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History of Silver, Part II: the great “build” 14 comments
In Part I of this series, I provided a brief exposition on the birth of silver mining, and explained how and why silver came to be universally considered a “precious metal” (and “money”) by humanity.
In Part II, I will provide an outline of the development of silver mining, and the huge growth of global, silver stockpiles which accompanied such production-growth – and which ended in the last century, when modern technology came up with an endless list of new applications for silver.
As humanity entered the “Middle Ages”, production of silver had been hampered by two constraints: the lack of new deposits/mines to offset the depleted reserves of older “First World” mines, and the primitive technology of that era – which made only rich, near-surface deposits feasible to mine.
Concurrently, two changes occurred, which allowed a dramatic increase in the amount of silver produced in the world. First, in the 15th century, the Americas were “discovered” (a very large historical “slight” to the indigenous peoples of these continents, along with the Nordic explorers who had reached North America centuries earlier).
Nevertheless, it was the highly-publicized expeditions of 15th century explorers (and those who came after them) which allowed the economic “development” of the Americas (i.e. the exploitation of their vast wealth of natural resources). Among the most-highly prized resources of the “New World” were precious metals.
Meanwhile, with science emerging from the Dark Ages, improvements in mining technology allowed a vast expansion in the production of silver and other metals. Bolivia was the first New World target for silver mining. According to data from the Silver Institute, between 1500 – 1800 A.D. Somewhere around 1 billion ounces of silver were extracted there.
However, while Bolivia was the initial destination in the Americas for silver mining, Mexico soon became the largest silver producer. Over the same time frame, there was an estimated 1.5 billion ounces of silver produced in Mexico, with the majority of that production occurring in a single century: from 1700 – 1800.
The third, principal producer in the New World was Peru. Silver mining in Peru did not commence until significantly later than in Bolivia or Mexico. However, by 1600 it is estimated that annual production in Peru had reached roughly 3 million ounces per year, with more than half a billion ounces extracted by 1800.
To provide some perspective as to how important these new centers of silver production were, from a global perspective, between 1500 and 1800 these three New World producers accounted for roughly 85% of the global silver trade – despite the fact that in 1500, silver production was just beginning there.
By 1800, silver production was moving north – into the United States. Large deposits were discovered in the United States, most notably the “Comstock Lode” in Nevada. With these new mining capitals providing vast quantities of ore for miners, and with the steady improvement in mining methods and technologies, global production continued to rise. By the latter half of the 1800's, annual production fell somewhere between 40 to 80 million ounces per year.
Naturally, gold mining and the global production of gold followed a similar trajectory to that of silver mining (but that's a whole story unto itself), and large stockpiles of gold and silver were accumulated in the form of jewelry and other ornamental applications (in the hands of private entities), and large inventories of bullion (held by governments) – which formed the basis of our global monetary system (in an era when people actually possessed real “money”).
Throughout this era, the amount of mined and refined metal continued to increase even faster than global population growth. This continued on into the early part of the 20th century. And then things changed!!
In our own modern era, rapidly evolving technology and mass-production of an enormous array of goods altered silver's value in our society from being only a precious metal (and “money”) to becoming an ever more important “industrial metal”.
Noted silver researcher and commentator, Ted Butler, provides us with some information as to how huge those global stockpiles were, at their peak (in “A good time to buy Silver”): “In 1959, there were about 9 billion ounces of silver bullion-equivalent in the world population of 3 billion...a per capita amount of 3 ounces for each of the world's citizens...”
In just 50 years since then, these numbers have changed enormously. The paradigm where silver production produced global stockpiles of silver which continually rose faster than our global population ended – permanently. This was a market trend which had been intact for over 2,000 years.
To find out how dramatically this trend has been altered (and reversed), you will have to read Part III (or do your own research!). In the conclusion of this series, you will see why “silver bulls” are so rabidly enthusiastic about the future – for those who are buying silver bullion products (real bullion – not “paper promises”), and accumulating positions in quality silver miners now.
Gold may seem to shine brighter for most people looking at precious metals investments today. However, the Metal of the Moon is poised to “eclipse” the Metal of the Sun in the future, and most likely, the very near future. When that day arrives, silver will completely shed its label as “poor man's gold”.
[Disclosure: I hold "physical" silver, and shares in several silver miners.]
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This post has 14 comments:
Looking forward to part 3.
Interesting historical side note: it appears that a HUGE part of the silver extracted from the Spanish mines in the New World, made their way across the Pacific to the Spanish Phillipeans where it then ended up, for the most part, in China where silver was more highly prized than gold at the time. Good thing that extra production did not go to Europe as what they did send collapsed the European silver market anyway!
