Precious Metals, silver, copper, silver bullion, copper bullion

A huge opportunity to hedge against both inflation and deflation is lying out there in the open. There are no transaction costs and right now there's even a built-in discount. But most people will never realize any of this.

In 1933 President Franklin Delano Roosevelt signed Executive Order 6102, which made it illegal for U.S. citizens to hold gold bullion.

Prior to that, the $20 bill was essentially a warehouse receipt for a one-ounce gold coin. Prior to the Federal Reserve Act of 1914, the $20 bill actually told you this.
After Executive Order 6102, $20 notes weren't allowed to be exchanged for gold anymore. Americans couldn't legally own or trade gold as money and savings, only as jewelry or collectible coins.

A year after making monetary gold ownership illegal, FDR revalued gold from $20.67 per ounce to $35 an ounce with the Gold Reserve Act. The Act also required all gold and gold certificates to be turned over to the Treasury.

The dollar was debased. A chunk of the gold it used to be good for was legally removed. Instead of “containing” 1/20 an ounce of gold, each dollar now only contained (or represented) 1/35 an ounce. And of course you couldn't actually own the gold itself.

In 1971 Nixon severed the last official ties between gold and the dollar. The dollar quickly sunk to its real value, which had been debased by years of money supply inflation.

By 1975 Americans were allowed to own bullion gold again, but during the roughly 40 years bullion gold ownership had been illegal, the dollar had been drastically debased. At its former lowest point in the summer of 1980, the dollar was worth only 1/850 an ounce of gold. It regained some value for a while, but for the past couple of years a dollar would only get you less than 1/1000 an ounce of gold (right now it gets you less than 1/1300 an ounce).

That was the story with a piece of paper that was merely standing in for a monetary metal. But what happens in the case of circulating coins actually composed of monetary metals?

Lets look at quarters, dimes, nickels and pennies…

Prior to 1964, U.S. quarters and dimes were 90% silver. From 1965 to 1970 half dollars were 40% silver “clad” over a copper-nickel or “cupronickel” mix. Now quarters and dimes and half dollars have no silver in them at all. They are now entirely copper and nickel, but only enough to get a little more than 1/4 their face value.
Prior to 1983, U.S. pennies were 95% copper and 5% zinc. In 1982 we started getting pennies made of 97.5% zinc with only 2.5% copper plating. Since 1983 every new penny has had this composition.
The U.S. nickel has been cupronickel since 1946: 75% copper and 25% nickel with trace amounts of manganese. But that's probably about to change…
Why are quarters and dimes no longer silver? Why is the penny no longer mostly copper? And why will the nickel likely follow suit fairly soon?

Because the amount of silver and copper and nickel in each case came to exceed the face value of the coin. The debasement of the U.S. currency over time has required the metal in the coins to be replaced with a cheaper substitute.

The average American has no idea what inflation really is or why currency debasement is a problem at all. He figures one metal is as good as another in minting of the currency…that when the face value of a coin falls below the value of the metal in the coin, its nothing more than a curiosity. Substitute a cheaper metal, they think. Problem solved.

And indeed the problem is solved for the government, which mints the coins made of real money at a loss after the effects of bouts of the inflation started by Monetization of government debt. Savers and the overall economy on the other hand…their problems are just beginning…

But that is a story for another time. For now let’s look at the opportunities to be had when the government makes metals available for a fraction of their market price via coins…And lets see if there are any opportunities left (Hint: there are!).

If you had seen the writing on the wall in the early 1960’s and started hoarding quarters and dimes while they still were almost wholly silver, you would have found that your dimes were worth a high of $3.57 each. Your quarters would have been worth $8.93 each.

In fact, these 90% coins still trade just like regular silver bullion bars and rounds. They were taken out of circulation — “hoarded” — by those savvy to debasement (Gresham’s Law tells us that good money will be hoarded when bad money floods the market). These coins were collected without any transaction costs. They were bagged up with different face value totals: $1,000 bags, $500 bags, $250 bags, $100 bags and $50 bags. These bags now sell with a transaction cost.

Each of these bags traded for over 35 times their face value because of the silver in the coins. At least they did at silvers peak in 1980. Even after the peak and during the ensuing 20-year slump they were selling for more than three times face value.

Now thanks to waves of money and credit expansion from the Federal Reserve, silver (and gold) is pushing back toward its old highs. These bags of so-called “junk” silver are trading at more than 20 times their face value. They may hit 30 times face value again and beyond…

If you had sold your house at the very peak of the housing bubble in 2006…just before silver took off…you could now sell your silver and buy back your house…plus five more houses like it.

And there's a lot more potential for that trade to get even better.

Silver shot up about fourfold, while real estate plummeted by a quarter or a third. That's “so far.” Silver’s price could multiply again — even if does dip in the interim — while housing could drop even more.

Even if you didn't catch the peak, but just saw the writing on the wall in 2000-2005, you'd still have done pretty well by selling your home and buying silver. You wouldn't have gotten quite as much for your house, but you would have gotten silver at around $4 instead of $9.

Silver probably has another trick or two up its sleeve. It probably has a lot more upside than gold. It will probably play catch up till the silver/gold price ratio gets larger. Who knows?

Look at the other coin that was debased: the lowly penny…

Prior to 1984, the penny was almost all copper. Now those old pennies have been driven out of circulation and hoarded (Gresham’s Law strikes again). And they're worth just under three times their face value: Almost three cents for the old one-cent piece.

Buying silver and copper bullion is a safe and easy way to help secure the future. If the U.S. Dollar ever does collapse these are perfect size for trading and purchasing items the U.S. Dollar may not be able to do anymore.

At worse the dollar strengthens and you've just saved money whose purchasing power has increased. That is not a bad worse case scenario at all.
Here are a graph on the rise silver prices since 2001.

silver-copper.com