The coordinated attack by the banking cartel on the price of silver in the futures market has exacerbated the silver shortage at the retail level, causing new signs of the shortage to manifest. This downward manipulation of the price of silver has occurred despite massive money-printing by the Federal Reserve and recent economic indicators showing its failure to bring about an economic recovery.
The Incompetence of the Federal Reserve
Following the collapse of the real estate bubble in 2008, the Federal Reserve, led by Ben Bernanke, initiated massive money-printing to buy toxic assets from the insolvent too-big-to-fail banks and artificially lower interest rates. The Fed believed that lowering interest rates would stimulate the economy, and miraculously bring about job creation and economic growth. Though expanding the monetary base from under $1 trillion to $3 trillion brought some collateral damage by means of inflation, particularly in rising food and fuel prices, the Fed believed that such an outcome would be preferable to a deflationary depression by allowing the economy to correct itself from excessive malinvestment. Notably, the housing bubble that burst and almost consumed the entire financial system with it was enabled by artificially low interest rates encouraged by the Federal Reserve, beginning with Alan Greenspan and continuing since.
Recently, the nonfarm payrolls report from the Bureau of Labor Statistics revealed that labor participation, which is the number of people employed or actively seeking employment, is the lowest it has been since 1979. The median household income of Americans is at the level it was in 1995, and almost 50 million Americans use food stamp debit cards, a digital version of soup kitchens. What all of these facts point to is that the American middle class, which defined America following World War II, is rapidly shrinking and the gulf between the rich and poor is widening.
The Motives for Attacking Silver
With this backdrop of incompetence by the financial engineers at the helm of the economy and a rapidly shrinking middle class, there is panic at the thought that the American people will lose confidence in the dollar and begin using alternative money that maintains its value. Though inflation has been eating away at the value of the dollar since the creation of the Fed in 1913, precious metals, such as gold and silver, have maintained their value by rising in price relative to the dollar. The rise in price of gold and silver, both of which have been regarded historically as monetary metals, has been a source of embarrassment and concern to Fed officials, who know that their power rests solely on public confidence in the dollar, which cannot be seen to have a suitable alternative. In particular, silver, historically having been used even more than gold by the common people as a form of money due to its lower relative value, has been viewed as a threat to the dollar, and, therefore, the power and livelihood of the banking cartel that controls the Fed.
The Paper Manipulation and Evolving Silver Shortage
As a result of the significant general rise in the price of silver in recent years, serving as a reminder of the dollar’s debasement, its price has been actively suppressed by the banking cartel to deter the common people from viewing it as a viable alternative to the dollar. This has been done by massive naked shorting by large financial firms, such as JP Morgan Chase, which has been revealed to have the largest short position on silver of all financial firms. On especially active days in the COMEX futures market, up to two and a half times the annual global silver production is traded in the paper silver market, indicating that manipulation is taking place that is distorting the true value of silver based on actual physical supply and demand.
The paper manipulation of the price of silver has caused the amount of silver available for sale to plummet, creating increasingly obvious shortages in the physical market. This shortage has been especially evident with delays in the delivery of large orders of silver from suppliers; the inability of national mints, including the United States Mint, to obtain an adequate amount of silver to satisfy demand for their products; the increasing divergence between the price of paper and physical silver; as well as the rising premiums of junk silver, which is normally sold for about the spot price of silver.
The Divergence of Paper and Physical Silver
Because the price of silver is artificially suppressed while the demand for silver remains strong, many vendors are now offering to buy silver for an amount greater than the paper price. Currently, due to the worsening silver shortage, the premium for junk silver is approximately 10 percent of the spot price of the metal. If the price of silver continues to be manipulated downward to boost the appearance of the dollar, the divergence between the paper price and the price to acquire the physical metal will be so great as to force the paper market to adjust its price substantially upwards to appear credible. If the physical metal dries up almost completely among suppliers and the paper market continues to be manipulated downward, those holding futures contracts increasingly will demand delivery of the metal due to concerns about its actual supply as well as the potential for arbitrage. A rising number of futures contract holders demanding physical delivery of the metal will cause a massive default in the futures market, due to the inability of the sellers to provide the metal, which ultimately would drive up the price of silver to much higher levels, perhaps multiples higher than its price today.
While investors of silver may be dispirited by the paper manipulation of the silver price, they must realize that the more the price of silver is artificially suppressed, the higher it will go in price once the suppression ends. Despite the apparent confidence of the Fed and government officials in their continuous mismanagement of the economy, the rising shortage of silver increasingly will become so obvious as to cause their efforts at suppression to backfire, since no action of theirs, other than relinquishing to the free market, will cause silver supplies to magically reappear.