I hope Part III contains a tribute to the "free minting" movement and silver's role in the growth of the money supply in the U.S. Almost no one knows that suitable grade silver and gold could be presented at any U.S. Mint to be coined without charge, or for a nominal minting fee, into U.S. legal tender. Mints were opened at now-forgotten places to take advantage of local mining activity. Among these are of course the famous Carson City Mint.
Ever hear of the Dahlonega, Georgia mint? Tulving's site contains this very interesting description of (admittedly gold) minting in Georgia 150 years ago. Note the interesting fact that the first minting activity here was undertaken by a private firm which issued gold coins in the same denominations as the U.S. mint, and the man wasn't arrested for issuing competing private money:
"Just as the California miners would discover twenty years later, gold nuggets and dust do not make for a practical medium of exchange, and their use in transactions often led to heated arguments over value. The solution to this problem was to have the gold coined, so that it came back to its owner in units of recognized value. In an era before railroads, however, this meant slow and uncertain transportation via wagon and canal boat to the United States Mint at Philadelphia. Not only was such a route risky, it was also quite expensive and time consuming."
"The first to undertake the coining of gold within Georgia was not the federal government but a jeweler and metalsmith named Templeton Reid (1789-1851). First in the town of Milledgeville, and then later in Gainesville, Reid minted gold coins having declared values the same as those of the U. S. Mint�$2.50, $5 and $10. These coins were similar to the federal issue only in size and value, their designs being highly distinctive. A unique specimen of the $25 denomination once held in the U. S. Mint's coin collection was stolen in 1858 and never seen again."
We must return to private money.
MarketSniper, you must have been reading my mind: I was wondering how so much silver ENDED UP in China - after being dug out of the Americas.
SW Richmond, you've exposed a 'chink' in armor! I really haven't done much research into "free minting". Am I right you're referring to private, minted coins (versus government coins)?
Needless to say, I had NOT thought about working this in to Part III. Got a good link for me - with some 'juicy' material I can work into the conclusion?
Articles about privately minted coins and the govt. looked the other way. Too much gold and not enough mints.
I noticed the mention that China valued silver more than gold. Did you know the Egyptians also valued silver over gold. Silver is still very popular there. I got a souvenir key chain gifted to me from there and its made of silver.
From WikiPedia(en.wikipedia.org/wiki/...): "It was around this time that the first gold dollars were minted in the United States, but not by the government. Christopher Bechtler, a German immigrant and jeweler by profession capitalized on the gold rush, by offering to turn prospectors’ raw gold into coins. He began offering this service in the early 1830s in North Carolina, and by 1840 he had produced over $2.2 million in gold coinage. Nearly half of this was in the form of gold dollars.[2]
Bechtler’s actions were perfectly legal at the time, but his success attracted the attention of the US government. It was suggested by members of the government that the US Mint take part in this new, profitable venture and begin minting gold dollars of their own. In 1836, Congress authorized the US Mint to do just that, but Mint Director Robert Patterson opposed the idea, and nothing came of the matter for the time being. In 1849 however, things changed. A new gold rush in California had sparked demand yet again for more gold coinage. Director Patterson still objected, but was unable to dissuade Congress. The Act of March 3, 1849 authorized production not only of gold dollars, but another new coin, the double eagle. Production of both denominations would soon begin.[2]"
And of course free coinage is another thing that used to be standard operating procedure back in the 19th century, as I remember learning in my history textbook in highschool (I'm actually somewhat surprised to remember that they haven't expunged gold and silver completely from history books like the have done with cannabis-hemp, once arguably the most important industrial crop in the world, used for sails, lamp oil, paper, alcohol fuel, rope, clothing etc. now omitted from the modern schoolbook and removed from the smithsonian institute; although come to think of it the book didn't tell the whole story and only touched on the gold and silver issue lightly and I came out of highschool not really understanding the monetary system fully, and I had to find out the real history on the internet...but I digress).
Anyway just thought I'd add my $0.02 cents. Which in silver coin is more than $0.20 in Federal Reserve Notes. Also did you know that a British Pound Sterling was originally equal to one troy pound of sterling silver (hence the name!), which is twelve troy ounces? It would take over 100 british pounds today to buy an original British pound at today's market prices. Also did you know that the word "dollar" comes from the German word Thaler which is a name for a big silver coin like the old morgan and peace dollars? The Germans were the first to mint such big coins of silver back in the 16th century and the name caught on as it is now used by more than a few countries around the world for their official currencies.
On Jun 14 04:52 PM Market Sniper wrote:
> Those mints were official US government mints under the Treasury
> Department and authorized by Acts of Congress. What is meant, I do
> believe, is the "free" coinage of money. The People own the money
> then, not the banks and their minions. If you had refined gold and
> silver, you could take it directly to the Mint who would exchange
> it for monetized gold and silver coin, less the seigniorage (a right
> and proper governmental fee charged for the service rendered).
The pieces are written once a month.
cormackcapital.wordpre...
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