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The ratio gold silver from 1800-1900

By: Chaize Thomas, Dani 2989, Dani 2989

-- Posted Tuesday, 28 September 2004 | Digg This ArticleDigg It!

This is the beginning of a succession of articles about the history of the gold / silver ratio. The objective is to discover what this ratio should be (hypothetical) between gold and silver. The current ratio is between 60 and 75; it seems to me to be a temporary abnormality of the market. I shall explain during these articles the various manners to approach this famous ratio. The ratio of 15 is generally put forward by numerous authors and 15 is rarely justified and explained. In these works, I hope to discover a natural ratio between gold and silver and to help to better understand the various factors which influences it. The researches tracks are numerous and I begin with those who seem to me the simplest to be used, which is the historic track. I shall study the other periods of the history later.

I. Legal report.

Numismatic is an interesting track to know the legal report between gold and silver. However, I do not intend here to make the work of a numismatist, it is just a question of determining the legal ratio between the gold and silver coins.

- The sovereign.
The golden coin weighs 7.988 grams (of which 11/12 of gold).
The sovereign amounts to 20 schillings of silver.
One schilling is 5.23 grams of silver.
For 20 schillings, we get 104.6 grams of silver.
Thus for 104.6 grams of silver, we get 7.32 grams of gold.
The monetary relation between gold and silver, established according to the law of 1816, gives a gold / silver ratio of 14.29.


- The Franc, or Louis d’or.
France, the law of March 28th, 1803
fixes the French monetary rules. The Franc is represented by a coin 1 franc, she contains 5 grams of silver in 900/1000.
155 coins of 20 gold francs (louis d’or) are needed to have 1 kg and 1 kg of silver represent 200 francs.
3100/200 = 15.5
The legal ratio between gold and silver is 15.5, in
, according to the law of 1803.
This represents the legal report between gold and silver, in
England and in France, at the beginning of the 19th century.

- In the United States of America, the legal report between gold and silver was also 15.5 at this time.


II. End of the gold silver standard.

The 19th century saw the fall of the very old ratio of 15 between the price of gold and silver.
The previous three centuries passed by with a ratio of 15 and even lower (globally). I shall explain this period with more details in a next article on the same subject.
The ratio of 15 seems to be a sort of natural balance between gold and silver. This balance is broken at the end of the 20th century with the depreciation of silver.

This depreciation is due to several factors :

- The surrender of the gold silver standard, silver not being any more a metal standard. This factor seems to take it on all the others.

- The increase of silver production in the United States.

- Sales of silver in Germany, which additionnaly have a very strong psychological impact.
Germany is in a different situation from other countries because it moves from the silver standard to the gold standard. It is a unique event because the other countries move from the gold silver standard to the gold standard. Germany thus has big inventories to sell, but the threat of the sales presses more on the prices than the sales themselves.

- The sales of silver by the Scandinavian countries.


During 2/3 of the 19th century, the ratio of the price of gold to silver is close to 15. This ratio is imposed by the legal report (as that of France, England and the USA). The end of the century is marked by a surrender, almost generalized, of the gold silver standard by all countries. It is the death-blow for silver, the market acts at the same time on supply (increase of production) and demand (surrender of the gold silver standard). It is at this moment that silver loses its crown of laurels.

This article is the first piece of a puzzle. Once all the pieces joined, we shall have a precise picture of the ratio of the price between gold and silver, then we shall better understand this ratio in the past, today, and we can more easily imagine what it will be tomorrow.

Chaize Thomas

Bibliographie :
Mertens Jacques, La naissance et le développement de l'étalon-or, 1696-1922, Paris, PUF, 1944, 423 pages.
(Other references are going to be add quickly).

-- Posted Tuesday, 28 September 2004 | Digg This Article

Previous Articles by Dani


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