Silver .. The Ticking Bomb

We suggest you check your scruples at the door for today’s blog. This will allow you to better appreciate the depraved genius on display by the sociopaths running the tightly controlled confidence scheme we are going to discuss today. The Con to which we are referring is the current SILVER market as well as the obscenely large paper short position on the CME, by a few banks. To properly contextualize our thoughts, a little history is in order.

Fresh off a decade of raging inflation in the 1970s, silver peaked at $50 an ounce in January of 1980. Anyone who was long silver in 1970 made 35x their investment by 1980. The 35x run-up seduced a large swath of the public into getting long silver in the early 80s. Back then most silver buyers demanded physical silver, but there were some who, for the sake of convenience, went long paper silver on the CME. The banksters were happy to oblige, as there was no sense in parting with actual silver, if some of the marks buyers were willing to take paper. This was the birth of the bankster CME short position.

The bankster’s relentless paper selling (and some timely rule changes by their friends at the CME) caused the price of silver to collapse in the 80's. The CME paper ounces the banks were selling, effectively levered their side of the trade. It wasn't enough they were selling at 50 and able to buy back at 5, no, they had to do it with leverage. World-class chutzpah.

While the paper short position was initiated to make money on the falling price of silver in the eighties (which it did), the position grew 8 fold in size from 1990-2002 for a completely different reason. After a decade of falling prices, the public finally threw in the towel in 1990 and began selling silver hand over fist. Bagholder can tell you with authority, as I was in the business then - we had 20 sellers come through our door for every buyer. As usual, the public was selling at a generational low. We kept what we could, and sold the rest of the public’s silver "up the chain" to the refiners & banksters.

The banksters, wanting to pay as little as possible for the public’s silver, were able to rig the price lower with the 8 fold increase in the size of their short position on the CME. For the unscrupulous banksters, it was a no-brainer. Since the price on the CME set the price at which physical silver is traded, why not take advantage? This pricing mechanism allowed the public's pockets to be picked, at silver prices well below where the price would have been without all the paper selling.

The ring leader of the massive silver paper short, which still exists today, is JP Morgan Chase. They are also likely the largest holder of physical silver on the planet. At first glance, you might think those two positions just cancel each other out. If that is the case, you failed to check your scruples at the door….

While JP could (if they had scruples) part with their physical hoard to cover their paper short - they are not going to. Much better for them is to default on the short position. When the time comes, they will blame some off-shore subsidiary or perhaps some rogue trader. The net result though, will be to welch on all the poor souls holding those paper longs.

Scorecard once the default becomes official: Thanks to the CME, the banksters will have sold the silver and pocketed the cash without having to deliver. They also have 2 decades of accumulated physical silver (bought at below market prices), and the paper longs will have paid for the whole thing. Oh, almost forgot, what do you suppose a paper default does to the price of physical silver - to which the banksters are Megalong?

All of this begs the question what will trigger the default? The ONLY thing which can trigger a default is the willingness of the public to get long physical silver. It will force the banksters into parting with their hoard to keep the con going. The default would have happened over a decade ago, except the powers that be wisely created a vehicle designed to funnel $$ away from the physical silver market. That vehicle was the SLV fund. Since it trades like a stock, anyone with a brokerage account could buy it. The public seemed to like the fact there was no more need to buy heavy bricks and then worry about storage. The public was/is completely unaware the SLV, much like the CME, is another shell game designed to get the marks buyers to take paper rather than actual metal.

The primary weapon for funneling investment $$ into SLV and away from the physical metal, is to increase the premium (the amount you have to pay over spot) on physical silver. As an example, all thru the 1990's Silver Eagles could be bought RETAIL for 40-50 cents over spot. Nowadays, the same silver eagles would run $8 over spot - if you are lucky enough to find them. It is one thing to have the conviction to buy silver at these price levels, it is something altogether different to ALSO have the willingness to pay the high premiums for physical. The high premiums are remarkably effective at funneling would be physical buyers into the SLV, where (in their minds) they won't have to pay a premium. They will, of course, have to take a paper promise.

The absurdly high premiums on physical silver today are like a brightly lit neon sign indicating which direction the market is headed long term. Assume for a moment the market is headed significantly lower from here. The banksters, who control the market, would set the premiums low, making it easy for anyone who wanted to get long, to do so. The low premiums would also discourage selling, as potential sellers might feel they are not getting a fair price relative to spot, in effect keeping them long for the ride lower. This is clearly NOT the world we are living in today.

Instead, the world we live in today, has record high premiums relative to spot. This encourages sellers, and discourages buyers. In other words, the powers that be do not want anyone getting long at current prices, while at the same time welcoming sellers with open arms and high premiums for their physical silver. These record high premiums practically scream; “higher prices ahead”.

Now that we have addressed the "what" will trigger the default, let’s talk about the "when". The answer to that is simple. The default will take place when physical is not available, no matter the premium. Speaking as someone with 35 years of experience in the precious metals business, I have never seen anything like the current tightness in the physical market. The default is not here yet, but it is close. Physical silver is still available in small quantities, but it is NOT available in any kind of size. Sure, you can find 500 ounces here, or a 1000 there - but try to find 50,000 ounces. It is near impossible. There are only scraps left, as the cupboard is getting bare.

Either the JP Morgans of the world part with their physical hoard and restock the cupboard, or they let the price run. There is no plausible third option. JP did not spend over 2 decades accumulating silver at $5 so they could 4x their money and sell it at $20. You couldn't get those guys out of bed for a 4 bagger. These are complete sociopaths running this game, who also happen to suffer from what Bagholder calls Elephantiasis of the nuts. Meaning, they play for zeroes.... 10x, 100x, 1000x is much more their style.