Silver Pyramid Power

Global annual silver production is approximately 820,000,000 ounces or a bit more than 25,000 metric tons.  What does that mean in terms that we can more easily understand?

If the global annual mine production of silver were cast into one large silver pyramid, it would be approximately – wait for it – only 65 feet high on a base of only 65 feet square.  Rather tiny!  For future reference, this is one “silver pyramid.”

At current market prices, the global production of silver would be about $16 Billion.  It is difficult to understand and appreciate what an 11 digit number means, so the equivalents for $16 Billion – the market value of global annual silver production – are approximately:

a)             6 days of Bernanke era Quantitative Easing at $85 Billion per month – you remember – digital dollars conjured from nothing for the supposed purpose of recapitalizing banks, levitating the stock market, and improving the US economy.

b)             7 days of average increase in the official US national debt.

c)              8 days of expenses for the US military

d)             21 days of crude oil imports into the US.

e)             7 months of bonuses for Wall Street.

f)               1 / 250th of the balance sheet of the Federal Reserve

Summary:

The Federal Reserve was conjuring up enough dollars for QE to buy the equivalent of one silver pyramid every 6 days in the Bernanke era.  In that context silver seems inexpensive and dollars seem overvalued.

The US military spends the equivalent of one silver pyramid about every 8 days and the official US national debt increases by one silver pyramid every 7 days.  Borrowing and “printing” this many dollars cannot continue forever.  Silver and gold will remain valuable long after the dollar has been inflated to near worthlessness.

Annual Wall Street bonuses are the equivalent of nearly two silver pyramids – nearly double the market value of the annual global production of silver.

Of course none of this means that the US spends too much or too little on Wall Street bonuses or the military, but it does make the current market price of global silver production look rather tiny by comparison.

I suspect that Wall Street bonuses and military spending will increase in the next five years.  I also think the cost of one silver pyramid – the market price for global annual mine production – will increase substantially in the next five years – not because mine production will materially change, but because silver will be priced far higher in a few years.

GE Christenson

The Deviant Investor