LBJ Remarks on getting rid of silver coins.

[henrysmedford]

If have been on a coin history blitz this week and found this a fun read. I will highlight in red the parts I liked.
From http://www.presidency.ucsb.edu/ws/?pid=27108#axzz1ta4mqmi1

Lyndon B. Johnson: Remarks at the Signing of the Coinage Act

Distinguished Members of Congress, ladies and gentlemen:
We are gathered here today for a very rare and historic occasion in our Nation's history.

Before I make some observations that I have made note of here, I want to say to the Congress again, as I do almost daily these days, in the words of the Navy--"Well done."

When I have signed this bill before me, we will have made the first fundamental change in our coinage in 173 years. The Coinage Act of 1965 supersedes the act of 1792. And that act had the title: An Act Establishing a Mint and Regulating the Coinage of the United States.

Since that time our coinage of dimes, and quarters, and half dollars, and dollars have contained 90 percent silver. Today, except for the silver dollar, we are establishing a new coinage to take its place beside the old.

My Secretary of the Treasury, Joe Fowler, is a little stingy about making samples, but I have some here. Joe made sure that I wouldn't put them in my pocket by sending them over here in plastic.

Actually, no new coins can be minted until this bill is signed. So these strikes, as they are called, are coins that we will never use. On one side is our first First Lady, Martha Washington. On the other, a replica of Mount Vernon.

The new dimes and the new quarters will contain no silver. They will be composites, with faces of the same alloy used in our 5-cent piece that is bonded to a core of pure copper. They will show a copper edge.

Our new half dollar will continue our silver tradition. Eighty percent silver on the outside and 19 percent silver inside. It will be nearly indistinguishable in appearance from our present half dollar.

All these new coins will be the same size and will bear the same designs as do their present counterparts. And they will fit all the parking meters and all the coin machines and will have the same monetary value as the present ones.

Now, all of you know these changes are necessary for a very simple reason--silver is a scarce material. Our uses of silver are growing as our population and our economy grows. The hard fact is that silver consumption is now more than double new silver production each year. So, in the face of this worldwide shortage of silver, and our rapidly growing need for coins, the only really prudent course was to reduce our dependence upon silver for making our coins.

If we had not done so, we would have risked chronic coin shortages in the very near future.

There is no change in the penny and the nickel. There is no change in the silver dollar, although we have no present plans for silver dollar production.

Some have asked whether our silver coins will disappear. The answer is very definitely-no.

Our present silver coins won't disappear and they won't even become rarities. We estimate that there are now 12 billion--I repeat, more than 12 billion silver dimes and quarters and half dollars that are now outstanding. We will make another billion before we halt production. And they will be used side-by-side with our new coins.

Since the life of a silver coin is about 25 years, we expect our traditional silver coins to be with us in large numbers for a long, long time.

If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content.

The new coins are not going to have a scarcity value either. The mint is geared to get into production quickly and to do it on a massive scale. We expect to produce not less than 3 1/2 billions of the new coins in the next year, and, if necessary, twice that amount in the following 12 months.

So, we have come here this morning to this, the first house of the land and this beautiful Rose Garden, to congratulate all of those men and women that make up our fine Congress, who made this legislation possible--the committees of both Houses, the leadership in both Houses, both parties, and Secretary Fowler and all of his associates in the Treasury.

I commend the new coinage to the Nation's banks and businesses and to the public. I think it will serve us well.

Now, I will sign this bill to make the first change in our coinage system since the 18th century. And to those Members of Congress, who are here on this very historic occasion, I want to assure you that in making this change from the 18th century we have no idea of returning to it.

We are going to keep our eyes on the stars and our feet on the ground.

[tractorman]

Very very interesting. Thanks Joe!!

[DebtFreeMe]

Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin.

And today the Treasury has been replaced by banks, and paper silver... Only now they are trying to keep it lower than the $100 bill...

[scyther]

lol.

[Treetop]

selling the silver hoard this country used to own was a very unwise move, even if it lead to people to pull old coinage from circulation. big deal!!! Of course we all know this happened anyway. Im tired of short sighted leadership.

[68Camaro]

In addition to those sections you highlighted, this one struck me as well.

Now, all of you know these changes are necessary for a very simple reason--silver is a scarce material. Our uses of silver are growing as our population and our economy grows. The hard fact is that silver consumption is now more than double new silver production each year. So, in the face of this worldwide shortage of silver, and our rapidly growing need for coins, the only really prudent course was to reduce our dependence upon silver for making our coins.

