Bi-metal versus tri-metal system
We should have a tri-metal system using copper, silver and gold. We just have to use the right rate of exchange for each. A three legged table for balance is much sturdier than a two or even four legged table.
In the past when using bi-metal or tri-metal systems there has been a skewed over-valuation of copper compared to silver or silver compared to gold. Therefore the tendency has been to trade up and get the one of greater value. However if there was a system that reflected a truer relationship in the value of copper to silver and silver to gold, then there would be no advantage of trading copper coins for a silver coin except as a means of storing wealth.
As a consequence there would be little stimulus to search for gold, since an increase in gold on the market could just as easily be offset by an increase in copper or increase in silver.
A true rate of exchange of copper-silver-gold should be based on the availability of each in the environment. Since there is about .0011 ppm of gold in the earth's crust as compare to silver with .07 ppm and copper with 50 ppm in the earth's crust, then these must be the rate of exchange.
The system would therefore consist of around 700 ounces of copper to one silver (ounce) unit and then around 70 silver units to one gold (ounce) unit. Gold itself would probably not circulate much since it would be a true store of wealth. Now this doesn't mean that it is necessary to have 700 copper coins minted for each silver coin, since copper coins tend to circulate more often and therefore would be found on the market more easily. On the contrary since copper is a relatively common metal, these would be constantly circulated or easily introduce by private means through the government in exchange for silver or gold, or likewise gold or silver for copper.
Today a modern U.S. dollar weighs 8.10 g with a mixture of 77% copper 12% zinc 7% Manganese and 4% nickel.
Since 1 ounce = 28.3495231 grams, it means that current dollar coin is about 1/3 of an ounce of copper.
So with silver trading today at 13,43 and gold at 823,20 that is pretty close to 70 times the price of silver to the price of gold.
Since copper is found in nature at 50 ppm than it would be easy to establish 1 ounce of copper equal to 1 dollar. Silver is found in nature (earth's crust) at .07 ppm and gold is found in nature at .0011 ppm.
Therefore the new fix of copper, silver and gold to the dollar would be as follows.
1 part - equal to 1 ounce copper - equal to 1 dollar.
1 part - equal to .07 silver or one ounce equal to 714.28 dollars.
1 part - equals .0011 gold or one ounce equal to 45454.54 dollars
Actually the government may have a similar plan since a current dollar is only 1/3 of an ounce of copper, so the relative value of silver and gold would only have to be increase by 3 relative to the above formula. That would put gold at 136363.62, which, if gold reserves were used would be enough to cover our foreign debt.
grant
They steal our silver and gold with copper and have for a while.
A 1793 One Cent copper coin weighted 13.441 g,1 troy ounce = 31.1034768 grams, so it only cost 42 ounces of copper to buy an ounce of silver or 840 ounces of copper to buy an ounce of gold. Pre-1933 money had a penny weighing 3.11 grams, meaning 10 pennies, or 10 ounces of copper were necessary to buy an ounce of silver or 350 ounces of copper to buy an ounce of gold. Currently gold is around 63-1 against silver based on market demand. Copper currently is the only commodity still circulating as money. If 10 pennies still had 1 troy ounce of copper, then an ounce of copper would be trading at around 130-1 with silver. However since copper pennies are no longer issued, the only commodity money we have for trading are new modern coins.
A modern dollar weights 8.10 grams at 77% copper, which means that it takes around 5 modern dollar coins to make an ounce of copper. That means that we trade an ounce of silver for around 3 ounces of copper and an ounce of gold for around 189 ounces of copper. The current price of copper is around .29 cents an ounce on the market, which means you actually pay 90 cents for an ounce of silver and 54.80 for an ounce of gold with U.S. coins.
I would assume that this is because more silver is mined less relative to copper, but annual production of copper is 6,540,000 tons while World wide production of silver is around 9950 tons per year. That means that around 657 times more copper is produced than silver.
grant
Of course the goal is to
Of course the goal is to replace the FRN with a dollar backed by gold, and there is no way this could be done by using the pre-1933 value of 35-1 or gold at it's current manipulated low value relative to the size of today's economy and the number of FRNs on the market. Just alone with what foreign central bankers have accumulated add up to more than 9 trillion dollars. U.S Gold reserves come no where near this value, so the current FRN is way over valued to consider gold as a new monetary system.
Ultimately gold is what would support the dollar, in the tri-metal system that I outline above, since the government controls it's availability on the market with it's reserves and mining rights, so the use of copper would be more of a trading vehicle for day to day use than anything else. This is somewhat of an advantage since people would not have to carry gold and silver around for daily trading and there would be little incentive to scrape off a piece of copper from a coin. Silver could be traded for large transactions and gold for even larger transactions.
