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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (5524)	2/11/2002 1:44:50 PM
From: John Pitera	Respond to of 33421

Hi Henry, you are so right... the more things change, the more they stay the same. Needless to say, my sleep has been much more restful the past few nights, now that you've confirmed that the '30's was the last time, we've seen this currency situation. to your original question, 'when last have so many st least secretly weakness against the key currency'. The answer of course is the 30s when the key currency was gold. Hopefully that is just a coincidence :). I agree with you that it's going to be very fascinating to watch this macro situation unfold. I think you have an excellent point that the US could benefit longer term by not getting into the competitive currency devaluation game. I had a history professor tell me about the Frank Baum "The Wizard of Oz" allegory. However he did not flesh it out as well as you have. I did not realize that Dorothy represented the US and that the slippers were silver. It really is interesting subject. btw I thought the gold standard came in 73 when we went off the bimetallic system. I believe Bryan's followers referred to it as the Crime of 73. Henry, That's what I love about you, you keep me honest and make me get the books back out to verify this kind of thing :-) I took the 1879 date for the resumption of the US Gold standard from Ron Chernow's book "The House of Morgan". I've read that book a couple of times. His biography of John D Rockefeller: "Titan" is also a great read. I went to the 1980 book "The case for Gold" written by Rep. Ron Paul and Lewis Lehrman to check out this question. That's a very good book, in it's account of US monetary history. it appears that in 1872 a few knowledgeable men at the US Treasury realized that Silver was about to sustain a big drop in price relative to gold. The Gold to Silver Ratio had held steady at about 15.5 to 1 since the early 1860's. The primary cause of this was that European central banks were shifting to gold backed standards and abandoning silver back currencies. A subsidiary reason was the discovery of Silver mines in Nevada and other western states. The treasury men had Senator Sherman slip a bill through congress in Feb of 1873 which in effect discontinued the minting of any further silver dollars. In June of 1874, a further act demonitized silver by making it no longer legal tender for any coin above $5. As you say the silverites called this "The Crime of 1873" the ratio fell to nearly 18:1 in 1876, to over 18:1 in 1879 and all the way to 32:1 by 1894. The US Govt, was not able to secure the resumption of payments in Gold until the passing of the Bland-Allison act of 1878. This act mandated the government purchase of 2 to 4 million of silver per month going forward. Specie resumption occurred successful in 1879, the gold premium to greenbacks fellto par and and the appreciated greenback promoted confidence in the gold backed dollar. So it was a gradual process that occurred from 1873 to 1879. John