The viability of Gold and Silver as Currency
Deborah
currency?
Opponents argue that gold and silver make bad currency. They are
anachronistic, as they are heavy to transport from one place to
another, which isn't helpful in facilitating trade, especially when
trade takes place between two companies on different continents. It
would take a lot of time and effort to transport the metal. Add to that
the cost of security.
Opponents therefore argue that, in this day and age of orders being
placed online from anywhere in the world, people should be able to
access bank accounts online to facilitate such trade. Encouraging the
use of gold and silver would be a step backward, back into the archaic
days of minting coins that are worth less than the cost of minting
them.
Indeed, the cost of minting, safe keeping and transporting gold coins
are substantial. Then, there's the added problem of counterfeiting -
where this was already a problem in the past, nowadays, it seems too
easy to produce coins that look similar to gold, but are in fact made
from a combination of less valuable metals.
Nevertheless, the Mexican Senate has passed a Bill to introduce the
silver Libertad, and the Lower House is expected to vote on the
introduction soon. To manage coinage, the Banco de mexico would add a
10% seignorage charge to whatever the coin is worth given its weight in
silver, i.e. 1 oz. Consequently, no nominal value would be engraved on
the coin and it would circulate alongside the conventional peso
currency.
Advocates of the Libertad point out that Mexico is well-positioned to
take the initiative, as it produced 3 million ounces of silver in 2004.
In times of uncertainty, people could rest assured that their money
remains valuable, they say, which seems particularly applicable in a
country like Mexico with a history of run-away inflation.
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7885125
http://www.gold-eagle.com/editorials_03/salinas061103.html