The History of "Gold" Is Really The History Of The Gold/Silver Complex

Forbes ^ | Dec 26, 2015 | Nathan Lewis

[expat_panama]

Sometimes, funny-money promoters like to dangle the idea that the "gold standard," in U.S. or world history, was a short-lived episode dating from about 1870 to 1914, a period of only forty-four years. I take a rather different viewpoint, that gold (and its adjunct, silver) was the primary basis of monetary affairs around the world for millennia, stretching up to 1971.

When we look at the history of monetary arrangements, we find that gold and silver were usually used together, in what I sometimes call the "gold/silver complex." The reality was that silver and gold traded in a tight band with each other, a few percentage points around 15.5:1 (fifteen and a half ounces of silver was equivalent in value to one ounce of gold). Thus, as a standard of value, both gold and silver were virtually identical, differing by only this slight drift. This stable value relationship...

[snip]

Red line is 15:1 silver:gold ratio. Blue line is 16:1 ratio.

[snip]

When you fully appreciate the long relationship that humans have had with the gold/silver complex over literally thousands of years, the notion that the “gold standard era” was a brief and arbitrary experiment covering a few decades is completely absurd. Ultimately, it is a form of propaganda, that today's funny-money-loving academics try to foist upon people ...

 

[snip]

Gold's track record, as a standard of value, is awesome. But, for as long as people believe that manipulation of the economy via currency distortion is the royal road to prosperity, people will shun the idea of gold-based money. I think that today's funny-money arrangements will have a crisis before too long; a crisis painful enough that it might change people's minds.

[expat_panama]

Hope everyone enjoys the article.

Many of us can recall the feel of a 1 oz silver dollar and a 1 oz. 20-dollar gold coin --that was when 1k oz silver bought 50 oz gold by gov't fiat.   What happened is that with the increased availability of transportation and communication market forces wroght havoc and even the 50 level had to be abandoned.  This morning the ratio is around 15.

[Ultima]

I have found this website to be a very useful source of information on the economy, gold, and silver.

http://goldismoney.info/forums/

[expat_panama]

Congradulations are in order this market morning as stock indexes power back up over their 50-day moving averages and IBD officially upgrades the outlook to "confirmed uptrend"!  Futures traders are still undecided tho, as these contracts are off a bit while these others are ecstatic.

Today's announcements:

7:00 AM MBA Mortgage Index
7:00 AM MBA Mortgage Purchase Index
10:00 AM Pending Home Sales
10:30 AM Crude Inventories

Almost forgot, these threads relate to this page:

• Ted Cruz’s ‘Big Problem’ (Gold Standard)
• Government's Gold King Whitewash
• The Mystery Of Dubai's Vaporized Gold: The Plot Thickens
• Nazi gold train: 'No evidence' of discovery in Poland
• Ted Cruz backers plan $1 million push on gold standard

[abb]

http://projects.exeter.ac.uk/RDavies/arian/origins.html

Functions of Money
Specific functions (mostly micro-economic)

Unit of account (abstract)
Common measure of value (abstract)
Medium of exchange (concrete)
Means of payment (concrete)
Standard for deferred payments (abstract)
Store of value (concrete)

General functions (mostly macro-economic and abstract)

Liquid asset
Framework of the market allocative system (prices)
A causative factor in the economy
Controller of the economy

[smoothsailing]

Today 1 oz. of gold will get you 77 oz. of silver

Something’s got to give.

[expat_panama]

slow loading for me today, but have you seen the forum address the problem w/ the ‘stable prices’ meme vs. the crazy swings that gold’n’silver even have w/ each other?

[expat_panama]

those are the classic criteria; for me the only way to think of ‘gold as money’ is by completely throwing logic out the window.

[expat_panama]

Something's got to give.

You mean you think that the split between the metals standard folks and the free market can't last?

[Former Proud Canadian]

Try these:

https://www.youtube.com/watch?v=DyV0OfU3-FU

https://www.youtube.com/watch?v=iFDe5kUUyT0

You might have to watch them several times. I did, and I have a degree in economics.

