With modern day fiat money it isn't necessary for the value of the metal to be equal to the value of the stamp, rather it can be much less. The $100 bills I use do not contain $100 of paper.
I expected that you would end up saying something along these lines. But this has evidently nothing to do with the trust that people reveal towards precious metals. You seem to have massively forgotten what you started with. Namely, that the trust that people have toward a
gold specie doesn't depend on what this specie is made from, but
only on the stamp of it.
You are paraphrasing me incorrectly.
I wrote:
Money has always been what people trust and have confidence in. This doesn't mean the metal itself, but as Armstrong has explained many times it was the stamp on the metal. Even when the invaders took over the Roman Empire, they used the stamps on the coins from the former Empire because it was more trusted.
By "money" I obviously mean what people trust to be currency (a universal unit-of-exchange). This has nothing to do with chunks of metal (in whatever form) hoarded for speculation and investment. You are conflating orthogonal concerns
The problem is that the very metal these chunks were minted from was considered money (in whatever form and state), not the stamp impressed on it as you and your buddy Armstrong erroneously claim. In other words, people trusted the metal, not the stamp.
You continue to conflate personal value system with PUBLIC CONFIDENCE in the stamp. A person will weigh the risk of lost of PUBLIC CONFIDENCE in the stamp against their personal assessment of the metal value, and the fact that PUBLIC CONFIDENCE in the currency is required for it to be a liquid unit-of-exchange (i.e. a personal assessment of metal value is relatively illiquid if there is not State endorsed PUBLIC CONFIDENCE in the stamp). This is why when PUBLIC CONFIDENCE in the stamp was peaking, the coins were able to be heavily debased but then as emperors were disposed every decade or less then it was necessary to increase the metal content in order to gain enough PUBLIC CONFIDENCE.
Moving the capital to more fortified location that could better leverage trade between East and West also helped Constantine establish more PUBLIC CONFIDENCE so the Byzantium Empire could carry on as Rome sank into the dust. And co-opting Christianity was another in the confluence of factors establishing PUBLIC CONFIDENCE. And then the Byzantine coins were heavily debased anew over time because PUBLIC CONFIDENCE in the stamp was high.
I have already told that people paid a relatively small fee (several percentages) for having royal coins minted from the gold or other coins they had brought to the royal mint. And that fee was the real "market" price of the stamp. This can be very easily explained by the fact that every king or emperor had been minting and accepting as legal tender his own coin, so the stamp itself cost virtually nothing. For the simple reason that rulers back then had been killed, assassinated, and overthrown every other day. The invaders that took over the Roman Empire fit into this scheme of things perfectly...
Seigniorage is exclusively for the State when PUBLIC CONFIDENCE is high. For the $100 seigniorage is about $99.9.
Just imagine what your 100 dollar bill would be worth if it had been outlawed every time a new POTUS came to power
Indeed one of the reasons the US dollar has high PUBLIC CONFIDENCE (even internationally) is because unlike European currencies which are routinely canceled, the dollar has never been (yet). That is why the stamp is worth $100.
But I am repeating myself:
But you still can't escape the simple question why authorities continued to use precious metals for minting coins until very recent...
They debased the coins in the Roman Empire and got away with it up to a point, because people trust the stamp and the strength of emperor stamped on it. But eventually the emperors were being overthrown every decade, so the stamp had to be backed by more metal value in order to bring back the confidence.
Also modern banking and paper money had not yet been invented in Western Europe yet, and I believe not until Florence, Italy if I am not mistake. China
had already invented paper money though.
So if the government is perceived to be strong and stable (e.g. the USA since at least WW2), then that government can debase the hell out of their fiat, which is exactly what the Fed has been doing with the world's reserve currency and formerly strongest military power.
And why people started evading such coins when the authorities began debasing them
No one stopped using FRNs and zinc pennies and quarters. The USA government is still perceived to be strong. But we are witnessing the fall of the USA empire now. Exactly as predicted by Armstrong's model. In fact, Armstrong's model for the US empire peaked on the day Edward Snowden made his final move of no return for releasing the NSA exposé.
