Silver Coin Clipping in a Modern Era

Sir Isaac Newton, head of the Royal Mint in Britain, introduced reeded edges on coins in order to curb the practice of shaving coins and debasing the currency.

In the modern day, many investors point to price suppression, market controls, and price manipulation as the equivalent to the once-prevalent practice of shaving coins.

While the practices of price suppression, market controls, and price manipulation are at times a speculative notion, there do exist some clear fundamental differences in precious metals prices and market demand.

Monetary debasement itself is nothing new. In Rome, the value of the denarius was specifically allowed to fall over time as the government changed the coin’s size and silver content. Originally made of almost pure silver, weighing 4.5 grams, the coin fell to 3.8 grams under the rule of Nero. Eventually, the Argenteus, containing only roughly 2 percent pure silver, replaced the denarius.

In the modern economy, many point to bubbles in specific markets as the cause of a severe maladjustment that eventually leads to crises. The theory of bubbles in markets is a relatively new phenomenon at least in scope as the world has moved away from hard assets to paper assets since the 1970’s. If there are bubbles in markets, there can be no bigger bubbles in the world than in paper markets and in U.S. government debt, which is so large as to make the U.S. the largest debtor nation in all of history.

Since 2003 the price of silver has gained 1,012 percent, roughly. If one were to measure the rate of increase in the price of silver to the increase in the rate of monetary expansion and credit expansion in the U.S., price gains in silver have been muted at best.

The indication is that if we could accurately measure real supply and real demand, real demand being the more difficult of the two to discern, an imbalance would become very clear. The demand for silver bullion has possibly never been higher. Even in range bound market activity, the U.S. Mint has been exceeding all previous records in sales of its American Eagle Silver coins, selling out of 2012-dated Silver Eagles and temporarily suspending the 2013-dated Silver Eagles after just ten days of availability.

If price manipulation, price suppression, or market controls exist and are operating in any form, the value of silver could make it one of the most important assets currently available in the market.

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