Consider that today we trade with a modern dollar with less than a third of an ounce of copper, and people accept it. I mean what person in their right mind today would keep and save a modern $1 dollar coin based on the amount of copper if they can go out and get an ounce of silver with enough effort or an ounce of gold? But if the government was to set weights and measures for copper, silver and gold based on their availability in the earth's crust, then there would be an increase in the value of silver and gold relative to copper, For example a one ounce copper dollar would require around 714 dollars for a silver piece and 45454,50 dollars for a gold piece.
Using today's modern $1 dollar coins would require $2142 dollars for a silver ounce piece and 136363.50 dollars for a gold ounce piece if a system was established upon the current U.S. $1 coin.
grant
Guys who came up with the Federal Reserve System are
extremely smart. This is a near perfect system for them with one flaw, in my opinion. For us, this is a near perfect system if charging interest was illegal, in my opinion.
government of the people, by the people, for the people
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Bi-Metallism already stable enough
At 700 to one availability of copper to silver, copper becomes an insignificant component of a dollar's defined value.
Defining the dollar is a de facto establishment of the exchange rate between the constituent metals. Dealing with two relatively scarce materials like gold and silver necessitates establishing a statutory relationship that as closely mimics market behavior as history and reason will allow. Even so, new reserves of either metal can throw off the relationship between the two and can have a somewhat destabilizing effect on the currency.
With a dollar defined as the sum of two metals they will tend to mitigate each other. With bi-metallism we buy great stability with little complexity. Tri-metallism provides a little more stability at the cost of lots more complexity. The currency would be obliged to follow the more rapidly shifting relationship between gold and copper, copper and silver, and silver and gold, or the market will mercilessly reject that currency. With a natural availability ratio of 700:1 (Cu:Ag) tri-metallism provides maybe 0.14% more stability while imposing three times as much complexity. Not a good trade.
Apparently, with regards to metallic stability, the authors of our Constitution had it right to begin with when they specified Gold and Silver, and no other considerations.
LXXI BC: Ego sum Spartacus // MDCCCLVII: I am Dred Scott // MCMVL: Ich bin Anne Frank // MMX: Je suis Assange // MMXI: Ik ben von NotHaus
Our current problem right
Our current problem right now is that we have a currency backed by nothing. There is no guarentee that the FRNs in circulation will be worth anything at all. However if we were to relink and make a real dollar to copper, silver and gold as I propose, it would offer some stability to the system rather than the total collapse that we are headed for. Imagine like your case with an alternative use for Ag, that there is some alternative fuel source that replaces petroleum, then the FRN wouldn't have any value at all. Currently it does because our military requires that petroleum producing countries accept FRNs as payment. But how long can we afford to keep that system in place.
grant
Are you serious?
We have a currency backed by slaves, as far as I can see.
government of the people, by the people, for the people
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We could use BTUs but since
We could use BTUs but since the government has gold reserves they may rather come up with a new formula. Who knows what the future holds, but they have the power and this could be a possibility. All the would have to do is fix the dollar to around an ounce of copper, which has pretty much already been done, a modern dollar is about 1/3 of an ounce of copper. Then the government would just have to make a law that gold is set at 136363 dollars an ounce, who is going to stop them? It would be to their advantage since the current FRN is worthless anyways.
grant
Instead of Metals...
... maybe BTU's should be considered. Energy is the true currency.
The government sets weights and measures, market resolves.
Yes these are ppm in the earth's crust.
One advantage of this would be that the government would have enough money to buy back dollars on the market. It would just have to give up about a third of gold reserves. By fixing the rates of each metal relative to there amount found in the earth's crust it wouldn't matter the market value of gold to silver or silver to copper. If too much gold was on the market, people would save silver and copper and trade with gold. If not enough copper, and the price of copper rose, people would strip the wires in their homes and have it turned into coins or copper mining would become advantageous.
We saw this when gold was fix to the rate of 20 -1 with silver. People would trade silver and hang onto gold. What couldn't happen would be if the government limited the number of each coin or restricted people from having their gold, silver or copper turned into coins.
grant
Ratios
>>We saw this when gold was fix to the rate of 20 -1 with silver.
I agree with both your premises and conclusion, but what happens if the ratio runs away and never comes back?
For instance, what if a new use for Ag is discovered and Ag becomes a primarily industrial metal like Cu currently is? Not that this is likely to happen, but if it did, it would completely revalue the dollar and make silver disappear from circulation. Kind of like what happened to Au leading up to its confiscation in the 30's.
I think the root of the question is how to arrange such a tri-metallic system.
On my side, I am advocating the elimination of the dollar in favor of what is essentially a three-currency system. All of them being backed by a different metal.
