever lasted as long, as a medium of exchange, as the Federal Reserve Note.  Now it’s just a matter of time before people see paper without convertibility for what it really is. A colored piece of paper issued by a non-governmental entity.  

To learn more about the difference in Face Value and Intrinsic Value click here to get the Free E-Book “The Simplicity of Money”.

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