There was a huge amount of silver present just in circulating oinage, billions of ounces, which was freed up by this act. Similar amounts were freed up elsewhere in the world as other countries also went to "fiat" coinage. It has taken decades to absorb this amount into other uses, but the signs are that it has been sucked up.

[Saabman]

So if there were 12 billion silver coins in circulation in 1964......and lets say that 99% have been removed (just to be safe)......120 million more out there?

[PMLurker]

In addition to those sections you highlighted, this one struck me as well.

Now, all of you know these changes are necessary for a very simple reason--silver is a scarce material. Our uses of silver are growing as our population and our economy grows. The hard fact is that silver consumption is now more than double new silver production each year. So, in the face of this worldwide shortage of silver, and our rapidly growing need for coins, the only really prudent course was to reduce our dependence upon silver for making our coins.

There was a huge amount of silver present just in circulating oinage, billions of ounces, which was freed up by this act. Similar amounts were freed up elsewhere in the world as other countries also went to "fiat" coinage. It has taken decades to absorb this amount into other uses, but the signs are that it has been sucked up.

Is silver really that scarce? Does it vanish once it's been "sucked up?" Where does it all go?

I am pro silver, but I don't buy into this whole scarcity bit. I'm more concerned with mine nationalization, but that is a whole other topic. Society uses a lot more silver today then they did in 1964 -- and the price is substantially higher. More silver is recycled today than there was in 1964.

Just because there are less silver coins in circulation doesn't mean that silver is all gone. People have smartly been pulling the silver coins out of circulation for years.

But, how many billions of dimes and quarters have been minted since 1964 diluting the supply?
http://www.coin-collecting-guide-for-be ... -dime.html

Old silver is usually melted and remade into other things -- sterling silverware, jewelry, new bullion coins, etc. It's not hard to find new silver for sale if you look -- you can buy sterling silverware and jewelry on Amazon. The local jewelry store has a large amount of silver items I can buy. I can certainly find as much new bullion that I can afford to buy -- though it does get tricker finding older bullion coins. The US Mint has a large selection of silver coins to buy. I've even eaten a holiday dinner using sterling silverware.

Once silver hits a certain price for a seller, the numi coins hoarded by coin shops and collectors, granny's silverware set, the ring you gave to your high school girlfriend,etc will be sold to refiners to be melted into other things. The price is what matters. If people need money and the price is right, they will sell their precious silver.

[68Camaro]

Fact: Annual supply is roughly 1 billion ozs, with roughly 3/4 of that newly mined, and balance mostly scrap/recycle.

Fact: Newly mined silver is on the decline.

Fact: Roughly half of annual supply is literally consumed, not recycled.

Fact: Total amount going into coins and investment (bars) has increased, to on the order of 300 million ozs per year.

Fact: Population of world is 7 billion people, and growth rate, though slowed, is still at over 1%.

Unknown: The true amount of available silver is unknown, as is the below ground affordable reserves (which are a function of price), but...

There is not believed to be enough available silver in the world above ground to give each person 1 oz, and it is likely there isn't enough remaining below ground to add more than 1 or 2 ozs to that.

If no one values silver, there is a lot of it. If silver is valued, there isn't much of it. So, it's relative.

[beauanderos]

If no one values silver, there is a lot of it. If silver is valued, there isn't much of it. So, it's relative.

Very nicely stated, Rich!

[PMLurker]

Your stated facts are slightly different than published reports I see online. I don't believe everything I see on TV or read online.

http://minerals.usgs.gov/minerals/pubs/ ... -silve.pdf

Data in this report is in metric tons. 1 Metric Ton = 32,150.7 toz.

"World silver mine production increased to a new record of 23,800 tons as a result of increased production at primary silver and lead-zinc mines."

You said Fact: "Newly mined silver is on the decline." which is true if you are talking about US mines which decreased from 1,270 metric tons in 2010 to 1,160 metric tons in 2011.

Just because silver is "consumed" does not mean that it is gone forever. It still exists, but may not be in the immediate market for consumption. If the supply of silver is low and the demand is high, then yes the price will go up. As the price goes up, people that own silver will consider selling it to make money.

[68Camaro]

You've caught me in a lie - rather, an error, or else my memory used a different source that had it wrong.

The intended source of data is the Silver Institute, linked below, which doesn't show mining in decline - yet. But does show it having flattened out, despite the 10x price increase of the past decade - which is incredibly significant. A decline is predicted for 2012, if I'm not mistaken.

http://www.silverinstitute.org/site/supply-demand/

Most consumed silver which is not immediately recovered ends up in landfills, effectively gone forever. There is some that doesn't - admittedly.

