When there isn’t enough of X and excess demand exists for X, the price of X rises. The casino aggravates the cycle, and things can get wild when those betting against X’s rise decide to get out of their bets. To suggest that JPM and others aren’t sitting at the table with bets against silver is a bit wigida wack. Nothing new really, the game has been going for a hundred years.
According to GATA (2000), associate Reg Howe published “The ESF and Gold: Past as Prologue?”, which revealed some good information about the Exchange Stabilization Fund (ESF), a quasigovernmental agency that reports to only the president and Treasury Secretary. Created behind to the 1933 gold confiscation, and subsidized by the paper profits arising form the 1934 devaluation of the dollar against gold, the ESF is cloaked in mystery and has the exclusive domain of the executive branch and operates largely outside of congressional oversight.
In GATA (2000), Howe notes that unexplained losses were appearing in the ESF’s quarterly reports to Congress in quarters when gold prices went up, while profits were earned in quarters when the gold price fell. The result was probing because, the Treasury both in the public statements and letters in response to queries, maintained that no interventions in the foreign exchange markets were taking place. Howe explains, “There were no other obvious activities that might explain these losses.” Conclusion: The ESF was intervening in the gold and silver market.
In 2000 irrefutable evidence of the U.S. government’s intervention in the precious metals market was available from its own public reports. The reports reveal reoccurring discrepancies month after month. Although denied this was indeed proof the U.S. government’s intervention in precious metals prices.
In February of 2001, the Federal reserve began covering it’s tracks, not only dropping all reference to the ESF in future U.S. Reserve Assets reports, but going back and changing already published reports (Turk & Rubino, 2004). Not only were the figures changed, but all previous references to the ESF were eliminated.
Why would a central bank bother to try and manipulate silver’s exchange rate in the first place?
Because among other things… silver is money.
Silver and big brother gold, together are yardsticks by which the world’s currencies, and the central banks that manage them are measured. When a precious metal’s exchange rate is low relative to a currency, the central bank appears to be doing a good job of keeping inflation down and the value of their fiat currency up. If a bank can keep precious metals undervalued they can make their currency look fancy nancy.
The precious metals market is mega, mega tiny and accounts for less than one percent of total worldwide assets. As the silver price continues to rise, those on what is increasingly looking like the wrong side of the bet to be on, will cut their losses. Silver is set up to surf to even higher levels. There could be a time soon when silver is not available for purchase. Hold on for the ride.
GATA. (2000). Gold Anti-Trust Action Committee. Retrieved from http://www.gata.org/node/1179
Turk, J., & Rubino, J. (2004). The coming collapse of the dollar. New York, NY: Random House.