I often find that making an exaggeration of a situation can help one see the answer more clearly. For example some people would debate why a big car rides more smoothly. Some would say it's on account of the softer suspension and that idea has merit, but is not the whole answer. One could put exactly the same spring rates based on weight and the same shock absorber action also based on weight and the larger car with its larger tires would still ride smoother.

Why? The bigger the tire in comparison to the object which will cause a disturbance to the ride, the less disturbance will be felt. A standard roadside curb is a substantial obstacle to a vehichle with car sized wheels. A hot wheels car has no chance whatsoever of climbing what would be a vertical mountain to it and a giant earth mover would never even feel the effects of something as tiny as a curb. That's the kind of exaggerations I like to make for analysis when it is appropriate to do so.

Now suppose I make a market for gold and silver. Each item sold must be a real physical transaction with the buyer receiving the physical metal. Then the fundamentals of the mining industry would come into play on every transaction. The scarcity of gold, the difficulty of permitting, the price of labor, the price of fuel. Each of those fundamentals would find their way into the price of the transaction.

But if all we did was trade paper, then the fundamentals are of no significance because no one ever has to deliver the metal. Fundamentals, such as availability, go out the window and the person with the bigger pocket book can push the price pretty much anywhere he wishes. The less physical metal that trades and the more paper that trades the less reality any market has. It can in fact be almost completely divorced from the price of production.

If a market is 75% paper and 25% physical it is quite compromised in terms of its fundamental values. The percentage is very important. How bad is the situation in the gold and silver markets?

That is the subject of three fine essays related to the recent meetings held by the CFTC.

I highly recommend they be read and thought about (meditated upon) as this information, though still hidden from the public in general, will circulate through the financial community like a wildfire. The genie is out of the bottle and cannot be put back in.

The articles address 1) how this has not been reported on by main stream media. 2) the confirmed paper market in gold [100 or 160 to 1] and 3) the 160 to 1 ratio in silver.

http://news.goldseek.com/GoldSeek/1270188480.php

http://www.runtogold.com/2010/03/cftc-gold-and-silver-hearing-is-old-news/

http://silverstockreport.com/2010/CFTC-plaque.html

The reason gold and silver (and the related mining shares, such as Tyhee) do not perform as they should is now obvious. Both metals trade in what is almost exclusively a paper market that bears little resemblance to the fundamentals of mining. If the paper market is 100+ times the physical market only promises are being traded. It doesn't need to get to 1000+ or 10,000+ times to become nothing but a fraudulent paper scam. Either the lid blows off this fraud or it is too late for the entire concept of free markets anymore.

P.