Silver Price Manipulation 101

Silver Stock Report

by Jason Hommel, September 16, 2006

I think Ted Butler has let his imagination run wild in his article, “Blatent Manipulation”,

If I understand what he’s saying, then, the dealers are manipulating because:

When prices rise, the dealers don’t sell. 
And when prices fall, the dealers don’t buy.  

So, when they are, in essence, doing nothing, that’s manipulation?

Either I’m confused, or Ted is confused, you be the judge.

Ted Butler’s confusing article provides an occasion and opportunity for me to try to bring clarity to this issue.

But before I try to correct Ted on this issue, let me praise Ted Butler for an astounding amount of clarity that he has already brought to the issue of metals trading.  I remember that Ted has said that metals leasing is inherently fraudulent, because if you rent, or lease, a house, you cannot sell that house to someone else, and if you rent a car, you cannot sell the car!  

But houses and cars are different from metal due to fungibility.  A car, or house, is unique; and a piece of silver is similar enough to other pieces of silver so as to be interchangeable (except in the eyes of coin collectors).  The point is that there is something wrong with borrowing and lending, (to borrow something just to sell it) and I’ll get to that in a bit.

First, what is manipulation?

1 : to treat or operate with or as if with the hands or by mechanical means especially in a skillful manner
2 a : to manage or utilize skillfully b : to control or play upon by artful, unfair, or insidious means especially to one’s own advantage
3 : to change by artful or unfair means so as to serve one’s purpose

I assume Ted means that the manipulation is something done unfairly, or insidiously.  

insidious means:

1 a : awaiting a chance to entrap : TREACHEROUS b : harmful but enticing : SEDUCTIVE <insidious drugs>
2 a : having a gradual and cumulative effect : SUBTLE <the insidious pressures of modern life> b of a disease : developing so gradually as to be well established before becoming apparent

So then, the manipulation in question seems to be something done unfairly, insidiously, to harm or entrap.  Sounds oppressive, and evil, almost like an attempt to enslave others, and I agree with the basic definitions here.

In the past, Ted and others have alleged that if the big bullion dealers lose money, or make money, while trading gold and silver, then they are manipulating the market, and “picking the pockets” of other traders.  And now, if they don’t even trade at all, it’s manipulation?

Nonsense!  If a big trader makes money, or loses money, or moves the market, that is not manipulation.  I know, because I am a big trader, sometimes I make money, and sometimes I lose money, and I move the market with articles.  That’s free speech; not oppression & manipulation.  And I’m free to trade as I like under capitalism.

I could falsely allege that small traders manipulate the market, because they set the price of a stock with very small bids, or very small ask order sizes.  And if I go to buy, the price changes on me, and moves up, because they were deceiving me with small order sizes.  And yes, small traders can falsely accuse me of manipulating the market, because I change the market price if I try to buy!  But neither the small trader, nor the large trader is at fault, nor doing anything wrong.  Each is free to trade as they wish.  

The point is that trading is not manipulation.  Trading is exchanging.  How can a voluntary trade be oppressive?

There may be many rules regarding position limits, and anti-trust laws, but let’s look at God’s laws about oppression.  After all, we want God on our side if we are going to have understanding, and if we are going to win.  The truth shall set you free!

God’s law is that Israelites are free to lend to strangers, and to charge them interest. 

Deuteronomy 23:19-20 Do not charge interest on the loans you make to a fellow Israelite, whether it is money, food, or anything else that may be loaned with interest. 20 You may charge interest to foreigners, but not to Israelites, so the LORD your God may bless you in everything you do in the land you are about to enter and occupy. 

God would prefer that they do not lend to their brothers, and thus enslave and oppress them through usury.  See Nehemiah Chapter 5 to see how lending at interest leads to slavery.  Usury is allowed, although not ideal.

In the New Testament Jesus tells his followers to love their enemies; meaning that we ought not to oppress strangers with interest, or usury!

