In 1486 the Germans started using a 1 oz silver coin. It was very popular as the other types of coins had been debased and people no longer liked using them. In 1497 Spain defined their silver pieces of eight to match the German thaler. After America's independence they defined the US dollar as 1 oz of silver to match the "Spanish dollar". Today silver is about $23/oz. So compared to silver the dollar has only gone down by a factor of 23 in more than 500 years. But really all of this drop is in the last 75 years. The Fed is printing paper dollars a thousand times faster than they did 75 years ago (printing a trillion per year instead of a billion per year). Paper money is being debased a thousand times faster and silver is only 23 times as expensive. Hum.
Time to use Occam's Razor, "the simplest explanation is usually the correct one". It could be the value of the dollar is going down. Or it could be there are simultaneous bubbles in copper, wheat, cotton, oil, gold, iron, rice, silver, etc. Which explanation is simpler?
All these things look like they are in bubbles because the value of the dollar is going down. The dollar is going down because they are printing too many and because it is becoming less loved as an international reserve currency (in large part because it is being debased).
Also, we could be getting closer to a crack-up-boom where people bail out of paper money into commodities and other real things.
Vincent - Just a slight correction... the US silver dollar is not a full oz of silver but somewhere around .77 oz. Also, you may be interested to know that The Coinage Act of 1792 defines the dollar as 371 and 4/16 grains of pure silver (basically copying the Spanish milled dollar)... the definitive work on US monetary history is Edwin Vieira's "Pieces of Eight." ... highly recommended! GSJ
ReplyDeleteThanks!
ReplyDeleteThat book looks hard to find.
My understanding is that it has been recently reprinted and is available from the author -- edwinvieira@megapipe.net or mailing address: 52 Stonegate Court, Front Royal, VA 22630 USA
ReplyDeleteTwo volumes, app. 1700 pages, $160 for orders from/in continental US (If you order it, you will NOT be disappointed!)
GSJ