On your side, we have the preservation of the dollar by returning it to a commodity backing that incorporates the same three metals.
Another potential consequence to basing the currency to any extent on Cu, is that the manufacturing output of the entire world (not just the US) would have a direct impact on the value of the US currency, regardless of if we ditch the dollar or save it.
Cu is a beautiful metal. I wouldn't mind seeing it coins to a greater extent. But regardless of all other factors, basing the money on Cu will have substantial consequences for both manufacturing and finance by tying them together at the hip.
BTUs would be a cool (snicker) thing to base a currency on. But the problem with it is that you can't put a BTU in your pocket. It would have to be a paper or (worse) electronic currency exclusively.
I have to sleep now. That was a really fun thread. I'll check back when I wake up. Thanks for giving my brain a workout.
Really good thread....
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Since copper is found in
Since copper is found in nature at 50 ppm than it would be easy to establish 1 ounce of copper equal to 1 dollar. Silver is found in nature at .07 ppm and gold is found in nature at .0011 ppm.
Therefore the new fix of copper, silver and gold to the dollar would be as follows.
1 part - equal to 1 ounce copper - equal to 1 dollar.
1 part - equal to .07 silver or one ounce equal to 714.28 dollars.
1 part - equals .0011 gold or one ounce equal to 45454.45 dollars
Actually the government may have a similar plan since a current dollar is only 1/3 of an ounce of copper, so the relative value of silver and gold would only have to be increase by 3 for the above formula to work.
grant
Copper is an industrial
Copper is an industrial metal, but as an element it is never consumed, since regardless of how it is stored it still remains available. For example copper can be stored in the form of wire or industrial product or left in the ground. Likewise gold can be stored as jewelry, or required as payment for taxes and stock piled by the government (making it more difficult than getting copper out of the ground.).
If the government was to fix the dollar to copper, silver and gold based on availability in the environment, then the government could do so with the following formula. Since copper is found in nature at 50 ppm than it would be easy to establish 1 ounce of copper equal to 1 dollar. Silver is found in nature at .07 ppm and gold is found in nature at .0011 ppm.
Therefore the new fix of copper, silver and gold to the dollar would be as follows.
1 part - equal to 1 ounce copper - equal to 1 dollar.
1 part - equal to .07 silver or one ounce equal to 714.28 dollars.
1 part - equals .0011 gold or one ounce equal to 45454.45 dollars
It wouldn't make a difference their individual market values since demand would decide which we would pay with.
grant
Pls to clarify¿
Can you clarify what you mean by copper not being consumed?
Technically, there is no way to consume anything. Nearly all of the copper (or anything else, for that matter) discovered on Earth is still on Earth somewhere.
But the chemical formula might change, and that means to recover the copper, you need to recycle it (which isn't far away from having to mine it again).
>>If the government was to fix the dollar to copper, silver and gold...
But that's exactly my point... You can't fix it to all three without setting the price on two of them. The only reason that a bi-metallic standard of Ag/Au can sort-of work is because Ag and Au have the same dominant role: money. When you throw a base metal into the mix, you are going to see wild swings in value if you decide to fix the price.
When you give these ppm values, are these ppm in the Earth's crust? That would make the most sense, but I want to be clear on that before I use it as a premise.
>>...demand would decide which we would pay with.
Oh! So that is intentional? I always viewed this as a downside. Basically, what would happen if you define a face-value in terms of three different metals is that there would be a currency market created that did nothing except trade those three metals back and forth. And this is what I was getting at with my poast in the last thread:
Is this really what you want, and if so, why? What would be the advantage?
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Minting in a tri-metal system without imposing exchange-rates
Minting in a multi-metal system without imposing exchange-rates is a very sticky problem for such a system. If I held three coins of roughly equal value and had to pay for something, I would pay with the least valuable coin according to the market that day:
http://en.wikipedia.org/wiki/Gresham%27s_law
The only way to work around this problem is by doing away with the idea of face-value on the coinage. Consider the $1 Ag rounds vs the $20 Au rounds. Current Ag/Au spot ratio is about 1/63. Thus, the Au stuff would never see circulation until the exchange-rate imposed by the face-value of the coins made it advantageous to spend the Au rather than the Ag (a ratio greater than 1/20).
So here is how you solve the problem....
Mint the coins with the ID of the metal and the number of atoms of the metal in the coin (moles, for the chemists).
Copper weighs 63.546 grams/mole. So a 1oz copper coin would be stamped as "Cu 0.446M", or "Copper 0.446 moles".