Luke 6:32-35
32 “If you love those who love you, what credit is that to you? Even ‘sinners’ love those who love them. 33 And if you do good to those who are good to you, what credit is that to you? Even ‘sinners’ do that. 34 And if you lend to those from whom you expect repayment, what credit is that to you? Even ‘sinners’ lend to ‘sinners,’ expecting to be repaid in full. 35 But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be sons of the Most High, because he is kind to the ungrateful and wicked.

So, usury, although allowed, is bad, because it is like slavery. 

“The poor are ruled by the rich, and those who borrow are slaves of moneylenders.” –Proverbs 22:7

Slavery is allowed by God, but God wants us to all be free.

1 Corinthians 7:23 You were bought at a price; do not become slaves of men.

The truth shall set you free!

So, although usury is allowed by God, it is nevertheless like slavery, in that it is oppressive, and the opposite of the freedom that God wants us to enjoy.  The study of usury therefore actually teaches us how God’s laws are designed to help us prosper in freedom!

So, trading is not manipulation.  Usury is manipulation–or the insidious evil that oppresses us, and silver prices.

So, here’s how this all relates to the silver futures market.

The existence of a short position in silver is a manipulation.  Selling something you plan to deliver in the future, depresses the price today, as it is perceived as extra supply on the market.

A short position is not much different than a debt; both are promises to pay.

But a short position is no different from a long position, in that they are both a promise to deliver.  A short promises to deliver metal, and a long promises to deliver cash.  And often the positions are sold and cancelled, prior to delivery dates, as 90-99% of contracts don’t result in silver delivery.  So, it’s a game of monetary chicken, with both sides “covering”, prior to delivery.

Therefore, if a short position, a debt, is manipulation, then debt is a manipulation.

Your dollar debt on your credit card, is a monetary manipulation that hurts silver prices.  Why?  Because you can have the consumer things you want without first consuming the silver you need to spend on them.

Thus, all debt is a manipulation.

Bonds are a manipulation.  A much, much, much, much, much bigger manipulation than the silver short position.

The world bond market is worth a total of about $50 trillion?  All the world’s gold, 150,000 tonnes at 32,151 ounces/tonne, or 4.8 billion ounces, valued at $578/oz., is worth $2.8 trillion.  See how much smaller in value the gold market is, as compared to the bond market?

Bonds are a monetary asset that competes with gold!   Money in bonds, is money not held as gold!

Paper money used to be a debt, a promise to deliver gold and silver.  Now, paper money is a promise to pay… nothing!  It’s a political promise. So, paper money is the biggest manipulative factor reducing gold prices.

In essence, it is the lack of monetary demand for gold and silver (as a preferred form of savings) that best explains the low price. 

For more on these topics, see my prior articles:

Finally, to the critics who fear that I would force my views on them.  I don’t believe in forcing my ideas on anyone.  I don’t believe that government would ever need to outlaw usury or criminalize borrowers or lenders.  Besides, who is more guilty, the borrower or the lender?  I don’t know.  But usury would stop if there were no government force!  Without force, usury cannot exist.  Usury requires force.  So, if usury contracts were recognized as invalid by Judges, due to misrepresentation of the terms of the contract, then usury would not be practiced.  Who would lend, if the lenders could not repossess your house, through force?  

Slavery was outlawed in the US at the time of the Civil war.  Perhaps soon, usury will also come to an end.

In conclusion, trading is not manipulation.  Debt is manipulative and oppressive.  And futures contracts, both short positions and long positions, are manipulative and oppressive.

Therefore, if you want the manipulation of silver prices to stop, then start with your own actions.  Stop lending.  (Sell your bonds, savings accounts, T-Bills, and CD’s).  Stop borrowing.  (Pay off your debt).  Live debt free.  And buy real physical silver.  

Find your local Coin Shops & Bullion Dealers
A Brief Guide to Buying Silver:
What kind of silver, and where to get it.


Jason Hommel
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