I started to edit one of my previous posts and say something about silver and decided it would be better as a separate post.

I mentioned that gold had a large stock to flow and that was one of the reasons for it being suitable as a money. Wheat, for example, would have a very large flow to the amount of stock. In other words we use up nearly all the wheat every year and there is a large flow that replaces it at harvest. This would be at least one reason it would be a poor choice for money.

Silver is a special case. A generation ago there was a large stock to flow. Silver had only limited industrial or consumption use so it also had a large stock to the flow (flow would be mine production). Our and other governments had huge stockpiles of it in the form of coins.

Two things happened. First thing is many industrial or consumption uses were found for silver. Silver is really a wonder metal, with these uses only being discovered within the last generation and more uses being found regularly. The second thing is that inflation has worked its magic and made the metal content in all the coins worth more (and I use ther term "worth" very loosely in this application) than what the face value of the coin stated so all the coins were pulled from circulation before they were all hoarded and melted down by the populace.

This huge "stock" of strategic metal has been used up over the years and for many years silver was consumed faster than the supply was replenished. We are now for all practical purposes "out" of any stockpiles of silver. All that is left of any significant amount is being used as an investment vehicle because of its value. Should the value of the metal rise enough, some of this investment silver could come back in the marketplace to be consumed, but for now it is locked up in fairly tight hands.

So silver no longer has a large stock to flow. The stock is relatively small and the flow pretty well matches current mining plus recycling. Therefore it does not make an ideal money.

But I personally think for those reasons it makes a great investment.

John