Wednesday, June 30, 2010

Silver – A Brief History of De-monetisation

Silver – A Brief History of De-monetisation

But throughout history, gold has not been the only monetary metal. Silver has always played a role alongside gold. In fact, up until the beginning of the 20th Century, more people used silver as money than they did gold. You wouldn't know it though, would you?

Beginning in the last quarter of the 19th century, the major economic powers, the US and Great Britain, systematically de-monetised silver. That is, they worked to remove silver from the global monetary system. This conclusion is debatable but as you will see the decision to stop using silver as money was not one taken voluntarily by the people.

As a consequence, gold/silver ratio has fallen from around 15.5:1 in the early 1700s to 66:1 today. The accompanying chart shows the gold/silver ratio from the early 1970s to today, along with the silver price. If silver is in the process of becoming 're-monetised', at these levels it is exceedingly cheap.

Gold/silver Ratio With a Silver Price Trend
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Original content Bob DeMarco, All American Investor