A Silver Dime Worth a Day’s Wage

It is perhaps history that shouts ‘Buy’ louder than anything else. Let me explain:

  • For thousands of years a silver coin (equivalent in weight to today’s dime) was worth a day’s wage. Whether the Greek drachma or the Roman denarius, this ‘dime’ payed the workman for a day’s worth of work. Even as little as one hundred years ago in the United States a silver dollar was all that was needed to pay for a day’s labor (see here for proof). Using a $15 per hour wage rate and multiplying it by an 8-hour workday yields a daily wage of $120. After dividing this modern wage by the historical standard, a $.50 silver dime, one discovers the amazing truth that silver is undervalued by a factor of at least 240! In fact, buying a bag of 90% silver dimes today for about $5,000, includes 10,000 of these dimes, which translates into 38 years of earned wages if one were to work 5 days a week! That same bag, if the historic norms were to return, would command a monetary value of $1.2 million. This same bag of coins could buy a comfortable home for you and your family.
  • For 500 years, from the mid 1400′s to the mid 1900′s, it took between 15 and 20 ounces of silver to buy one ounce of gold. This is referred to as the silver/gold ratio. As you might have guessed, today (10/24/05) that ratio stands at a very lopsided 61/1 (silver/gold).

Why Such an Imbalance?

Today no nation uses silver as money. Instead, everyone trusts in the myth that is fiat. The demand for real money began to slip as early as the late 19th century, and finally dropped off completely in the late 1960′s. But worldwide demand for silver is still out-pacing the supply by between 50 and 150 million ounces per year even without monetary demand!* The reason for this imbalance is the emergence of modern industry following World War II, and now even more so today in our electronic age. The world is consuming silver like never before. Understanding this, one must then come to terms with the main difference between industrial and monetary demand. When used for industrial purposes, silver is consumed, never to return to the market again (barring, of course, an incredibly dramatic rise in price to justify the cost of recycling very minute bits of silver).

Though it is impossible to know the exact amount of the above ground supply of silver left in the world when including such items as jewelry and silverware in the calcuation, it isn’t nearly as hard to determine the numbers for accessible silver (able to be used industrially at the current prices) left in the world. As of 2005, this number stands at less than 300 million ounces, which equates to a very insubstantial dollar amount of $2.3 billion. Two billion dollars, after all, is only about 2 days worth of the USA’s ongoing trade deficit.

When including silverware, jewelry and other miscellaneous items, a reasonable estimate would be between 15-20 billion ounces of silver left in the world (the vast majority of it in a form that cannot be used industrially barring a sharp rise in price). Keep in mind that this is all that is left of the estimated 40 billion ounces mined in the history of mankind. Amazingly, the missing 20-25 billion ounces was consumed by industry in less than one hundred years starting at the turn of the 20th century. But, nevertheless, some might wonder whether it is conceivable that this jewelry and silverware would come to market and stop silver from rising. Undoubtedly some would be sold if prices were to rise much higher, perhaps in the range of $40-50/oz. But even at these prices it isn’t likely that more than a few hundred million ounces would find its way back into the market, since, among other reasons, silver held in these forms represents an individual’s life savings in many parts of the world where it is unwise to save paper money. A rise in price might only serve to encourage saving in this manner, as it is likely that at the same time all paper currencies will perform quite poorly.

But let’s not worry about these ‘ifs’, suffice it to say that before much of this silver would ever come to market, silver would have already caught the attention of some major financial giants and mutual funds, not to mention tens of millions of American’s who would have hopefully by then woken up to the corrupt system of unjust weights and measures in the form of broken promises (i.e, paper currency) under which they now live. Why not wait to argue about these fundamental shifts that occur in the silver market after the gain of some 700%.

Besides, even if a very large amount of this silver supply were to be sold onto the market in the event of a high and sustained silver price, it would still be financial child’s play to the world’s 691 billionaires all wanting a piece of the action. After all, what’s another $10 billion worth of silver introduced into the market, when the market commands an unreal potential investment pool of $764,628,208,195 US dollars and cents (total amount of all U.S. Paper currency & coin in circulation as of June, 2005 http://www.fms.treas. gov/bulletin/index.html ) With this in mind, it certainly isn’t hard to imagine where the investor demand will come from. Many millions of men and women will inevitable become magnetically attracted once again to the precious metals scene as all their previously ‘precious’ paper currencies continue to inflate.

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