Silver is a much smaller market than the gold market and quality research about the poor man’s gold can be less easy to find. One academic who does stand out though is the late Professor Roy Jastram, whose works on gold lead him to an investigation into silver’s monetary history and record. His book‘Silver: the restless metal’ is much cited by silver experts like David Morgan, but being out of print is now not that easy to get hold of. The Amazon book markets in the US and UK were trading at >$140 when we looked, so we headed down to the British Library in London to get hold of a copy. Published in 1981, this book is a look at silver’s recorded monetary history with a forward look at what the future might hold for the silver price.
The historical depth of data used in the compiling of this book is impressive. The main historical analysis focuses on England and the USA, and the statistical story of silver begins in England in 1273. Although American data begins later, this monetary analysis seeks to separate periods of inflation and deflation, has some interesting findings.
Unsurprisingly, and as other monetary experts we cite find, Professor Jastram finds that “annual rates of inflation were not at all severe until the twentieth century”. More interesting is the finding that silver actually lost purchasing power against commodities in every period of inflation in England since the end of the sixteenth century. Similar more general findings of loss of purchasing power during inflations had also been found for gold in Jastram’s ‘The Golden Constant’. Only during the inflation deemed to start after 1933 in England was silver found to gain in ‘operational wealth’. This period may be of more relevance to investors today, and we return to this later.
In the USA the silver price is broadly found to be an almost constant between 1800 and 1827, before a downward trend from 1873 to 1932, before a contemporary trend of appreciation from 1932 onwards. As for gold, it is found that silver lost purchasing power in all American episodes of inflation until the present one beginning in 1951. In fact “the record of the two precious metals is remarkably similar”.
Professor Jastram is drawn to ask where gold and silver get their long standing reputations as hedges against inflation. Perhaps this is a post Great Depression phenomenon, but an analysis of 150 years of American and 300 years of English monetary records suggests this “lore was not borne out by the facts”.
Within the American data there is one period that goes a significant way to destroying silver’s reputation as a potential long term store of value; in the 40 years after 1890 silver lost 76 per cent of its purchasing power. This was deemed to be “cataclysmic for a precious metal” with reference that “gold never behaved that way in all the history of Britain and America”. It was silver’s “ceaseless fluctuations in purchasing power” that drew the Professor Jastram to term it ‘the restless metal’.
Silver’s performance during deflations in England and America is found to be quite different than during inflations. As far as recorded English monetary shows, silver “did very well as an instrument of accrual in periods of deflation. The pattern of increased purchasing power failed only in the depression of 1873 to 1896. Even then it behaved well, down only 6 per cent, in the face of a 50 per cent collapse in the price of silver per ounce”.
Whilst there were fewer periods of deflation to assess in America than in England, Professor Jastram finds gold and silver performing well in deflations. One should note that the silver price had enjoyed government support from as early as the 1878 Bland-Allison Act.
