Hard Money Benefits

March 11, 2016

If and when the US Dollar returns to being a Hard Currency – i.e. one backed by or actually containing Gold or Silver – there will be numerous changes which will occur.

One will be the elimination of constant and continuous growth of the money supply. A stable money supply is likely to result in a stable price level (CPI) – or even a continuous decline as the US saw during the 1800s.

But, there will be other, sometimes much less obvious benefits, and I’d like to consider one possibility today – the effect on the Price of Copper.

Copper is one of the most widely used base metals worldwide, mostly in electrical components like wire and motors. It has an active futures market, where because its ups and downs in price coincide with the ups and downs of the Economy, it has acquired the nickname of Dr. Copper.

The ores which contain copper usually also have other metals as well, including the Precious Metal Silver. When copper is mined and refined, the Silver which is recovered adds value to the copper operation, which shows up as a Silver credit toward the cost of mining the copper. Over 2/3 of all Silver produced comes as a by-product of mining other metals, including copper.

One current copper mine is Arizona’s Rosemont project, which has a credit for Silver around 8% compared to the price of copper. Surely, the Silver credit (and Gold credit) will vary from mine to mine, but the amount is significant.

Let’s imagine a scenario in which the Paper Dollar is replaced with a Silver Dollar instead. With Silver trading around $15.50 an ounce today, it’s hardly a stretch to expect, if Silver resumes being the Dollar, that viewed as a price today, $1 Silver could trade for $100 Paper – or much more. That’s 6+ times today’s price.

How would that affect the mining of copper? For the Rosemont Mine, the 8% credit would turn into a greater than 50% credit! It essentially would become a primary Silver mine – that is, it would produce Silver as its major product with a copper credit figured for accounting purposes.

If the Price of Silver needed to allow for a Silver Dollar circulating money in the US were higher – say $200 an ounce – then the copper credit at Rosemont would become an even less consequential 25% of revenues.

In such an environment, with a significantly higher Silver Price than we have today, the actual price of copper, while still being important to the miner, would be far from critical to the “All-In” economics of Silver mining. Silver mining production could increase, even though it might depress the price of copper.

Think about that for a second.

In a Silver Dollar world, it is likely that the price of copper would be a lot lower than it s today, since Silver mining would respond more to the “Price” of Silver.

As we said earlier, copper is used throughout our Economy and throughout the world. Copper’s price makes up a significant factor in the production of so much of all the things we include in our Standard of Living. A lower copper price would mean an increasing Standard of Living for everyone.

Silver also is a by-product today of Lead/Zinc, Molybdenum, and Gold mining. Lower Lead, Zinc, and Molybdenum prices also would lower prices for products containing these metals, increasing our Standard of Living.

Now, the purpose of this essay is not to be a cheerleader for Silver (and Gold) – well maybe a little – but to demonstrate that our leaders creation of a fiat money, Paper Dollar system in the US in 1913 with the creation of the FED, they have hurt us in more ways than just by stealing away the 98 cents out of the 1913 Dollar. The have taken away the benefits we could have had from lower prices.

Robert (Bob)  Shapiro is self-taught in Austrian Economics and has consulted briefly for the governments of Mexico, Greece, Portugal and Spain. He has traded Gold & Silver and their stocks since 1970. Bob Shapiro’s blog is http://us-issues.com

Man has had the ability to separate silver from lead for as far back as 4000 B.C.