...Bullion & Money

Silver has been used historically and cross-culturally as money. In fact, the words "silver" and "money" are the same in many languages. Silver is one of the so-called "coinage" or "noble" metals because it is a relatively inert and corrosion resistant metal that is used for minting coins. Being more geologically abundant and cheaper than gold, silver can be used in the smaller denominations of coins that are typically use in daily transactions.

In the United States, as recently as 1964, silver was used in U.S. dimes and quarters. In 1969, the United States Mint issued the last 40% silver U.S half-dollars.

Precious Metals & Money

Over the last few hundred years there has been a gradual, international drift away from using precious metals in national coinage or as the backing for value of national currencies.

When a currency is backed by a precious metal, currency issuers guarantee to redeem notes of that currency for a set amount of that precious metal and so the price of both the currency and metal are "fixed" to each other. When that link is broken, the currency and price of the metal are said to be "allowed to float freely". At that point the metal is priced by markets. Simultaneously, the currency is said to becoming a "fiat" currency, which holds value due to the authoritative mandate of the issuer.

The decision to continue to use fiat money as national currencies is the basis of a great deal of political and economic debate and often tied to discussions of inflation.

In the United States, the U.S. dollar was initially backed by both gold and silver. In 1900 the dollar became backed by just gold though silver was used in coinage, so the price of gold and silver continued to be stable and linked, and in 1975 the gold standard was removed and the dollar became a fiat currency.

Silver Markets & Price

In the beginning of the 21st century, even though silver is not materially used as coinage or as the conceptual backing for most currencies, it is still used, in part, as a store of wealth in the form of bullion. Market action at large commodity exchanges in Chicago, New York, Dubai, Sydney and Tokyo regularly update the price of silver and that information is communicated around the planet via the Internet.

Here are a couple examples of online charts showing recent silver prices:

                 

Silver is traded on the large exchanges in the form of 100oz bullion bars. Individual investors typically purchase smaller 10oz bullion bars and 1oz coins. The one-ounce, .999 pure silver coin is the most typical form of purchase for the small investor. The silver ticket is minted in a one-ounce ingot so to be comparable to the typical investment size.

Coins

Both national and private mints mint bullion into investment forms. The American Silver Eagle and the Canadian Silver Maple Leaf are two examples of one-ounce nationally minted coins that are typically collected.

American Silver Eagle

Canadian Maple Leaf

These coins sell for a small markup over the market price of silver. Most of the bullion coins now minted by national mints have a face value and are officially money but are not used as such because the value of the metal is worth more than the face value. The Silver Eagle has a face value of one U.S. dollar and the Silver Maple Leaf has the face value of five Canadian dollars.

Some silver owners feel that the designation, of these official bullion coins as money, protects the investor from a rapid fall in market prices for the metal. So if silver were to become worth less than a dollar/ounce an American Eagle coin could at least be used as a dollar coin and so hedging the investment somewhat.

Some silver owners also feel the designation, as money, will protect them in the case of government confiscation. In 1933 the U.S. government confiscated all privately held gold with the exception of some coins deemed as collectables. The concern is that, since silver is a valuable industrial and financial commodity, in a time of crisis the government may try to confiscate silver. Others argue there is just too much of silver out there to practically collect. This issue has been addressed by the Mint though some people are still concerned.

Another concern is by designating silver, as money, it gives the government more control over how the metal. A example of this is the control of base metals used in coins in the 2006 interim rule that generally prohibits the exportation, melting, or treatment of United States one-cent coins (pennies) and 5-cent coins (nickels).

Private Mints produce one ounce silver coins that are referred to as "generic rounds" or just "rounds". These coins do not have a face value and are often a bit smaller in radius and thicker that the national bullion coins so not to be seen as attempted counterfeits. They sell for a slightly smaller mark up over the price of silver. These coins are often produced with commemorative designs and can be found stamped with faces of war and sports heroes as well as generic nationalistic iconography like eagles and neo-classical decorations.

Silver in Alternative Currencies

There are examples of private, alternative currencies using silver coins. The Liberty Dollar and is a popular example.

Liberty Dollar

In 2006 the U.S. Mint issued a press release stating that prosecutors at the Justice Department had determined that using Liberty Dollars as circulating money is a federal crime.

Another contemporary twist to alternative currencies has been the introduction of electronic currencies backed by precious metals (aka: e-bullion, goldmoney, e-gold). Typically the e-currency is denominated by weight such as grams or ounces and can be used as a way of investing in precious metal as well as money for making purchases. Examples include the eLiberty Dollar, the ePhoenix Dollar, and e-silver.

Silver investors also invest in collectable "numismatic" coins that include former currency coinage. These coins are valued more for their rarity as collectables rather than their bullion content and typically sell well above their bullion value.

Some people accumulate silver in small denomination silver coins in case of economic and social catastrophe, with the idea that silver will again become a currency if governments are unable to maintain the credibility of their fiat currencies.