(With Real Charts)
Silver Stock Report
by Jason Hommel, August 8th, 2008
I’m pleased to announce the birth of our new baby boy Jude, who was born on July 16th. I’ve been busy bonding with baby. For my first article in nearly a month, I decided to focus once again on the fundamentals, and update my “money charts”.
First, the fundamentals: An investor from China who says he regularly reads the Silver Stock Report has helped me come up with a Chinese translation of my recent article: 4 Fundamentals of the Silver Price.
http://www.silverstockreport.com/2008/fundamentals.html
If you can read Chinese, you can find the translation at http://www.silverstockreport.com/2008/fundamentals-zh.html
Please feel free to forward this e-mail to friends and relatives who can read Chinese. (Just in time for the opening of the Olympic Games in China!)
Since silver is not used as the common medium of exchange anywhere in the world, a process of “de-monetization” which has taken over a century, silver has fallen out of favor as a form of savings, in every nation in the world, even China. Today, however, silver is returning to be used as a form of savings, and it stands ready to perform better than ever, due to the relative scarcy of silver compared to paper money.
The best way to evaluate the fundamentals of silver is to look at the annual flows and totals of silver as compared to the annual flows and totals of other forms of money, such as gold, and paper money.
The last time I did this was in my “Money Chart” of Feb. 2006.
http://www.silverstockreport.com/email/The_Money_Chart.html
This time, I will put some of this information into real charts, as a way to help understand the relative size of the numbers, as some people get confused by the terms trillion, billion, million, and also by the numbers of zeroes.
These basic fundamentals will be in place for years, and will explain why silver prices will move up for the next few decades.
Estimated World GDP: $54 trillion, $54,000,000,000,000
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
Estimated Size of the world stock market: $51 trillion, $51,000,000,000,000
http://en.wikipedia.org/wiki/Stock_market
Estimated Size of the world bond market: $45 trillion, $45,000,000,000,000
http://en.wikipedia.org/wiki/Bond_market
U.S. GDP (Gross Domestic Product): $13.8 trillion, $13,800,000,000,000
http://en.wikipedia.org/wiki/U.S._GDP
U.S. Total Public Debt: $9.57 trillion: $9,571,432,990,910
http://www.treasurydirect.gov/NP/BPDLogin?application=np
http://www.brillig.com/debt_clock/
China GDP $7 trillion, $7,000,000,000,000
http://en.wikipedia.org/wiki/Economy_of_the_People%27s_Republic_of_China
Estimated Total Gold Mined and Produced in the History of the World: 155,000 tonnes, at 32,151 oz/tonne at $855/oz.: $4.2 trillion, $4,260,811,275,000
http://www.gold.org/
Estimated World Oil Production 2005 est: 78.9 million barrels/day at $115/barrel at 365 days/year: $3.3 trillion, $3,300,000,000,000
http://en.wikipedia.org/wiki/World_oil_production
U.S. Proposed Annual Budget for 2008: $3.1 trillion, $3,100,000,000,000
http://articles.latimes.com/2008/feb/05/nation/na-budget5
Estimated Total Silver Mined and Produced in the History of the World: 43 billion ounces, at $15.27/oz.: $656 billion, $656,610,000,000
http://www.gold-eagle.com/editorials_99/mbutler110799.html
http://www.gpmgroup.com (2008 annual yearbook)
U.S. Official Treasury-Owned gold: 261,498,899 ounces at $855/oz.: $223 billion, $223,581,558,645
http://fms.treas.gov/gold/current.html
Estimated Annual World Gold Demand for 2007: 3516 tonnes at 32,151 oz/tonne, at $855/oz.: $96 billion, $96,651,693,180
http://www.research.gold.org/supply_demand/
Estimated Annual World Silver Mine Production for 2007: 670.6 million ounces, at $15.27/oz.: $10 billion, $10,240,062,000
http://www.silverinstitute.org/supply/index.php
Estimated Total Silver in Known Depositories, ETFs, Funds, Exchanges: 430 million ounces, at $15.27/oz.: $6 billion, $6,566,100,000
http://www.sharelynx.com/gold/TransETFs02.php (members only)
Estimated Annual World Net Silver Investment Demand for 2006: 60 million ounces, at $15.27/oz.: $916 million, $916,200,000
http://cpmgroup.com/new_presentations/CPM_Silver_Yearbook_2007_Release_May_2007.pdf
p. 13
Estimated Annual World Net Silver Investment Demand for 2007: 25.8 million ounces, at $15.27/oz.: $393 million, $393,966,000
http://www.silverinstitute.org/supply/index.php
=============I put the information above into the charts below, so you can see the relative size of each monetary item. Note, I had to break the information down into two charts to continue to see the relative size. The last item in the first chart, and the first item in the second chart, are the same thing, which is the total value of all the silver mined in all of human history, valued at today’s silver prices, which you can see, is regarded as nothing in the realm of world finance.
All of this shows that the recent dip in silver prices is nothing to worry about, and is merely a normal fluctuation in the grand scheme of things, the grand return and re-emergence of silver as money, which is a process that may take many years to play out.
For those who ask me what to do in terms of short term price movements, all I can say is that I bought more physical silver today.
Sincerely,
Jason Hommel