A 1oz silver: "Ag 0.2628M"
A 1oz gold: "Au 0.1439M"
The reason to use moles and not weight of the metal would be because copper alone would be a bad metal to make durable coins with. It not only tarnishes, but it actually corrodes. You would need to alloy it with something. And that something would diminish the purity of the copper and bias the weight. When people buy copper for industrial use, they don't typically buy it in alloy. If they DO buy it in alloy, they call it by the name of the alloy (IE, brass).
The other reason to use moles is that it would function as the face-value of the coin. Moles would allow you to precisely state the cost of something in all three metals, and would simplify commerce by taking alloy, purity and weight out of the equation.
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Glad you gave this its own thread...
By basing the standard on three metals, as opposed to two or one, you are adding stability in the sense of adding more buffers and reducing the impact of fluctuations in any of the metals. But the problem is that you would, by definition, be imposing an exchange-rate on the metal itself. In other words, a price control.
The only possible way that this could work, is if...
a) The gov't didn't impose an exchange-rate on the metals. This means that NONE of the metal could ever be minted with a face-value. It would need to have an ID, and a mole value. (A coin might be stamped with: "Cu 0.446M", more on this later....)
b) It wasn't illegal to destroy the copper or silver coins, because these metals have significant industrial value.
c) There was a reliable (IE, not manipulatable) source for minute-to-minute market values for all three metals, and everyone agreed to accept them.
You are still going to face the forces and interests of sub-market that will take the form of arbitrage within your currency. And for that reason, I am strongly skeptical that such a system would be workable, but the above three guidelines might help it work.
I'm about to make a second post about minting such coins. Stay tuned.
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Ok
I have more questions on a and b, but I'll wait for your second post...
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"I killed the banks"
Did I cover your questions?
I'm not an advocate for the idea of a tri-metallic standard, but it sure is a fun idea to kick around.
Moles is just a way of counting atoms, if that was the source of confusion on 'a'.
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Yes, this is an interesting
Yes, this is an interesting thread. a) I just needed to know more about and b) was answered...
There was a post here a couple weeks ago which suggested people can collect 1982-and-earlier pennies and melt them down for their copper value which is a little over twice their face-value... And even though there's a bill that would reduce the cost of minting pennies, and a clause in the bill to allow people to melt them down to sell, the clause was removed...
So this system would allow the coins to retain their market value as opposed to having a fixed face-value... So merchants would then price items in relation to mole-values instead? Or would the coins have a simple ID which corresponds to a mole-value, making it easier for people to figure the cost of something?
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"I killed the banks"
Haha! Melting pennies
My first semester of general chemistry, that was one of our labs: "How much copper is in the penny". Yes, I save old pennies. Mostly for teaching that lab, rather than for selling them as scrap.
>>So merchants would then price items in relation to mole-values instead?
Yes, IMHO that would be ideal. You could also use weight, but if you did that, you would need to factor in the purity of the coin that you were using, and the metal that it was composed of. For instance, those 1oz generic silver rounds? There isn't exactly 1oz of Ag in them. There is 0.999oz (if they are 999 fine).
>>...a simple ID which corresponds to a mole-value...
Sure, I guess you could do that. But you would have to setup the system carefully so that prices don't get confused. And you would always need to distinguish between metals, because 1M of Au is worth LOTS more than 1M of Cu.
The big advantage of denominating in moles is that the mint could change the sizes and compositions of the coins without affecting prices or suitability of exchange of coins already in circulation.
One of the other choices you would have to make would be what your basic monetary unit would be.
Good thread...
Comments? How would you like to see it setup?
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How do the unique properties
How do the unique properties of each play into their value? Like the demand for gold/silver jewelry or the functional uses of silver and copper in different industries.... Doesn't that also play a role in determining value, or is it mostly based on the relative scarcity of each metal?
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"I killed the banks"
Yes, they do...
See my poast above.
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Why not just run with
Why not just run with copper?
The cheaper the metal the easier to control.
?
___________
Lisa C.
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I like copper
I think it is pretty. Plus, if I run short of money I could just get my handy hacksaw and go at my pipes in the basement. LOL Seriously, good thread and interesting topic. I bought a Platinum coin just to have doubt if it will become valuable I just liked to have it to look at. I like variety. Variety is the spice of life. Peace
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No takers?
What? Nobody wants to trade 4 ounces of copper for an ounce of silver?
grant
stop and think
Today a modern U.S. dollar weighs 8.10 g with a mixture of 77% copper 12% zinc 7% Manganese and 4% nickel.
Since 1 ounce = 28.3495231 grams, it means that current dollar coin is about 1/3 of an ounce of copper.
So with silver trading today at 13,43 and gold at 823,20 that is pretty close to 70 times the price of silver to the price of gold.
Altough our current modern dollar takes three units to make an ounce of copper.
4 ounces of copper = ounce of silver. Who wants to trade 4 ounces of copper for an ounce of silver?
grant