The Logic of Pre-1965 Silver Coin Pricing in Inflationary Times

We are living in an age of inflation. The recent wave of inflation in the United States will surely continue and may very likely become more severe than what we witnessed in the late 1970s and early 1980s. Double-digit and even triple-digit consumer price inflation may be in our near future. Life in a country where 20% or more of the purchasing power of the principal currency unit erodes annually is not pleasant. When this happens, inflation inevitably breeds even more inflation. Producers, wholesalers, and retailers all get in the habit of regularly jacking up their prices, in anticipation of continuing inflation. This soon becomes a feedback loop that pervades all of society. Once the annual inflation rate exceeds 25%, people begin to hoard things (tangibles). And once the annual inflation rate exceeds 50%, people start spending their money just as quickly as they earn it. The phrase “cash is king” is replaced by the phrase “cash is trash.” In Central America and South America, they fittingly refer to inflation as: “El Enferno.” (The Furnace.)

My personal response to rising inflation has been to switch to using silver, as much as possible, as a practical store of wealth.

Why Pre-1965 Silver?

When I do radio and podcast interviews, I’m often asked why I have my Elk Creek Company antique guns priced in terms of pre-1965 U.S. silver coinage. (Commonly called “junk” silver, by rare coin dealers.) I can explain that very succinctly, in three points:

  1. As a hedge against inflation.
  2. To build my family’s silver stockpile.
  3. As a teaching tool.

I have found that by firmly setting my prices in pre-’65 silver (real money), I don’t have to worry about inflation. It leaves me hedged, and our silver stockpile steadily grows. Even if the inflation of Federal Reserve Notes (FRNs) jumps to double digits, unlike other retailers, I won’t find the need to constantly re-set my prices on each of my cataloged items. Instead, all that I need to do is watch the market price of silver and re-set one number: my FRN multiplier, which is then applied “across the board.” Presently, the multiplier for the silver prices is 23.7 times face value, for any customers who want to pay in FRNs. That multiplier is derived by taking the approximately 715 Troy ounces of silver contained in a $1,000 face value bag of circulated coins, and multiplying it by the day’s spot price. (It is $25.02 per Troy ounce, as of this writing.) That makes a $1,000 “face” bag worth $17,900 wholesale, or $23,700 retail. Hence, four silver quarters (i.e. One Dollar, “face”, in silver) are together worth $23.70 in FRNs. The fact that I’m willing to in effect pay retail for silver shows you how serious I am about stacking silver.

Now, let me explain the “teaching tool” part of this: I feel strongly convicted to teach my readers and customers that FRNs are not real money. Rather, they are fiat currency, in the modern sense of the word. Unlike back in 1964, an FRN is not redeemable in specie. When you go to bank and plunk down your FRNs at the teller window, the only exchange they can make is for other paper FRNs or token coins that are made of copper and just flashed with a silver-color coating. So the FRN is now an IOU Nothing note. The only vestige of proper redeemability is with U.S. Nickel 5-cent pieces, which now have a melt value of around 8 cents apiece. There are, of course, no more 90% silver dimes, quarters, half dollars, and silver dollars circulating at face value. Shortly after the introduction of clad copper coinage, all of the 1964 and earlier 90% silver coins were swept out of circulation and privately hoarded. The public had woken up to the Federal Reserve’s ruse. They instinctively knew that they had been robbed of their real money. Gresham’s Law is inescapable: “Bad money drives out good.”

Other Silver?

I also accept payment in U.S. Silver Dollars and in 1-ounce silver rounds. But those transactions are a bit more complicated. For those paying in Silver Dollars, I presently allow 30 times face value, for two reasons: 1.) The slightly higher silver content of a Silver Dollars versus 10 dimes or four quarters, and 2.) The numismatic value of Silver Dollars, even in low grades. And for those paying in generic 1-ounce to 10-ounce rounds or bars, I allow $2 over the spot price of silver. For those paying in U.S. Mint American Eagle 1-ounce rounds, I allow $4 over the spot price of silver.

The math on 40% silver half dollars –those minted between 1965 and 1970) is even more confusing to my customers. So I try to avoid any trading in those. And this reluctance is even greater because I don’t want to inadvertently mix any 40% halves with my 90% silver (1964 and earlier) halves.

Hedge, As I Do

For any of my readers who operate small, independent retail stores, I recommend that you consider doing the same as I have done: Start quoting your prices two different ways. Here is an example of a retail operation that did so: Oregon Gas Station Accepting 90% Junk Silver as Payment.

In an age of inflation, taking the initiative to accept silver in payment is wise. Those who fail to do so will someday be looking at their empty store shelves and a pile of worthless paper, and wonder: “What the heck happened?”

Stack, As I Do

And for most of the folks reading this, who are not retailers, I recommend that you convert at least 5% of your liquid net worth into silver, and stack that well-hidden, at home. Yes, you can bury it in a sealed length of large-diameter PVC pipe, but a hidden wall cache is much more convenient, for frequent access. Stacking silver in the form of pre-1965 90% silver dimes, quarters, half dollars makes a lot of sense:

  • You will be buying silver at a very low premium over spot silver.
  • You will be buying it in a form that is very rarely counterfeited.
  • You will be buying it in a form that is widely recognized and thus quite suitable for barter, in the event of a Dollar collapse.

Start stacking! – JWR