‘Returning’ To A Silver Dollar Standard

I read a lot on the alternative – Gold Bug – web sites that we need to get back on the Gold Standard. While I certainly don’t disagree, I would suggest that we already have Gold and Silver as official, legal tender in the US. It is only the need to implement a way for individuals and businesses to Earn, Spend, and Save using them which prevents general, daily, widespread use.

That implementation actually should be easier and less costly to get off the ground than you might expect.

First, you would need a bank which accepts for deposit – separately – both Paper Dollars and Silver Dollars. (I prefer the Silver Dollars over Gold $50 coins, but either could be used.) A depositer might have a Paper Dollar account with $100 in it, as well as a Silver Dollar account with $10 in it.

Since most Americans today think only in Paper Dollars, let’s translate to place a value on the two accounts. Silver Dollars (Liberty Eagles) sell/trade today for about $18 each, so the $10 Silver Dollar account is ‘worth’ $180, in Paper Dollar terms. Add the $100 Paper Dollar account, and the holder has about $280 Paper Dollars worth of value between the two accounts.

To facilitate making a payment – using Dollars from either the Paper or the Silver Dollar account – the bank (or a third party company) could be directed to accept the Paper Dollar check but deduct the equivalent amount from the Silver Dollar account.

No bank today offers such a service, so a new bank would need to be formed to blaze the trail. A new bank takes about $5 Million to get started, which in the grand scheme of things is not a lot of money. Since it would be the only bank offering accounts in Silver Dollars, our new bank would need to maintain the Silver Dollars in its vault.

Our new bank would charge a fee for this (and other Silver Dollar) services of 1% or less. As the number of transactions grew, the Bank’s earnings would grow.

Next, individuals and businesses would need a way to get paid in Silver Dollars. Let’s look at individuals first.

Consider an employee currently getting $20 an hour ($40K) at his present job. Between payroll taxes and Social Security/Medicare taxes, his take-home pay might be reduced by 15%, leaving a net pay of $34K.

If the state has a $10 an hour Minimum Wage, then the taxes deducted could be reduced to only about $1600, for a net take-home pay – as a mix of Paper and Silver Dollars – $18.4K. Translated into all Paper Dollars, the value (as most Americans today would think of it) would be $38.4K. That’s a gain for the employee of $4.4K just for accepting a mix of Silver and Paper Dollars as payment for work done.

The employer also saves money, since the nominal value which must be paid as the employer match to Social Security/Medicare would be half, the amount saved by the employer wold be about $1.5K for that employee. The employer will have saved about 3.5% on employee compensation, just for using a system to pay the employee using a mix of Silver Dollars and Paper Dollars.

For more highly paid employees, the tax saved grows rather quickly since the federal payroll tax is graduated to it high wage earners more than low wage earners.

The weekly pay amounts would go into our new bank, which accepts and facilitates these deposits.

For businesses, the process is similar, but it would require a third party intermediary. Our business would take an order, ship it, and include a bill in Paper Dollars – payable to the third party intermediary (let’s call it an Invoicing company). The Invoicing company also would receive a bill for the shipment denominated in Silver Dollars. When it received Paper Dollar payment from the customer, the Invoicing company then would pay our business in Silver Dollars, depositing that amount into our bank’s account held by the business.

The business would have expenses payed out for the year in Paper Dollars, and would have some of its revenue paid in to it as Silver Dollars. At the end of the year, the business would have a much lower (or zero) profit to report, greatly reducing its tax liability.

The Invoicing company would earn a fee for service for the transaction. It would look like our Invoicing company has a capital gain, but in order to pay out using Silver Dollars, it would need to ‘purchase’ those Silver Dollars, canceling out that capital gain.

A retail business could offer a discount to the customer for paying using Silver Dollars, since the business would be able to pay less in income and in sales taxes.

And this leads to our closing the loop of allowing the bank account holder to spend the Silver Dollars.

Both the individual and the business which receives pay or other payments in Silver Dollars may write checks denominated in Paper Dollars, but with instructions for the bank to debit the customer’s Silver Dollar account. And while some retailers might begin offering discounts for payment using Silver Dollars, we (or others) also could create a retailing web site (competing with Amazon?), which accepted payment using Silver Dollars, offering a discount to customers.

The benefits to using our Silver Dollar mechanism are fairly straightforward, so marketing it – locally at first – might be relatively easy. Businesse and individuals would save, while the reduced amount going to the federal and state taxman would pay for it.

This is one way to facilitate the use of Silver Dollars in every day commerce. I’m sure there are other ways.

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