Back in the late 1800s William Jennings Bryant made a speech at the Democratic political convention that electrified the audience and secured for himself the partys presidential nomination, the speech was in favor of a fixed rate of exchange of 16 to 1 silver for gold, this was not so much a revolutionary idea but a return to the previous sherman law which had been repealed. Despite his oratory though Bryant lost the election, the Republican answer to "free silver" was "sound money". Silver has been trading for some time at over a 60 to 1 ratio, despite the many more uses that silver commands in the economy, the ratio while changing has been averaging about 50 to 1 http://www.taxfreegold.co.uk/goldsilverratioshistoric1970onward.html This means that for prices to normalize to the trend, either gold might drop a lot and silver drop a little, gold might hold its own and silver raise a bit, or gold might raise a little and silver a little more, or gold might jump and silver leap. Prices are trickier in the internationally controlled economy that has replaced our national economy. Traditionally when a recession hits, prices are also hit, the great depression saw people out of work, but prices deflated this is because of supply and demand, less people with money meant that sellers could not command the same prices for their goods, but in a global economy things are somewhat different, if the buyers here do not have the money for the goods, those goods can be sold elsewhere where prices are not as depressed. This would tend to keep the price more stable. Also within our own nation the business of buying and selling bullion has also been affected by the recent stock market crash and housing bubble popping, many who lost money in those instruments put their money into precious metals, causing them to expand beyond their traditional tracking of inflation. As everyone knows that is the best use for precious metals, as a hedge against inflation. But here we have two contrary trends, on the one hand the dismantling of our national economy by well meaning citizens of the world would trend us to recession and deflation, on the other hand the printing of more money to prop up local and state governments from the effects of loss of tax dollars and the ineveitable loss of services would tend to lead to inflation. SO as in all things time will tell, my prediction is for more or less stable prices, with mild swings either way, in the long run though I think that PMs are better than I bonds for an inflation hedge, mainly because the indices used to calculate inflation can be as manipulated as an enron prosepectus.
Very good blog, you put into words what I've been thinking and solidified my thoughts on selling my bonds for gold
