What are the U. S. Silver Standards

Group: Silver Investing

Written by Jude Sutton on Oct 5, 2008 6:45 pm

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The silver standard is a monetary system in which the standard
economic unit of account is a fixed weight of silver. The silver
standard was widespread until the 19th century, when it was
replaced in most countries by the gold standard. Sterling, at
92.5 % silver, is just one of the silver standards in the U.S. today.

Today, common standards include the following:

* Coin Silver -
This is a U.S. standard and is an alloy of 90% silver and 10%
copper.
* Sterling Silver -
This describes any alloy that contains at least 92.5% silver.
* Mexican Silver -
This standard from our friends to the south is an alloy of 95%
silver and 5% other metal(s) -- usually copper. (Most silver
jewelry from Mexico is using the sterling standard these days.)
* Britannia Silver -
Even more pure than Mexican silver, Britannia silver has no
less than 958.4 parts per 1000 of silver, and no more than
41.6 parts per 1000 of copper. Operationally, silver of this
quality is marked in the U.K. and Ireland as "958 silver."
* Fine Silver -
Most of us would rather have a sterling reputation than a fine
one, but in the world of silver, "fine silver" is almost as good as
it gets. Fine silver is 999 parts per 1000 of silver. This level
of purity is found in bullion bars bought for the underlying value
of the silver, fine silver is usually too soft to be used in most
applications.
The United States adopted a silver standard based on the "Spanish
milled dollar" in 1785. This was codified in the 1792 Mint and Coinage
Act, and by the Federal Government's use of the "Bank of the United
States" to hold its reserves, as well as establishing a fixed ratio of gold
to the U.S. dollar. This was, in effect, a derivative silver standard, since
the bank was not required to keep silver to back up all of its currency.
This began a long series of attempts for America to create a bi-metal
standard for the U.S. Dollar, which would continue until the 1920s.
Gold and silver coins were legal tender, including the Spanish Real, a
silver coin struck in the Western Hemisphere. Because of the huge debt
taken on by the U.S. Federal Government to finance the Revolutionary
War, silver coins struck by the government left circulation, and in 1806
President Jefferson suspended the minting of silver coins.

The U.S. Treasury was put on a strict hard money standard, doing
business only in gold or silver coin as part of the Independent Treasury
Act of 1848, which legally separated the accounts of the Federal
Government from the banking system. However, the fixed rate of gold
to silver overvalued silver in relation to the demand for gold to trade or
borrow from England. Following Gresham's law, silver poured into the
U.S., which traded with other silver nations, and gold moved out. In 1853
the U.S. reduced the silver weight of coins, to keep them in circulation,
and in 1857 removed legal tender status from foreign coinage.

In 1857 the final crisis of the free banking era of international finance
began, as American banks suspended payment in silver, rippling through
the very young international financial system of central banks. In the
United States this collapse was a contributing factor in the American Civil
War, and in 1861 the U.S. government suspended payment in gold and
silver, effectively ending the attempts to form a silver standard basis for
the dollar. Through the 1860–1871 period various attempts to resurrect
bi-metal standards were made, including one based on the gold and silver
franc, however, with the rapid influx of silver from new deposits, the
expectation of scarcity of silver ended.

The interaction between central banking and currency basis formed the
primary source of monetary instability during this period.The combination
that produced economic stability was restriction of supply of new notes, a
government monopoly on the issuance of notes directly and indirectly, a
central bank and a single unit of value. Attempts to evade these conditions
produced a periodic monetary crisis, as notes devalued, or silver ceased to
circulate as a store of value, or there was a depression as governments,
demanding coinage as payment, drained the circulating medium out of the
economy. At the same time there was a dramatically expanded need for
credit, and large banks were being chartered in various states, including
those in Japan by 1872. The need for stability in monetary affairs would
produce a rapid acceptance of the gold standard in the period that followed.

The Fourth Coinage Act enacted by the United States Congress in 1873
embraced the gold standard and de-monetized silver. Western mining
interests and others who wanted silver in circulation labeled this measure
the "Crime of '73". For about five years, gold was the only metallic standard
in the United States.

On June 4, 1963, president John F. Kennedy signed Executive Order No.
11110 that gave the Treasury Department the power "to issue silver
certificates against any silver bullion, silver, or standard silver dollars in
the Treasury." This order has never been acted upon, but has yet to be
repealed.