Hi Hobbers!

I was debating that very point with Bob Moriarty in Mexico last week. His point of view is that there can be no real manipulation of the silver price because it is such a small market that the government does not care what goes on there. Tim Wood made a similar comment last Sept in Las Vegas during a debate with Bill Murphy about gold. But for me its part of a bigger picture. The price of silver is connected with the price of gold in that games are played in both markets with paper futures in order to keep each of them in check and when one breaks out, often the attention shifts to the other to stiffle the enthusiasm.

Now if it was just about money, that is bad enough. Enron for example was about money, it was a group of crooks that rigged the market illegally to generate extra profit in their own trading behaviour, and the government had no interest to see it continue, so eventualy it was exposed and ended. With gold and silver, the government very much has a direct stake in the action.

For example, runaway gold prices often are taken as an indication of pending inflation. And that creates uncertainty in markets, especially in the bond pits where interest rates climb at the threat of higher inflation. Since the government debt is at record high levels, even a small blip in interest rates will cost many hundreds of millions of dollars to service. Also, indexed rate pensions would also have to rise, costing more money. Collectively, this extra money is more than the value of the PM futures trades themselves. Like a loss leader, it serves the interest of the government to create the illusion of low inflation by pounding gold and silver in the pits. The extra scam run in the ETFs and front running with manipulative shorting is just a bonus for the crooked Wall St houses.

When people start to understand how much leverage on the entire economy can be generated by manipulation of the metals trade, then I wont have to argue that the physcological impact of the suppression is the real objective. Its not about the money in a tiny market. Its about the need to fool people into thinking that we are not facing severe stress across the board in our entire economy.

So how does it end if the people responsible for regulating a free and fair market are pretty much the same counterparty that wants the scam to work? Well, silver and gold are both finite commodities. Every month some real metal is called away and there is that much less bullion on hand to back the futures trade next month. There are some big name banks that failed because they left their currency reserves depleted a bit too much too many times and then one day there was not enough money on hand to meet the payout obligations. The same will eventually happen to those short more metal than is produced in a year. Sooner or later it will all be called away and then a delivery failure will occur when the illusion of unlimited metal inventory levels can no longer be sustained.

That may occur next month, or it may take 20 years. This is the unknown that has frustrated many participants. Evidence of slow delivery, emergency bullion loans from overseas, bullion pools being raided so that pool accounts exist on paper only with no metal backing at all, etc are just more signals that the failure is more real now than it was even just a couple years ago. When enough people begin to fear that the real metal does not exist to back the contractual obligations, it will be the same as a bank run. Every last ounce of gold and silver will be bought at whatever premium it takes, and then the COMEX will have to announce force majeur and declare settlement in cash only. From then on there will no scam that can suppress the bullion below a fair market value where buyers are willing to part with it at much higher prices than today.

cheers!

mike