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The Silver:Gold Ratio, 1687-2011

- Nathan Lewis - New World Economics

You are right that a currency based on precious metal is subject to inflation if there is a big increase in the supply of that metal. Indeed, this happened during the mid-to-late 16th century in Europe, when the Spanish imported silver plundered from the Americas. But this inflation was mild in comparison with that of the fiat currencies of the 20th century. It is less of a risk now because, despite ever-advancing technology in exploration, development, and mining over the past century, there has been no dramatic increase in supply. In fact, supply has generally lagged real economic growth. So the expectation for a world using gold or silver as currency is a gradual decrease of the price level.

Commented 3320 days ago

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Beginning of the headline :We have something special this week: the open market value of silver, compared to gold, over a period of over three centuries. The location is London. For a long time, silver and gold were, in a sense, two versions of the same thing, just like one dollar bills and twenty dollar bills are today. Their ratio of value was not perfectly stable, like the 20:1 ratio of $1 bills and $20 bills, but it was quite stable between about 16:1 and 15:1. Both silver and gold ser... Read More

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