The Silver Deficit
(1942-2004) David Zurbuchen February 25,
2006 Editor of www.silverinscripture.com Free Silver Stock Investment Newsletter This is the 2nd installment of a planned 7-part series: Part 1 – The World’s
Cumulative Silver and Gold Production. Documenting the total amount of silver and gold produced since recorded
history. *Part 2 –The Silver Deficit. Documenting the silver supply/demand deficit since 1942. Part 3 – The Real Silver Deficit. Answering the questions of “How much silver has been consumed by industry?” and “In what potentially marketable accessible forms does it remain?” Part 4 – The Illogical Performance of the Gold to Silver ratio Since 1848. A look at silver and gold’s comparative production growth since 1848. Part 5 – Why the Depressed Prices? A brief look at the amount of silver and gold stockpiles held throughout
the 1900’s and the resultant pressure they placed on upward prices movements as
they were liquidated. Part 6 – What Happened in 1980? Did production increase? Did extraordinary amounts of scrap silver come
to market? Part 7 – The Future of Silver. An overview of silver’s
fundamentals, price predictions, and some intriguing price ratio comparisons
between silver and other commodities. Preface “Because of the long-term
structural deficit in silver, stretching back to World War II, we have consumed
inventories for more than 60 years.” -Ted Butler, “The Coming Silver
Bubble” This essay will seek to prove what Mr. Butler and other silver bulls
have been confidently asserting for so long, that is, the claim that silver has
experienced a supply/demand deficit which stretches back all the way to 1942. The Silver Deficit One problem with documenting the silver deficit is that world consumption
rates are almost non-existent prior to 1955, at least according to my research. If this
data is available, please bring it to my attention. But despite the lack of official figures, one can know to a fairly
accurate degree how much ‘deficit’ has accumulated worldwide in the years prior
to 1955 through the use of some comparative math. In order to accomplish this, we must first obtain US silver consumption data. Then, in order to determine the total world
consumption of silver, we simply find what percentage of the world’s
consumption the From the Minerals Yearbook
1932-1933 (pg. 18) we discover that total world industrial and arts consumption
of silver was 91.4 million ounces in 1930 and 70.1 million ounces in 1931,
whereas By looking at US industrial and arts consumption from 1956-1960, we find
that on average the What this 45% figure means is that I will assume US industrial and arts consumption
of silver represented 45% of the world’s total in all the years where only US
consumption data is known, namely 1901-1954.
We can then find the estimated total world industrial consumption during
these years by dividing the Finding the total world consumption including coinage also presented a
problem due to lack of data between 1901 and 1954. I would like to think I estimated to a fairly
accurate degree, but if in fact I have not, I nevertheless remain fairly unconcerned
because this value will be shown in Part 3 to be of only minor significance in
the quest to obtain the true silver deficit.
Some Important Notes
Concerning the Table Shown Below* *The importance of this information may become more apparent in Part 3 of
this series when the total amount of silver consumed by industry is calculated
using several methods to account for some of the ambiguity within the Minerals Yearbooks. 1901-1954: It is somewhat ambiguous whether or not world
industrial and arts consumption given in the Minerals Yearbooks during this period is a measure of net
consumption (i.e. demand – recycled scrap) or simply total consumption
regardless of scrap supply. In the years
prior to 1955 it seems clear that at least the US numbers do represent
net consumption, and using this data I have approximated net world consumption
using the 45% US to World ratio obtained above*. Net industrial demand in the words of the
Minerals Yearbooks is “silver issued for industrial use minus silver returned
from industrial use.” Following 1955, US
numbers still seem to describe net consumption/demand, but at the same time world
consumption numbers are not at all clear.
Regarding these issues of misunderstanding, representatives of the
United States Geological Survey (USGS) were unable to answer my questions. Therefore, I will evaluate the total silver
deficit in Part 3 from several different angles, making use of various
combinations of the data sets. *Approximations were
only necessary through the year 1954. In
all the years following, with one exception (1994), world demand is known
without having to calculate estimates based upon US consumption numbers. 1955-1984: World Consumption totals are free-world only, and
are therefore underreported by an estimated 30-60+ million ounces per year
based upon an annual production from communist countries of 35-55 million
ounces during this period (see the year 1985 in the chart below for reference). This is important because during this same
period total world production adds
the estimated production from communist countries into the total, thus
explaining why in some years there appears to be no deficit at all when in reality
the deficit continued (e.g. 1955 and 1981-1985). 1955-1994: As was alluded to above, total
world industrial and arts consumption numbers and total world consumption
numbers during this period are somewhat ambiguous, again because they could be
representative of either net demand or simply total demand. While the US consumption totals are usually
identified as ‘net demand’ within the Minerals
Yearbooks, it is not clear if world demand/consumption totals are meant to
mean the same thing, even while the US and world totals are at times
described with the exact same wording. Ø ‘e.’ stands for estimated Ø All years in RED are years in which there was a worldwide
supply/demand deficit (1942-2004). Ø Industrial and arts consumption stands for total
silver demand (i.e. photography, jewelry, electronics, etc.) minus coinage
demand. Ø Many years have two quoted values for various
calculations, one net (i.e. total demand - scrap) and the other total (i.e. not
factoring in scrap supply). Lastly, I
highly recommend you read the quoted material inserted between the yearly data
within the following chart. Many gems are enclosed, I assure you of this. One such entry mentions that the Total World Silver Consumption (1901-2004) (Reported in millions of ounces, with the
exception of the totals) Source: Minerals Yearbook
(1901-1994) Source: The Silver Institute
(1995-2004)
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