United Coin and Precious Metals 950 Silverado Street La Jolla, CA 92037

China devalued its currency last night in a sign that the country’s economic outlook is dim. The action by China could delay the timing of the Federal Reserve’s expected US interest rate hike which would have an effect on the stock market and gold and silver markets domestically.

The Fed might look first and foremost at domestic economic data instead of trying to conjecture what is going on in China, however, which would mean no major changes to their economic policy. The one time depreciation on Tuesday of 2 percent reverses that currency’s plight of two years. Stock market turbulence in recent months

The move in China marks the biggest one-day fall since a massive devaluation in 1994.

“I think it’s screaming that China is in trouble. … The Chinese leadership is really starting to run scared,” said Schlossberg, managing director of foreign exchange strategy at BK Asset Management.

The stock market in China has been soft. The Shanghai composite increased 80% in 12 months, but plunged 23% since June 12. Wall Street anticipated a rough Tuesday morning with the US stock market Monday broke a seven-session losing streak.

The Chinese central bank said it was striving to make the state-controlled exchange rate more market-oriented. The yuan strengthened alongside the dollar.

The bank said it was carrying out reforms and that meant, starting Tuesday, its daily fix would take into account supply and demand. Washington has asked this of Beijing numerous times.

The bank said it had to devalue because the yuan has been rising despite that market forces show it should have fallen. The yuan has increased because it is tied to the US dollar which has increased in price.

Currencies of other developed countries have decreased in value. This has hurt Chinese exporters by making goods more expensive abroad.

US policymakers will have to consider what China’s move means for them. A weaker yuan makes Chinese exports more competitive. Tuesday’s 2 percent decline with every bit of relief from price pressure helping Chinese exporters.  China has recently wanted its price to rise. Its domestic and international goals mean a stronger yuan is best. A main reason for China’s move is likely a strong dollar.

The move is undoubtedly good for gold and silver prices and in the next one to three years it is likely we will see the major effects of this market move by the government in China.

At La Jolla Coin & Precious Metals, it is not only gold bullion, silver bullion, pre-1933 gold coins you can purchase for the best prices in San Diego, but also currency.

United Coin & Precious Metals has had numerous currency deals walk through the front door in recent months, with beautiful notes coming into play. Buying currency can be a great way to hedge some the risk of liquid metals prices.

For instance, in stock currency, UCPM has PCGS graded 1,000 notes, which feature Grover Cleveland, in premium grades. We also have many silver certificates, still bundled in their original packaging.

Graded by PMG, we have $1 notes from 1899 in CU condition. These are great historical documents for you to see. Please come into our store and see them for yourself.

In metals news, the prices have been soft despite many pundits for seeing softening market prices in terms of paper.

Compared with metals, currency has been very stable over time, much more like the numismatic coin collection. If you have any old notes at home, passed down through the generations, UCPM would love to take a look at them to tell you what they are worth.

There are many different types of currency out there. Like silver certificates, National currency, colonial currency, confederate currency, Legal tender notes and Federal Reserve Notes.

The Pittman Act of 1918 resulted in the melting of more than 270 million Morgan silver dollars. This bullion was then sold overseas.

The US Mint had to buy bullion from US mining companies for more than the market price. The Act was designed to help silver miners in the western states…

International trade during the time was conducted in gold, and the Allies thus needed steel, food, and supplies for the largest armies the world had seen.

Since international trade back then was conducted in gold, and the Allies needed steel, food, and supplies to build and maintain the largest armies the world had seen (to that point), they pulled their gold coins out of circulation. The rising price of gold meant that the gold content exceeded the face value of the remaining coins anyway, which led to their hoarding.

Since there was no gold available, Britain was using silver certificates to pay for goods and services from its colony of India, which was a major contributor to the war effort. Germany started spreading the rumor that the government did not have the silver to back the paper certificates it was using for purchases of war goods (which actually was true.) Emotions ran high, and the independence movement, which had quieted down during the war, hit a fever pitch. The UK was looking at the very real possibility of needing to sue for peace with Germany, as it would take most of the Royal Army to put down a revolution in India.

The only place of Earth that England could get its hands on enough above-ground silver in time to avert disaster was the United States. The U.S. also used paper silver certificates as money, which the public much preferred to big old clunky silver dollars. However, every dollar in silver certificates was backed by silver dollars in Treasury vaults, and could be redeemed at will. The American government, of course, did not want to see their side lose the war, and also saw a chance to use the situation to their advantage.

Since the U.S. had no planes or tanks of its own, it had needed to buy them from the British and French. This meant the U.S. was on the hook to its erstwhile allies for a considerable sum. America wanted to hold on to at least some of its gold reserves for the post-war period, and the European powers were desperate for fresh American soldiers in the massive war of attrition that had decimated the armies of both sides. Thus, the Americans (who had silver up to their ears) figured that Britain and France would be happy to take silver instead of gold as settlement for the debts.

When the India crisis hit Britain and they appealed to America for help, all the pieces seemed to fall in place. Except one.

The U.S. government planed to melt up to 350 million existing silver dollars into bullion, and sell it to Britain, to prevent collapse of India’s (and thereby Britain’s) economy. The silver mining interests in the American West and their politicians were terrified that Eastern interests would use the opportunity to eliminate the silver dollar, reducing the government’s demand for silver. In order to placate them and win support for measure, Congress promised to buy silver from Western silver miners after the war at the same $1/oz it charged Britain, and re-mint replacements for every silver dollar melted down.

All in all, it went pretty well (except for silver dollar coin collectors!) Britain was able to honor its silver certificates, preventing a banking collapse and revolution in India. The U.S. paid off some $200 million of its war debt from the sale of the silver. And the American silver industry was able to use the government to short sell three years of post-war silver output at much higher wartime prices, while selling wartime output to Britain.

The U.S. Mint was able to recoup some of the seigniorage lost from melting down the 270 million silver dollars by using 8.59 million ounces to mint much-needed dimes, quarters, and halves. These lesser coins had less silver content per face value, meaning increased seigniorage. As replacement silver dollars (the new Peace Dollars) were made, they were used to buy wartime Federal Reserve Notes (which were not backed be silver) and retire them.

Scholars note that the Pittman Act needs to be seen as an emergency war-time measure, rather than a monetary measure. By those standards, it was a rousing success, since it basically saved the war for the Allies, and didn’t lose the government any money.