None of this changes my basic assertions.

However, you are free to believe otherwise.

[Alchemist]

One thing I find interesting from this Silver Institute fact sheet, if you will, is the demand side of the equation. Unlike gasoline consumption here in the U.S., with this silver chart, demand has continued to increase even as prices have increased 10 fold. Obviously we have not yet met the point of demand destruction based on price; allowing for more price appreciation.

[Investin Cents]

Thanks for the history lesson, however sad it is. None of us was around when the Roman Empire declined, but this is similar to what happened. Their money, like ours, was diluted & cheapened and everyone accepted it - what else could you do? The smart people and those with "strong" hands, kept and continued to keep "real" money around.

Hang on folks, as the next wave hits cents and nickels will soon either be eliminated, or made of plated steel. Next, they will begin to remove all coins and paper money altogether. At that point it won't matter - it won't be worth anything anyway.

If you have strong hands, continue to hold onto real money. The worst is soon ahead I fear.

[PMLurker]

You've caught me in a lie - rather, an error, or else my memory used a different source that had it wrong.

Not trying to catch you in a lie or call you out, just trying to share information so we can all make more sound investments. Data changes more often than we realize.

Most consumed silver which is not immediately recovered ends up in landfills, effectively gone forever. There is some that doesn't - admittedly.

So once silver is buried in a pit along with other trash and metal at a landfill, it's gone forever? In my opinion, it is only a matter of price until landfill owners start mining their landfills for precious metals. I think silver will be a byproduct of the gold, platinum and REE that will be mined out of these landfills should it get to that point.

[68Camaro]

Landfills will be mined when the PM recovery in oz per ton becomes competitive with mines. By the time that happens, if ever, we'll be a long way down the road with weak mine yields, no more new mining opportunities, and skyrocketed prices. JMHO

[theo]

The problem with silver supply, as I understand it, is that the mining yields don't really respond to increases in price. Since most silver mining is a byproduct of other metals, the mining supply of silver actually might be more responsive to the prices of other metals like gold, copper and zinc. Of course, as the prices rise more supply can be had from stored coins and jewelry but those supplies are finite and dwindling. Inelastic supply coupled with strong, persistent demand points to a parabolic rise in the future; and the more prices are "managed" today, the greater the panic will be done the road.

Landfill silver may not be "lost" in the technical sense, however at these price levels they may as well on the dark side of the moon.

[IdahoCopper]

Sooner or later, the PoS will be high enough to open mines where the primary product is silver. There are mines just like that which closed around WW2 and were never reopened, due to the low price for silver. They did not close due to depletion, it just wasn't economical to open them again.

My three silver claims, about 100 miles north of home, are good bets for when the price goes up. They are within a local area with lots of claims by major producers. When those producers want to begin operations, I'll sell my claims to them. They are nearby and will interfere with the claims that they will want to develop.

[Treetop]

Im not so sure any metals in landfills are lost. there are countries where the poor mine landfills for things like plastic, and paper and whatever garners the tiniest amount. could that happen here? Obviously many are to proud here, but when not if we cant fund social services anymore (since we are to dense to streamline these systems and balance budgets) I wouldnt say its impossible. People will do dang near anything to fill an empty belly. stranger things have happened.

[68Camaro]

The problem with silver supply, as I understand it, is that the mining yields don't really respond to increases in price. Since most silver mining is a byproduct of other metals, ...

Ah, thanks! You've jogged my memory. I don't have the number or resource handy, but (relative to my other posts above on production) It is the amount of silver produced from primary silver mines that has hit a peak and is on the decline, and the by-product silver from copper and gold mines is only barely making up for that shortfall, and is starting to trend down itself.

With all due respect to IdahoCopper, from everything I've read, the ore yields in primary silver mines have topped out and are declining, and I'm quite sure that if there really were had other deposits available that were better, and available to meet economics, they would be working them already. There probably are some mines in the US that could be economical - if located elsewhere - but the cost of US regulation has made them prohibitive at silver in the $30s. These are not mother lodes or they would already be worked, so if the price goes up to make them feasible, it's not like they are going to flood the market with product. I have no idea what the break point would be for these mines to open profitably.

I read elsewhere that the average profit on an oz of silver in 2011 was about $20/oz (that includes both byproduct as well as primary mines). So I have to believe that if feasible mines could be opened, they already would be on it. That tells me that the price of pulling silver from these other mines or deposits must be significant.