In the 1800s silver was the predominant money. Several silver discoveries occurred and miners began bringing more silver to the market, making silver somewhat more commonplace. “New” silver was in the possession of parties not of the establishment, that is to say miners rather than bankers or politicians.
At that time, both silver and gold were defacto world currency, and a certain weight of silver was the same as a smaller weight of gold. Therefore silver was convertible to gold, and both were convertible to dollars.
Soon after, the banks in the US and elsewhere, instigated by a London connection, lobbied for silver to be retired as official form of money. The required laws were passed in the US and UK. This caused a situation to arise whereby people who had borrowed from the banks were required to repay in gold. But their savings were in silver, and silver could no longer be used to pay off debts to the bankers. This hit particularly in far eastern countries, and in the lower to middle classes. The demand for gold pushed it’s price upwards, and the silver sold to get gold dropped the value of silver. The bankers did very well from the demonetization of silver.
Since that time, and during most of the 20th century, the US dollar became the defacto world currency of choice. At first the dollar was convertible to gold. Dollars became more numerous and gold remained as scarce as ever. But this came to a head and during the 1930s the link between dollars and gold broke and gold rose in price and the dollar fell, in a sudden re-marking of valuations. Citizens of the US were ordered to sell their gold prior to the rise in the price of gold.
Sovereign countries could still own gold and demand repayment for dollars in gold. New dollarswere brought to the market by the US and the dollar became available to a greater degree during this period. Subsequently during the late 1960s there was another currency adjustment and this ability of countries to present dollars and be repaid in gold came to an end.
This post was published at TF Metals Report on September 7, 2014.
Follow on Twitter
Recent Comments