What is the Gold / Silver Ratio?

CLICK CHART TO ENLARGE

The chart (above) shows the gold / silver ratio for the last few years. The ratio simply put describes how many ounces of silver will buy one ounce of gold. Historically, the ratio was pegged at 16 ounces of silver to one ounce of gold. Indeed, this value relationship of the two precious metals actually mirrors their relative abundance in the Earth's crust.

In more recent times the ratio has swung heavily in favor of gold as silver was demonetized, averaging around 55. Currently the ratio is about 40x and thus above the median of 55x. This means that silver is attractively valued relative to gold. A low was hit in 1920, when 15 ounces of silver would buy 1 ounce of gold. 1940 saw a row of historical highs, when one ounce of gold bought 100 ounces of silver. We experienced similar values in 1990.

Looking back over the centuries, we find that gold has been substantially more expensive since the beginning of the 20th century than in the previous three centuries. The long-term median (since 1687) is 15.7x. This also reflected the actual ratio of physical supplies: gold is about 16 times more scarce than silver. According to USGS, the measured and assumed silver resources are about 6 times as high as the ones of gold. Therefore silver is at the moment clearly undervalued at a ratio of 40x relative to gold.

Note: 3/25/11 - GOLD/SILVER RATIO touched more new lows this week. Closed today at 38.486. Shhhh -- Listen. Come close and I'll tell y'all something you won't hear anywhere else, but don't tell anybody. At 38.486 the ratio stands below its 10 year, below its 20 year, below its 30 year, below its 50 year, below its 60 year, and below its 110 year average. In fact, it's nearer the 220 year average than the 110 year. Put that into perspective: the 10 year average is 60.53, 22 points higher.

[Using a gold:silver ratio of 16:1 equates to a price of $90 per ounce for silver based on the current ballpark price of $1430 per ounce for gold and suggests a price of $650 if gold were to reach a parabolic top of $10,400!]

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

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Rising Cost of Restaurant Meals!

The year was 1943. The Second World War was raging in the Pacific and Europe and the Zoot Suit Riots were pitting soldiers against Latinos in Los Angeles. The atom bomb was still on the drawing board and it was 5 years before the first McDonald's opened. You could grab a hamburger from a good restaurant for 40 cents and get some curly fries for another 20. A Coke? That will cost you another dime, mac. For a little more than a dollar you could substitute a steak for the hamburger and exchange the coke for a milkshake concocted with real milk and real ice cream.

Inflation

When reading old menus the first thing that stands out naturally are the prices. If you could still order off a six and a half decade old menu, there wouldn't be a hungry person in America today, and if you're still challenged by the concept of inflation, one look at the menu will clarify your mind. The average price of 10 staple casual dining restaurant items were $0.47 in 1943 compared to $6.10 today. That's a stunning 1,302% inflation or 4.05% per year. For example, back in 1943 you could treat three of your buddies to steak sandwiches, fries and a large coke and pick up a $4.00 tab. Today, that act of generosity would cost you over $54. Other wallet busters included hot fudge sundaes for 35 cents and a stack of pancakes for 30 cents. A Root beer float or freshly squeezed lemonade would set you back another 20 cents.

Sales Taxes

In California the sales tax was 3 percent. That's a far cry from the current 9.75% rate in Los Angeles County. This is not a misprint; in nominal dollars, the sales taxes on that burger went up a stunning 5,464% and somehow the local and state governments managed to have balanced budgets. For those of you history buffs, West Virginia was the first state to enact a sales tax in 1921 and California didn't have a sales tax until 1935. I would have paid 12 cents in taxes for treating my three buddies to a steak meal. Today, the state charges diners $5.40 for the privilege. I guess that's why good friends are harder to find nowadays!

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

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How eBay Helps Junk Silver Coins Live!

In the "Big Silver Melt" of 1980, millions of dollars (face value) of junk silver coins (pre-1965 US dimes, quarters, halves) fell victim to refinery cauldrons. Many silver coin collectors and hoarders today lament the wholesale destruction of these US coins that represented the last physical manifestation of "real money" in this country.

A question that is commonly asked today on internet boards is why the coins were melted at all? Why didn't junk silver sellers find buyers who would've held onto the coins rather than toss them into the refinery cauldrons? To find the answer, we have to return to the turbulent days of 1980 as silver prices rose rapidly to peak at $50.

Coin dealers of the era relate vivid stories of long lines outside their shops with eager sellers looking to convert their old silver coins, jewelry, and silverware into fast cash. Many large stores had armed guards who'd only let a few customers in at a time to sell their goods. Multiple coin counting machines were constantly clanging nonstop as they busied about their task. However, as silver reached $50 US on the Wall Street trading floor, customers weren't offered more than the equivalent of $30 an ounce for their silver dollars and other coins. The reason being that the refineries, who were the dominant silver buyers at the time, weren't willing to pay more than this lower price due to the large inventory backlogs that afflicted them. For the part of the coin dealers, the necessity of cash flow and a fear of being caught with too much inventory in a volatile market, compelled them to take their profits each night. It was just too risky to hold onto the Morgan silver dollars, Walking Liberty halves, and Mercury and Barber dimes for too long waiting for willing buyers of these rare and beautiful coins.

As the price of silver skyrockets today, many wonder whether the surviving junk silver coins are destined to die by fire as their relatives did three decades ago. I believe this fear to be groundless due to the internet revolution which birthed sites like eBay. Today, when the average seller desires to sell his roll of Franklin halves, he doesn't automatically march to his local coin dealer. No, instead he goes online and uses sites like eBay. In a few minutes his auction is created, which in a few days will net him a buyer for his silver coins at melt pricing, and sometimes a few percent above. Other sites like Bullion Direct use a slightly different sales mechanism, but with identical seller-buyer matching results.

Due to internet technological innovations that allowed sites like eBay to proliferate and be used by the average American, the current silver price run will not feature long lines at coin shops and vats of melting silver coins. Instead, sellers will easily find willing buyers who will hold onto their new silver acquisitions as islands of security in a collapsing paper money world.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

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Weimar Hyperinflation vs. US Dollar

German Children Playing with Worthless Paper Reichsmarks

During the Weimar Germany hyperinflationary period (1922-1923) the Reichsmark lost value rapidly against the US Dollar. Review the information below for conversion rates as the hyperinflation progressed:

Timeline of Weimar Republic Hyper-Inflation (Reichsmarks per USD)

June 24, 1922: 272 Reichsmark (RM) to $1.00 US
July 1922: 670 RM
August 1922: 2,000 RM
October 1922: 45,000 RM
November 1922: 10,000 RM
December 30, 1922: 500,000 RM
February 1923: Reichsbank buys back RM (or reichsmark); stabilizes RM at 20,000 to 1 US dollar
May 4, 1923: RM 40,000
June 1, 1923: RM 70,000
June 30, 1923: RM 150,000
August 1-August 7, 1923: RM 3,500,000
August 15, 1923: RM 4,000,000
September 1, 1923: RM 10,000,000

Around September 10 to September 25, 1923: Prices reportedly rise hourly in several German cities.

September 30, 1923: RM 60,000,000 = 1 US Dollar

November 15, 1923: Rentenmark issued; pegged to the Gold Standard; Rentenmark 4.2 = 1 US dollar; at this time: Old Reichsmark 4,200,000,000 = 1 US dollar.
1 New Rentenmark = 1 Billion Old Reichsmark!

Only the issuance of the Retenmark, backed by bonds indexed to market prices (in paper Marks) of gold, brought the out of control hyperinflation to heel.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.


Rick

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