When you hear the word “junk” you immediately assume low-value or quality. This isn’t the case for junk silver coins. We explain why and how to invest.
As the famous orators, Wu-Tang Clan once said, “Cash rules everything around me. C.R.E.A.M. get the money, dollar dollar bills y’all.”
And listen, I’m not one to disagree with some of the greatest thinkers of our time, but in the world of numismatics, the truth is that dollar bills are not where the money is, the money is in coins.
To be specific, it’s surprisingly in what we commonly call junk silver coins.
Let’s start with a quick history of how we wound up with junk silver coins, and what that means for coin collectors and bullion investors today.
An Arbitrary Order: The Fiat Economy
In 1970 President Nixon enacted a series of economic policies that have come to be known colloquially as the Nixon Shock. The content of these policies is multifaceted and complex but in the world of numismatics, the most important consequence of these pieces of legislation was the decoupling of the American dollar from its value in gold.
Traditionally money is meant to represent, or literally be, it’s material value. For example, what we now know as junk silver coins used to cost as much as they were, so a nickel contained 5 cents worth of silver.
After Nixon’s policies passed, the global markets turned to what is known as a fiat economy, or an economy where legal tender has no inherent value. The word fiat is defined as “an arbitrary order” when understood in the context of money we can look at the dollar bill. The materials used to make a dollar bill are worth almost nothing: a dollar is a dollar because it’s a dollar by fiat.
Even before the 1970 policies, the material worth of coins was already being devalued. This is why most junk silver coins are coins that were minted before 1964 when the coinage act of 1965 lowered the amount of silver used to mint coins.
Why Buy 25 cents for 20 Dollars?
Now that we’ve given you a brief overview of how we wound up where we are today with regards to the value of junk silver coins, it’s time to talk about why investing in silver is a good idea.
As we discussed earlier, in today’s fiat economy the dollar is an unstable thing subject to the fluctuations of the global stock market leaving it vulnerable to inflation. In short, money itself is a dangerous investment. So, what about silver? Is silver a good investment?
The straightforward answer is yes.
At the time of writing, a 1932-1964 Washington Quarter is worth approximately 18 American dollars. Investing in silver isn’t the same as buying stocks, you’re buying an object, or in the case of junk silver coins possible many objects. Silver coins, and other precious metals like gold, are things you can hold in your hands.
While many investment experts agree that investing in any precious metal can be a safety net, silver is considered to be a top choice for investors. Many factors play into this opinion, ranging from silver’s affordable price point to its history of offering a higher ROI than gold.
Buying Junk Silver Coins: The Numismatic Perspective
When considering whether to invest in silver bullion or junk silver coins, there are more straightforward numismatic considerations at play. Silver bullion, often purchased in bars, is the most traditional form of precious metal investments.
So, what differentiates an investment in bullion from an investment in junk silver?
For one, there is a limited supply of silver coins. When a currency is minted there is going to be a cap on how much is produced, and production stops once it’s in circulation. This means that junk silver coins may not hold much numismatic value as a rare pre-1933 gold coin, they still hold more unique value than a bar of silver bullion.
So, when you invest in junk silver coins you’re not only investing silver, you’re also investing in a numismatic commodity. Essentially, you’ve got your hands in two discrete markets, the rare coins market and the precious metals market.
This brings us to our next point.
Not All Coins Are Created Equal
Before the 1965 coinage act, every coin was representative of its intrinsic value. If you remember what we talked about regarding fiat currency you’ll recall that each coin used to represent its intrinsic worth, a nickel was worth five cents in silver, a quarter 25 cents and so on. Junk silver coins are still valued at their silver content, so while a nickel will be worth way more than five cents it will still be valued less than a silver quarter.
This information though, just like the post-1964 coin, has lost most of its value. We can blame this on what is known as Gresham’s Law. The conceit of Gresham’s Law is that bad money drives out good.
So, in practical terms, what does that mean? When a coin with intrinsic value or “good money” such as a silver quarter is in circulation with a coin of fiat value or “bad money” for example a modern quarter made of alloy, the “good money” will slowly be removed from circulation as people stop using it at face value, instead collecting and keeping them for their intrinsic worth.
At this point in time, it’s very unlikely that you’ll come across a silver quarter in your day to day life. The only way to reliably get junk silver coins in through a bullion dealer.
Time to Secure the Bag… of Junk Silver Coins
So, you’ve decided (correctly) that investing in junk silver coins is a good idea. What are your next steps?
As mentioned above, silver junk coins are, for the most part, only available from bullion dealers. When you’re looking into purchasing options, you’ll find that junk silver is usually sold as bags priced according to their weight in silver.
The most common price point for a bag of junk silver coins is $1000.00, although some bullion dealers sell bags in a range of prices, sometimes going as low as a dollar.
So, while Wu-Tang’s C.R.E.A.M. still rings true, it’s time to trade in your dollar bills for a bag of junk silver coins.
If you’re interested in learning more about numismatics outside of junk silver you can search our free database or read through some more of our blog posts.