Chinese Bank introduces gold and silver coin ATMs

One of the objections we often hear to the Constitutional Tender Act is that it would force the States and their citizens to "buy silver and gold coins" and carry them around in their pockets all of the time. The only way to believe this, is if you believe that you have to "buy Federal Reserve Notes" and carry around hundreds or thousands of dollars in order to buy groceries, pay car payments, pay mortgages, etc.

Of course, you don't. You can use your debit card to pay almost anything nowadays. Bank computer programs automatically compute debits and credits; they can even automatically convert the cost of items from foreign currency to domestic currency, based on whatever the current market exchange rate is.

That's exactly what can be done by the banks under the Constitutional Tender Act's conversion formulas, as this story about getting gold and silver coins from ATMs in China proves. The unfortunate part of this story is that it falls into the modern trap of thinking that exchanging one form of currency -- fiat printed money -- for another form of currency -- gold and silver coins -- is the same as "buying gold or silver coins". If you go into a bank and exchange four $5 Federal Reserve Notes for a $20 Federal Reserve Note, did you just "buy an FRN"?

Of course not. If you exchange $25USD (U.S. Dollar) for $1SAE (Silver American Eagle), you aren't buying a once-ounce silver coin, you're exchanging American legal tender currency. And all you're doing at these Chinese ATMs is exchanging ¥268CNY (Chinese Yuan) for ¥10SP (Chinese Silver Panda) or other denominations -- you're not buying one-ounce silver coins, etc.

Regardless, this story once more shows how the ConTen Act could easily be implemented.

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People in Beijing can now buy gold or silver coins at ATMs after the Beijing-based Hua Xia Bank introduced five of the machines earlier this month, according to Hong Kong's We Wei Po.

The bank installed the five machines at its branches across the city in Xidan, Fangzhuang, Zhongguancun, Dongdan and on Qingnian Road.

The ATMs look like ordinary teller machines but have an additional compartment to dispense the gold and silver coins. The machines currently offer panda souvenir gold or silver coins and Year of the Snake silver coin and plate sets.

A single 1-oz panda silver coin priced at 268 yuan (US$40) is the cheapest item available, while the panda gold coin set is the most expensive at 23,800 yuan (US$3,800).

Buyers can purchase the coins using their bank cards. After they place their orders using the machine's touchscreen, their payments are verified through bank card organization China UnionPay and they can pick up their purchased items through the opening on the lower part of the machine.

If they want to purchase more than 20,000 yuan (US$3,200) worth of items, they will first need to place their ID cards on the machine's sensor to verify their identity before the order can be placed, Wen Wei Po said.

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Silver money for China

This comes from the "Asociación Cívica Mexicana Pro Plata A.C." It's an interesting approach to solving that country's rising inflation woes...
The most interesting section is here:

The silver coins that go into circulation will be money, but will hardly be used for purchases. It will be difficult to find these coins, as they will all be treasured up by the Chinese population. Their velocity of circulation will be close to zero and thus they will have no inflationary effect upon the economy. Paper Yuan are withdrawn and replaced with silver money which goes into savings; this is a correct way to fight inflation.

Saving these coins will amount to voluntary austerity for the Chinese. Saving is the postponement of consumption. Voluntary austerity is always more effective and sounder from an economic point of view than the forced savings beloved of Statists, who have dictated taxes and scarcity for consumer goods so that the Statists can build factories.

The monetization of a silver coin will be a free-market decision that prompts people to save, spontaneously, of their own accord, and which does not require raising interest rates to draw the people’s money out of the economy into savings.

We have been proposing the monetization of a silver coin in Mexico since 2001. According to our proposal a one-ounce coin of pure silver, with no engraved value, would be given a monetary value by the Mexican Central Bank. This coin would exist and circulate as money, in parallel with the paper money system of Mexico.

The monetary value would be superior to the bullion value of the silver ounce by about 15%. This margin would allow a profit, called “seigniorage”, for the Central Bank. Since the coin would not have an engraved value, rises in the price of silver (which would tend to eliminate the seigniorage of the Central Bank) would be met with new, higher, Central Bank quotes for the monetary value of the coin.

The rises in the value of silver in the silver markets of the world would no longer cause the disappearance of the monetized silver ounce. As soon as a rise in the price of silver would begin to affect the seigniorage of the Central Bank, it would produce a new and higher quote.

In order for the silver coin to become money and cease to be a commodity, the last quote of the Central Bank would have to remain stable and not diminish if and when the price of silver were to fall, which of course it does from time to time. Granted such immunity from falls in the price of silver, the coin would become legal tender money and could be used for any commercial transaction.

Now we read that China is having problems with inflation of its money supply. We think that if China were to monetize a silver coin, its Central Bank would have an effective instrument to assist in dealing with inflation.

China used silver exclusively as money for many centuries and restoring it to circulation in China would seem appropriate for China, as it aspires to recover its former glory as the richest country in the world.

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