Price of gold and silver in terms of 1792 copper
Posted: Tue May 08, 2012 3:35 pmThis started with me digging back into historical US coinage to monitor the changes over time due to the various coinage acts. Much of this may be old to some of you, but I learned and/or re-learned some things. This next part is mostly just an interesting exercise. For what's is worth, full of holes, but it gets you thinking a bit.
I can support the math with a spreadsheet, as needed, but I won't post it here - at least just yet.
The Coinage Act of 1792 defined our original copper, silver and gold coinage in terms of street values as US dollars as specific weights of metal. From that you can determine the percieved value of each coin. In that, it turns out the copper cent gave 26.5 US cents of value per literal pound of metal. Now, that's not necessarily the actual cost of copper back then, as we all know coins have not always been valued as their intrinsic metal content. So, what was the price of copper back then? Well, it turns out the English Royal Navy was paying 110 pounds sterling per ton to copper the bottoms of their fleet, as part of a then new life extension and maintenance reduction program started in 1780-81. The pound was exchanging for the dollar - based on gold weight (once the dollar was established) - at $4.86 per pound. So, the price of copper? 26.7 cents per pound. An amazing correlation. So, the original US cent (which was large, and weighed 17.1 grams) was essentially priced at the intrinsic value of its copper metal. Interesting... At least to me. To anyone else?
OK - let's take it to the next level. If the price of copper, as an industrial metal, was priced back then the same (in terms of buying power) as it is today at $3.70 of current dollars, then the now/then copper ratio is 13.8 to 1. (Effectively our current dollar priced as copper is worth 7.2 cents in 1792 coinage.) Not saying that's an adequate definition of the valuation of now/then dollars - there is a lot more to consider when pricing value over time - but... hang with me. It's at least one datapoint.
So, how do gold and silver fall into this?
Well, silver was valued at a 71.1 to 1 ratio over copper, and gold at 1066.67 to 1 over copper.
Take that, and do the math, and the current values of silver and gold, expressed in constant copper prices, should be:
Silver: $236/toz
Gold: $3543/toz
And that's about where we expect these to go, BEFORE hyperinflation... when people stop relying on fiat promised of broken governments.
For what it's worth. DYODD.
I can support the math with a spreadsheet, as needed, but I won't post it here - at least just yet.
The Coinage Act of 1792 defined our original copper, silver and gold coinage in terms of street values as US dollars as specific weights of metal. From that you can determine the percieved value of each coin. In that, it turns out the copper cent gave 26.5 US cents of value per literal pound of metal. Now, that's not necessarily the actual cost of copper back then, as we all know coins have not always been valued as their intrinsic metal content. So, what was the price of copper back then? Well, it turns out the English Royal Navy was paying 110 pounds sterling per ton to copper the bottoms of their fleet, as part of a then new life extension and maintenance reduction program started in 1780-81. The pound was exchanging for the dollar - based on gold weight (once the dollar was established) - at $4.86 per pound. So, the price of copper? 26.7 cents per pound. An amazing correlation. So, the original US cent (which was large, and weighed 17.1 grams) was essentially priced at the intrinsic value of its copper metal. Interesting... At least to me. To anyone else?
OK - let's take it to the next level. If the price of copper, as an industrial metal, was priced back then the same (in terms of buying power) as it is today at $3.70 of current dollars, then the now/then copper ratio is 13.8 to 1. (Effectively our current dollar priced as copper is worth 7.2 cents in 1792 coinage.) Not saying that's an adequate definition of the valuation of now/then dollars - there is a lot more to consider when pricing value over time - but... hang with me. It's at least one datapoint.
So, how do gold and silver fall into this?
Well, silver was valued at a 71.1 to 1 ratio over copper, and gold at 1066.67 to 1 over copper.
Take that, and do the math, and the current values of silver and gold, expressed in constant copper prices, should be:
Silver: $236/toz
Gold: $3543/toz
And that's about where we expect these to go, BEFORE hyperinflation... when people stop relying on fiat promised of broken governments.
For what it's worth. DYODD.