Most people want to get rid of their junk. I don’t; not anymore.

I had just begun investing in silver. The year was 2004, and the asking price on the day I made my first purchase was $7.26 per troy oz. on the spot market. The spread was a mere three cents, and the price fluctuations were relatively mild from one day to the next. I was excited to share my newfound enthusiasm for what I believed to be the upcoming raging commodity (and particularly silver) bull market with a like-minded individual.

When I told a friend about my initial order of physical silver, said friend replied, “Oh, got yourself some junk silver?” Dismayed at the response, and feeling somewhat betrayed, I came to the defense of the precious and industrial metal—the best reflector of light, the best conductor of electricity, and the best conductor of heat. “It’s not junk!” I emphatically replied. Surely one man’s junk is another man’s treasure, but I failed to comprehend how anyone could perceive silver to be garbage to be disposed of, especially since silver had once been considered money; that in fact in 50-some-odd countries around the world the word for money is the same as the word for silver. My friend calmed my nerves by explaining that she was not insulting my investment vehicle, and that junk silver merely meant silver that was coined before1965. No longer on the defensive, I decided to learn more about “junk silver.”

Junk silver is composed of 90% silver and 10% copper. Each “dollar” (whatever combination of coins it is that adds up to $1.00) of silver equates to .715 troy oz. of silver. At that point, I became less concerned with numismatic silver, and more attracted to the idea of getting more silver for each Federal Reserve Note (FRN) I spent—knowing that the true definition of a dollar was 371.25 grains of silver.

A great benefit of junk silver is that it does not yet command a hefty premium over spot. It is generally the least expensive form of silver on the market to buy. Gresham’s Law has been enforced with this medium of exchange. Silver coinage has been chased out of circulation due to its intrinsic value, and replaced by a weak substitute. Within the past few years we have also seen such an eclipse with the penny. At one point the melt value of a zinc penny was worth more than the one cent it represented itself as. The cost to the Federal Reserve for producing both the penny and nickel now exceeds their stated value.

A silver dime’s metal content is today valued at about 10 times what it is denominated as on its face. What else besides gold holds its value over time so effectively? Milton Friedman once stated: “Inflation is always and everywhere a monetary phenomenon.” No civilization in the world’s recorded history has ever escaped the total debasement and eventual destruction of its fiat currency. Silver could indeed again be used as money. Something has got be used as a medium for exchange when the dollar and other currencies lose their full faith and credit and are no longer honored as anything of value. Got junk?

Related Posts:

What About Investing in Silver and Platinum?
Financial Preparedness: Why Gold?
Should I Be Acquiring Gold and Silver?
The Capstone of the Readiness Pyramid

Tags: commodities, currency, Federal Reserve, fiat, financial preparedness, Gresham's Law, investments, junk silver, money, precious metals, Preparedness, Self Reliance, silver

One Response to “Self Reliance: Make Sure You Have Some Junk”

1. Bruce Hopkins says: August 21, 2009 at 5:02 am

   You’re right about precious metals, and I’ve turned my IRAs into gold and silver.

   BUT, you can’t eat metals. I think it’s also wise to put some of your money into storable foods. In the event of hyper-inflation (which I think is coming since we’re now printing worthless dollars), it’s a smart move to put your money into food that can be stored.