David Morgan, a well-known silver commentator, recently wrote a Seeking Alpha article where he comments on how he (or as it turns out, another author) believes silver will perform in a deflationary period. He begins by stating his belief that based on history gold actually does best during deflations, rather than inflations – referencing what he calls ‘the seminal work on this topic … The Golden Constant – written by by Professor Roy W. Jastram of the University of California at Berkeley. Morgan says Jastram said that when writing The Golden Constant he found that throughout history silver was intertwined with gold – and then says Jastram asked the fundamental question “Just how does silver perform during inflations or deflations?” and that he concluded that “in most cases, the two metals, yes, both silver and gold, gained operational wealth in deflations”.

My Comments: When I researched the Post Series on this Blog I concluded that gold likely was a ‘safe-haven hedge’ in both inflationary and deflationary periods (read Gold as an Investment – Post 9 of 11 by clicking here). I find silver a far more complex metal to assess than I do gold, given in particular silver supply/demand equation influenced by the fact that much of the new silver produced each year is a by-product of mining activity aimed principally at other metals, and by the fact that approximately 70% of all silver used in the past ‘good economic time’ years has gone into industrial products. As a generalization I think that many ‘gold bugs’ are very locked into their beliefs and positions. From my discussions with ‘silver bugs’ and my reading of some of the commentary they produce, I think that if ‘gold bugs’ walk further out on a tree limb than I typically would, ‘silver bugs’ seem to me to be even more extreme in their outlook and behavior. Morgan’s article doesn’t include his own thoughts and conclusions but relies on those of Jastram. I have placed an order for Jastram’s book and will give you my views on what Jastram said after I have read it.

Read the article by clicking here.

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