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Old 04-18-2012, 02:19 PM   #1
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Silver to gold ratio in Weimar Germany

Hi all.

A couple of days ago in a Chris Martenson article on ZH, a poster put up a chart of gold and silver prices during Weimar Germany.

It can be found here: http://www.bullionmark.com.au/gold-r...ices-1919-1923

I made the following reply:

Something is seriously messed up with this chart. Notice that the gold to silver ratio stayed at around 15 to 1 until Oct 16, 1923 and then it jumps to over 150 to 1 starting at Oct 23, 1923 and stays that way until the end of the chart.

I think someone left out a zero for the silver price or added one to the gold price.

"But what's a zero or two amongst friends?" Future Bernanke quote.
---------------------------------------------------------

To which several posters responded that the price had changed dramatically and rapidly due to people's desire to run. One poster provided a link:

http://www.24hgold.com/english/contr...as+and+Crashes

A have to admit that this answer leaves me puzzled. How could the price change so rapidly AND consistently. I know of no market ever to have such a radical price change without volatility. How could this ratio change so dramatically and not fluctuate wildly?

Anyone have any thoughts on this?

Here's the link to the post on ZH: http://www.zerohedge.com/news/chris-...omment-2352592 if you're interested in the replies.

Cheers, -Ron
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Old 04-18-2012, 02:35 PM   #2
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I am guessing the record keeping during a true SHTF time isn't the best. However, in situation where a lot of people want to move thier entire life out of the country, I can definately see such a spike occuring. Think about converting an entire family's net worth into A (gold) or B (silver) and fleeing a country. Suddenly, gold is more desirable!

Even at current prices, think about a family selling everything they own: cars, houses, stocks, .... and buying gold. It would most likely fit in a backpack with room to spare. Now do the same mental exercise with silver; Ever try to transport hundreds or even thousands of pounds of anything!?

Example with current prices:
Gold
1640 spot * 500 ounces = $820,000
500 / 14.58333 = 34.29 pounds

Silver

25,957 * 31.59 = $819,981.63
25,957 /14.58333 = 1,779.9 pounds
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Old 04-18-2012, 11:24 PM   #3
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Originally Posted by Island_Dweller View Post:
A have to admit that this answer leaves me puzzled. How could the price change so rapidly AND consistently. I know of no market ever to have such a radical price change without volatility. How could this ratio change so dramatically and not fluctuate wildly?
If it is a SHTF scenario, there will be no reason for the market to fall in value as a seemingly endless amount of people are pouring into it.

Also consider how small the gold/silver markets are today. Now imagine how small they were in 1930s. The barrier of entry was much higher for the average citizen. The smart ones got to their silversmith early to convert wealth into metal, but I'm sure those stores dried up pretty quickly. This would explode the price.

It's exciting to think about the implications on today's gold/silver markets considering the availability of many new potential investors around the world in relation to the gold/silver markets size today.
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Old 04-19-2012, 09:17 AM   #4
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It's not really a puzzle. As people got more and more afraid of losing their wealth, they began to convert to gold/silver en-masse. This meant those who were fleeing the country wanted to have as little weight as possible. If one was converting 25K in to gold, at the time [in US dollars anyway] gold was around twenty and change an ounce, so the conversion would have been in to about 1,150 oz,/gold. If a conversion was done in to silver dollars, they would have 25,thousand ounces, or 1,562 pounds of silver, not quite as convenient as carrying 72 pounds of gold. In addition to this, having a place to store three quarters of a ton of metal would be of great concern.

The smart man would have traded as much gold as he could for silver, then just wait a few years to realize an enormous profit.
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Old 04-19-2012, 09:21 AM   #5
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I don't buy it. Losing 90% of your value to change to gold, as implied here? If you're going to then do weight comparisons, you should take that into account too.

As ancona says, the smart guy would have been taking the other side of that trade if he could, and it's the sort of thing a prepper would plan for if he's going to assume survival after the initial turmoil.

Actually, I don't think there's enough data to support that yet - when a ratio changes, value/ounce of something went up or down, but the ratio doesn't tell you which.
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Old 04-19-2012, 09:22 AM   #6
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Perhaps a similar scenario is going to play out again.
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Old 04-19-2012, 09:50 AM   #7
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Originally Posted by PMBug View Post:
Perhaps a similar scenario is going to play out again.
I damn well hope so! If the spread gets that big between gold and silver, I will be a buyer of silver with everything I have!

I am after all, a greedy mother fucker. ;-)
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Old 04-19-2012, 01:37 PM   #8
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Note that back in the 90s that the ratio was 100:1 momentarily.
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Old 04-19-2012, 08:01 PM   #9
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Thanks for this info Island.

Here is a graphic showing the overlaid Gold Price vs Time for today's gold vs Weimar gold, on an equivalent time scale, but with the Weimar gold curve overlaid over today's gold curve.

I only plotted the Weimar Germany gold price through 6000 so as not to bury today's gold curve in the noise.

I also added Elliot Wave Analysis for comparison.

As everyone knows, we are headed in that direction, but not as fast as Weimar Germany.

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Old 04-20-2012, 12:05 PM   #10
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Unobtanium, do you also have one for Silver? I would be interested to see the total delta that developed between gold and silver, how long it lasted, and what kind of timeline some greedy bastard such as myself would have to wait before being able to realize a fantastic profit as price/ratio's equalized.
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Old 04-20-2012, 05:56 PM   #11
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Originally Posted by ancona View Post:
Unobtanium, do you also have one for Silver? I would be interested to see the total delta that developed between gold and silver, how long it lasted, and what kind of timeline some greedy bastard such as myself would have to wait before being able to realize a fantastic profit as price/ratio's equalized.
Ancona, can you clarify? Are you talking about a graph vs time of gold and silver (and their ratio) during Weimar Germany?
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Old 04-20-2012, 06:45 PM   #12
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Yes sir, that is what I am asking. I do not have some of the resources and on-line connections that some of the traders out there either subscribe to or know about. What you guys do is in a very narrow niche, and although I would like to harvest some of the info, I simply do not have the links to use. I sincerely appreciate all the TA you guys proffer, and don't want to wear you all out with requests, but that chart would answer some questions I do have about the silver/gold dynamic during Weimar.

Anything, is appreciated.
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Old 04-20-2012, 09:34 PM   #13
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Click this link to see a month-by-month:
http://www.bullionmark.com.au/gold-r...1919-1923.html




Last edited by the sugar monster; 04-20-2012 at 09:39 PM.
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Old 04-20-2012, 09:54 PM   #14
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Originally Posted by ancona View Post:
Yes sir, that is what I am asking. I do not have some of the resources and on-line connections that some of the traders out there either subscribe to or know about. What you guys do is in a very narrow niche, and although I would like to harvest some of the info, I simply do not have the links to use. I sincerely appreciate all the TA you guys proffer, and don't want to wear you all out with requests, but that chart would answer some questions I do have about the silver/gold dynamic during Weimar.

Anything, is appreciated.
Along with the two graphs just posted above from Island's original link, there is another graph on Island's second link that shows the gold/silver ratio. But as Island mentions, the ratio went up by X10 almost overnight. This can better be seen in the following chart that was created with data from Island's first link.

Keep in mind though this ratio changed by x10 when the gold and silver prices were already both at astronomical values.

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