Gold To Silver Ratio
When we look at the gold to silver ratio, silver has a big problem compared to gold temporarily at least. It hasn’t had this problem historically but it has had this problem for roughly 140 years now.
|Essentially the producers of the world wouldn’t accept it as money. Throughout history silver and gold were money and were found throughout the world. An important property of money is that the source has to be found all around the world.|
Now there are silver and gold mines throughout the world. But for example, there is a problem with platinum in that approximately 80% of it is mined in South Africa and roughly 10% is mined in Russia. Because of this the rest of the world wouldn’t want to accept it as money.
In the late 1800’s the centre of the financial world was in Europe, all those countries were very strong and what was happening was all these silver mines were being discovered in the new world, North and South Americas. What that did to the money supply was reducing the purchasing power of the European’s money supply and increasing the purchasing power of these countries.
|So the Europeans power realised their money was being devalued because their finding more silver in the new world and decided to refuse to accept silver for payment of debt. Because the production of the world and the world’s economic power was in Europe they could get away with that.|
The Americans and Chinese still used silver as money but looked at a money vector,
You have to look at where the economic powers of the world were, who had the most flow and control of money, and that was Europe. So when Europe decided they weren’t accepting silver any more the gold to silver ratio plummeted.
Gold has an advantage that other metals don’t have. The supply of gold is very stable because gold is not consumed. All the mining in the world only adds less than 2% supply to it. So when the European’s refusing to accept silver it caused mass inflation of gold. The gold holders won and the silver holders lost.
So the money vector really depends on the production of the world, the financial centres of the world etc and that’s similar to the problem that silver has now. We hear about all the central banks holding gold, if the producers of the world say they’re not going to accept silver as silver backed currency, the money vector of that silver and silver backed currency doesn’t go up. If they accept the gold, the money vector of that gold goes up.
However the power of the world is shifting, all this production is moving to Asia and China, and if Asia and China decide to accept silver as money and it turns out that the real production of the world comes from there, the money vector of silver will go way up.
So essentially they’d be calling the shots. Basically the money of the world is determined by who will accept it, the Chinese have the worlds production, a big population and resources they might decide to start accepting silver as money and with the westerners refusing silver, the Chinese have the bigger money vector because they have more production, more population and more resources and the silver vector will go up.
So in conclusion based on this logic, in order for the gold to silver ratio to fall it will take the economic strength of the world to shift to Asia. It looks like it’s going to happen eventually anyway. It could take years but if the western banking system panics and try’s to resist silver, with the Asia production growing like it is they might find they have no choice.
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