[smoothsailing]

Yes. But I’m no expert by any stretch of the imagination.

It’s strictly speculation based on my thinking that silver is way undervalued. It looks like a buyer’s market to me.

[Ultima]

It is a good time to buy silver. Not paper silver but physical in your hand silver.

[bert]

The article seems to digest the book by Peter Birnstein that describes the use of gold as a medium of exchange since pretty much the beginning of time. If you are interested in details of the relation of gold to silver and such historical characters as Isaac Newton that wrestled with the problem of maintaining the 15:1 ratio, you will enjoy the book.

The history of gold is the history of commerce. The question of America returning to the gold standard is not if but when

[grania]

Today 1 oz of gold will get you 77 oz of silver.

It's silver that's illogical. It's a necessary metal for many things. Silver purchases are so robust that at times the US mint has to halt sales of Eagles. Mines barely make a profit at current prices. Yet its price doesn't increase.

I'm hoping it's the price of silver that adjusts, upward.

[Yo-Yo]

A very simplistic and European-centric view of the "gold/silver complex." The value ratio of gold to silver prior to 1934 changed when the supply of gold and silver changed through either mining or confiscation.

Mining in North America, southern Africa, and Australia, as well as the confiscation of gold and silver from Central and South America vastly changed both the total amount and the ratio of the metals available.

After 1934, the private ownership of Gold in the US was outlawed, so silver took on a distorted role in wealth storage. After 1971 both gold and silver was allowed to float in the international market, and that's when you start seeing the wild fluctuations in value.

[expat_panama]

...America returning to the gold standard is not if but when...

That's how it's been for almost a hundred years now and will probably continue for another hundred.  In addition, noone seems to want a gold/silver combo either, that's what William Jennings Bryan argued for (William Jennings Bryan's Cross of Gold Speech).

 

3:30

[palmer]

Specific functions (mostly micro-economic)
Unit of account (abstract)
Common measure of value (abstract)
Medium of exchange (concrete)
Means of payment (concrete)
Standard for deferred payments (abstract)
Store of value (concrete)

General functions (mostly macro-economic and abstract)
Liquid asset
Framework of the market allocative system (prices)
A causative factor in the economy
Controller of the economy

Bitcoin performs the specific functions, even the store of value will be plausible as it matures. The general functions will come with time also and ironically some by tying one's Bitcoin to a precious metal or other commodity. There are companies in that space already. Even if Bitcoin fails, some technology like it will endure.

[GrandJediMasterYoda]

Speaking of gold...pretty ironic that I should run across this article today. I just learned this morning my 76 year old father was scammed out of $100,000 in a Ghana gold scam by two “women” he met on Facebook. I feel like I’m going to puke. He didn’t tell me for months and I only found out about it today because - if you can believe it - he was all set to fly to Ghana to make final arrangements to get the “2 million from his gold” which to me means he was more than likely setting himself up to be kidnapped.

Anyone have any experience with this? I feel like my blood pressure is going to make my head explode at any second. I cannot cannot cannot believe he fell for this, and amazingly he still believes it is legit “These women were so nice to me”...Oh yes and 2 days ago he sent them another $2000 because one of these “women” were in the hospital and needed help paying medical bills. To say I am flipping out is the understatement of the century, he is retired and still paying a mortgage that I help him with, but we are not rich by any means. I assume all this money he gave them will be impossible to get back? I cant believe this, what a way to start the new year.

[PeterPrinciple]

I suspect most of these stories never get known.

Would appear lots of kidnapping in Ghana. so you are probably right in that assumption.

Not much one can do except be thankful it wasn’t worse. Is your father finally seeing the light?

[PeterPrinciple]

I still remember being in Africa. The only place to store wealth was in gold jewelry and they wore the jewelry, because there was no good place to hide it in the hut. Banks were state run and not trustworthy.

Maybe it was not a bad idea...................

[PeterPrinciple]

as long as people believe that manipulation of the economy via currency distortion is the royal road to prosperity, people will shun the idea of gold-based money

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key quote