In ancient Rome, the Denarius currency started out as a 4.5 gram coin made of almost pure silver. But over time the amount of silver content in the coin was reduced to just 2%. The Denarius had become almost worthless thanks to inflation and had to be replaced by a new currency, the Argenteus.
In the 17th century the colonial currency suffered the same fate. The famous English economist Adam Smith criticized colonial currency in his work, The Wealth of Nations. The inflationary nature of the currency, he wrote, was a “violent injustice” to the creditor; “a scheme of fraudulent debtors to cheat their creditors.” A creditor is someone who lends money to someone else. In 1775, the colonial pounds were replaced by a Continental currency, which of course also failed.
In 1794 the first American dollar was minted 🙂 These were made from almost pure silver. But they are no longer produced today. And starting in 1965 American quarters were minted with a combination of copper and nickel, which replaced the original silver content.
History has repeated itself over and over again. Governments debase their currencies by replacing their coins with less valuable metals because it gives the State more power since they can create more money with the same costs, even though it hurts savers and creditors. But each currency cycle from start to bust takes a very long time so most people aren’t aware of how this cycle can affect their own lives. Gold and silver have always played an important role in the beginning of all historically significant currencies, including the present day U.S. dollar. To diversify currency risk, I propose making some silver wages.
We can’t earn silver coins directly from our employers today, but we can convert our money to silver after we get paid. Here’s how to do it.
- Decide what percentage of your income you want to be paid in silver. For example: 1%
- Calculate how much that is in dollars each year. For example: $300/yr, if our take home pay is $30K a year.
- Finally, use that money to buy silver. For example, $300 would buy about 15 ounces of silver today.
This is the equivalent of getting paid a wage 99% in dollars, and 1% in silver. What you do with the silver is up to you. Personally I plan to hold it until I retire. I will then begin to slowly sell my collection of silver and use the money to partly fund my retirement 😀
Random Useless Fact: Scientific research into attractiveness suggests attraction boils down to how symmetrical one’s face is.
Funny your post should be about silver. I have a day off work today and I am heading to one of those silver and gold buyers to sell some silver chaffing dishes that I have no need or want for. I do need cash for debt payment.
If I am happy with what the buyer offers me I may go back with some mismatched silverware.
Hope you were able to get a good price on your silver dishes 🙂
My trip to the gold and silver buyer was a total bust. It turns out my grandmother’s fine silver was only silver plate. If I had a 1/2 tonne full of it a scrap metal dealer might be interested.
I’m sure you’re aware of Buffett’s criticism of precious metals. Gold and silver prices reflect them whims of whoever on the other end of the transaction will pay for it; precious metals produce no economic value. Is it not better to direct the money earmarked for precious metals to productive companies or would precious metals act as a hedge? If viewed as a hedge, any worries about over diversification? 😀
I see precious metals as another asset class to own for diversification purposes. Historically hard commodities are good hedges against the rising cost of goods and services, so I view my silver and gold as more of a hedge than an investment 🙂 I would only worry about over diversification if it becomes inefficient to manage, but so far that isn’t the case yet.
My thinking exactly. I wouldn’t hesitate to buy silver or gold if the price was very, very attractive!
I like your farmland and dividend stocks Ideas, they generate positive cash flow for with long term capital gains, but gold & silver.. mmmm..nothing right. For me, gold and silver are one of the metal found in earth, but useless. Silver is being use in some electronics devices, but the expensive gold? May be I’m wrong.
That’s right, precious metals don’t generate any income. I like silver more than gold because it has more industrial uses like you said. I wouldn’t hold more than 5% of my investments in it though. I think when really successful investors like George Soros and Jim Rogers are buying silver, it can’t be a bad long term investment. Even Warren Buffett, who says he doesn’t like precious metals, bought an estimated 130 million ounces (4,000 metric tons) of silver through Berkshire Hathaway in 1997. He sold it years later and made a big profit 😀 I think when it comes to investing, there are always exceptions. Buffett may not agree with the idea of investing in precious metals because gold and silver don’t produce anything, but that isn’t going to stop him from trying to buy low and sell high if he thinks it’s undervalued.
I’ve bought some Silver coins exchange $20 for $20, $100 for $100 from the Mint. It says 99.99% pure silver, but are the coins really silver though?
