(Government Agencies at War with each Other)
Silver Stock Report
by Jason Hommel, June 7th, 2008
There has been a shortage of silver ever since the world abandoned using silver as money. The reason why we have paper money, is that there was too much paper money being printed, and not enough silver and gold to cover all that was printed. So anyone who denies there is a shortage of silver ought to have their head examined, or they just don’t know what the word shortage means, or they just don’t know how I’m using it to describe reality, or they have their own pet definition of the word “shortage”.
Now, when there is a shortage of anything, there are two basic and conflicting ways to allocate the scarce resource. The first is by rationing, and the second is by price. Rationing is a sign of communism or government controls that thwart the free market process. When things are allocated by price, then that’s a sign that the free market is working.
The U.S. Commodity Futures Trading Commission (CFTC) is thwarting the U.S Mint and the free market.
When the world abandoned silver and gold as money, futures markets sprung up for trading the precious metals, which took place in 1975. This happened because the prices for precious metals became highly variable, and the inherant scarcity of the precious metals was self evident in a world filled with paper money, and thus, more people with more money became more capable of cornering the market in the scarce precious metals, actions which would be called “manipulation”.
So, the CFTC was set up, specifically, to prevent market manipulation, both long and short. The CFTC is supposed to help make sure that the market remains free and fair.
But the problem is paper money, which is incompatiable with free market principles, because paper money is a monopoly and requires legal tender laws to keep it alive. Paper money also ends up giving many people more buying power than is “fair”. After all, there are over 1000 billionaires who could each corner the market in silver.
In the mid 1980’s, the US Congress did what it could to make sure that the U.S. economy could survive the demise of paper money, after the debacle of the price rise in the precious metals in 1980. So, the U.S. Congress created the gold and silver American Eagle coin programs to insure that precious metals would be available to all who wanted them, and to ensure that precious metals would be available based on the free market price, and not by any form of rationing.
However, in our crazy world, the U.S. Mint buys silver based on the price of silver in the futures market!
SEC. 3. PURCHASE OF SILVER BY THE SECRETARY OF THE TREASURY.
(a) PURCHASE OF SILVER-
(1) IN GENERAL- Section 5116(b)(2) of title 31, United States Code, is amended by inserting after the second sentence the following: `At such time as the silver stockpile is depleted, the Secretary shall obtain silver as described in paragraph (1) to mint coins authorized under section 5112(e). If it is not economically feasible to obtain such silver, the Secretary may obtain silver for coins authorized under section 5112(e) from other available sources. The Secretary shall not pay more than the average world price for silver under any circumstances. As used in this paragraph, the term `average world price’ means the price determined by a widely recognized commodity exchange at the time the silver is obtained by the Secretary.‘
One problem is that futures markets are manipulated to prevent large purchases, as is evidenced by the limits in place by the NYMEX, which are a form of rationing.
Rule 4.47, “Position Limits”
(bold indicates additions; strikethrough indicates deletions)
(b) Applicable Limits. The maximum number of futures contracts, options on such futures contracts, or any combination thereof (collectively referred to as “position”) which any person may own or control is as follows:
Commodity Spot Month Limit Net Futures Equivalent Limit
Gold 3,000 Subject to Position Accountability
Silver 1,500 Subject to Position Accountability
1500 contracts of 5000 ounces is a limit of 7.5 million ounces.
Another problem is that futures markets are for a different product, 1000 oz. COMEX bars, not 1 oz. blanks.
Another problem is that the U.S. Mint is facing a shortage of silver blanks. But there are not supposed to be any shortages, as the Mint is supposed to purchase freely available silver and allocate silver to investors based on free market prices, as required by law, and not by any form of rationing!
I believe another problem is that the CFTC is not making sure that the largest 8 traders in silver are not selling phantom silver that does not exist that would be suppressive of the real silver price, and would lead to shortages and rationing, which we are seeing throughout the world at coin shops and mints, such as the Northwest Territorial Mint, which has 8 week delivery delays or more, and the Johnson Matthey refinery which has 6-8 week delays, and the Perth Mint, which has 4 week delays to 6 month delays.
The rationing of Silver Eagles by the U.S Mint is thus making a mockery of the recent CFTC report that says there is no manipulation in the futures markets, and shows that the CFTC is working in opposition to the legal requirements of the U.S. Mint.
See my two recent articles on the CFTC report:
A Further Warning to the CFTC! May 16, 2008
Four Proofs of Silver Manipulation May 14, 2008
Here’s the proof: US Eagles are being rationed, more than ever!
Eagle rationing gets tighter
Several market commentators noted the many lies in the recent CFTC report denying manipulation.
Open Lawyer’s Letter to Bart Chilton, CFTC Commissioner
Road to Roota VI: CFTC Silver Manipulation Investigation…6 Strikes and yer out!
The CFTC needs to insure that financial entities are not manipulating the market prices of silver too low, which cause shortages and rationing.
Shortages, in the free market, are supposed to be alleviated and fixed through rising free market prices, not by delivery delays and rationing.
The essential problem is what Lew Rockwell called on June 3rd, “The Cause that Won’t Go Away”, which is an essay showing that the real problem is our paper money system, which can only be fixed by a return to using gold and silver as money.
Again, I don’t expect the CFTC to admit the truth, that the silver market is manipulated too low and that they are paid to “look the other way” and deny manipulation. Maybe the U.S. Mint will do something, as they seem to be trying their best to follow the law. Maybe the U.S. Mint will stop outsourcing silver blanks, and will start taking delivery of COMEX bars to make into coins to comply with the law!
Regardless of what any government agency does, you ought to take advangate of the situation, and buy cheap silver while it is still available. Shortages stand to get worse as silver prices rise, because increased investor demand is sure to follow.
The beauty of silver is that you cannnot eat it. This means that higher silver prices will not cause anyone else to starve to death, which is the current result of too many investors buying commodities like grains, rather than the commodity of silver becuase it’s not available due to the stupid policies of rationing.
Rationing food ends up killing people. Because many people cannot wait 8 weeks to 6 months for food.
Copyright notice: Please feel free to copy, translate, improve, re-write, re-post, any and all of my works to promote your own services. (It generally works best for you if you give credit, such as a web link, or reference to my name, otherwise, other people may assume you are not being intellectually honest.)