If they say 99.99% silver on them then they better be 🙂 The $20 for $20 coins are collector items so the longer you keep them the more they’ll be worth.
Yes, the coins are real silver, but not $20 worth of actual silver. Everyone can do as they wish, of course. While the Royal Canadian Mint coins are indeed some of the purest certified silver or gold content (often expressed as 99.999% or “5 nines,” you must do a little homework before you buy as an investment. If you are buying the $20 for $20, etc, you are not buying the value of the silver content, but rather a numismatic *collector* coin (as Liquid stated). The $20 denomination “guarantees” the coin can be sold back to a Canadian bank, for example, for $20 at any time (and the longer you hold the coin, the less the actual $20 bill you get for it will likely be worth). It only weighs 7.96 g of pure silver, while currently you could buy a full troy ounce ( 31.1 g) of pure silver bullion (in coin or bar form) for about $25 – $30 Cdn. If you are interested in silver and gold as diversification or protection of wealth, you should look into non-numismatics. Are you a coin collector whose collection may rise in value based on rarity (most RCM coins are not… Read more »
Ha! I was just doing some research on gold coins. I have some rather old gold coins that are almost a century old, and apparently just 3 or 4 of them were a monthly salary for somebody back then.
Wow, almost a century. That’s like an antique item 🙂 Back in the old Feudal days peasants would work a whole year for a silver coin. I’m glad income inequality has gotten much better now.
I knew an old farmer who was a gold hoarder. It was not by intent, it just turned out that way. Throughout the 80’s, 90’s, & 00’s, all of his farming profit was ploughed into gold and stored in a safety deposit box. It made him a millionaire…. sitting in some metal box in the bank.
Be careful, because gold hoarders often don’t have an exit strategy. This old farmer never sold an ounce, because it was always going to go up next year. His success re-affirmed his strategy. He never got to live off the fruits of his labor, he was scared to sell his gold.
The guy died with an old house, old clothes, old car….. and some metal box in a bank full of gold. Having his gold locked in the bank eliminated his desire to spend any of it. I would argue any day that he would have been much better off with $2 million of dividend stocks, or index funds, or even bonds than a bunch of rock in a metal box hiden in some local bank!
Thanks for sharing that story. I think there’s an important lesson in there for everyone. Gold can change people and delude them from reality. To a certain extent it’s true for other forms of wealth as well. We have to be careful to not let money or wealth control us and get in the way of life 🙂
I like silver coins. Every year I buy 1 each of the US, Canada, Austrian, Australian, Mexican and British versions for my collection. I’ve got a nice collection going and like you going to hold on to them until retirement.
Excellent diversification strategy 🙂 All those countries should have good quality minting. Buying precious metal coins from a reputable source is important to maximize the value of the metal.
As I’ve told you in the past, I like shiny things… I keep in on hand, and not in a bank – I have a “hidden” safe, and you know what, I do not hold what I have as an invest, but rather as a security to own a truly international/global currency. Gold and Silver can be bought or sold anywhere in the world, at anytime. Name me some other substance, that has that legal, that has that type of value. Whenever I travel, I carry with me 2 pieces of silver and 1 piece of gold. To each his own when investing, but for me owning old world money and having it on hand reminds me of the roots of money and trade. – Cheers.
I sound drunk when I re-read this… LOL. I guess I should re-read before I hit post. I guess it is my hen pecking keyboard skills… But hey you get the idea. – Cheers.
I like old world money too. Sometimes when I use salt for cooking I’m reminded of how valuable sodium was back in the past. People use to trade salt as a precious commodity, but today it’s hard to find a dish at a restaurant that doesn’t have so much salt lol.
With all the silver coins at the Canadian royal mint how do you determine which one’s to buy. I have inherited little coin collection including 10 silver dollar coin from 1960 to 1963 from my grand mother. I enjoy reading you blog, we also have 70 acres of farmland that we inherited, we rent it out to potato farmer, we are in maritime
[…] for now. But what good will it do if we can’t access our funds when we need to? This is why I trade a portion of my salary for silver and gold. Not for speculation purposes, but it’s so I can exchange them for cash whenever the […]
[…] work. Started to invest in mortgage securities which produce passive income. And began to exchange a small percentage of my salary for precious […]