- Has the United States resolved it's massive debt situation?
- Are China et al prepared to buy huge amounts of US Treasuries again?
- Have the PIIGS (Portugal, Ireland, Iceland, Greece, Spain) resolved their debt issues?
It's a desperate, albeit temporarily successful, attempt to keep the price of Silver down. But has it stemmed the demand for physical Silver?
- "Just as Charles Ponzi needed donuts to turn back a suspicious crowd of investors, the Fed needs “donuts” in order to fill the bellies of the literally millions of investors worldwide who worry about the alarmingly large U.S. budget deficit and the impact that the U.S. debt dilemma could have on their Treasury holdings...Their collective buying has created what we believe to be a profit illusion with many investors mistakenly believing they can continuously reap profits from perpetually falling bond yields and rising bond prices, just as they have had opportunity to do over the past 30 years, amid the great secular bull market for Treasuries and the bond market more generally...For many reasons, this “duration tailwind” for Treasuries can’t last, particularly because the United States has reached the Keynesian Endpoint, where the last balance sheet has been tapped."
From COMEX analyst Harvey Organ:
- The total silver COMEX Open Interest surprised everyone, rising from 149,899 to 152,945 for a huge gain of 3046 contracts despite Part A of the raid. Part B was today... The options to purchase a silver contract went off the board tonight. The estimated volume today was very heavy, it came in at a huge 250,247. The confirmed volume yesterday was a monstrous 319,204 contracts. [Note: each contract represents 5,000 ounces of Silver.] This is an all time record volume at the silver comex. If the total Open Interest standing tomorrow is around the same number as today, the bankers will assemble for more [intervention]. They are getting quite exasperated.
- It was only a matter of time. Now the talk of silver price conspiracies has shifted from long buyers to those on the other side of the fence.
- [While] order was reestablished among the short side conspirators [when] the COMEX trading floor opened on Monday morning. After silver prices had temporarily risen to over $49 per ounce during Asian trading, they were beaten down again to about $47 in a flood of newly opened short positions.
- In practical terms, however, the only thing they will have accomplished is to cause a few speculators to lose money while helping well-financed market vigilantes to buy more bars of physical silver for the same money.
- The massive losses that short sellers have been taken has naturally led to some new urban myths. Some now claim that "evil" long side billionaires are out to "ruin" the market. Yet, even the Financial Times article points out the ridiculously paranoid nature of this theory. The author notes that silver prices were rising even as speculative positions at COMEX were reduced by 8.4%. This illustrates that the COMEX is now just a sideshow. A lot of people are simply buying physical silver.
- The silver buyers do include some billionaires, undoubtedly, but most of them are simply folks who realize The banks were ostensibly "selling" and then "storing" so-called "unallocated silver bars" for silver investors. In reality, they seem to have been maintaining a fractional banking system in which only one physical ounce is really purchased for every 100 ounces they supposedly sell.
- Let's go over that again...because once you understand the particulars, the reaction of the price of silver becomes perfectly understandable. 1) Bank sells silver, a very precious item, for big money; 2) Bank doesn't buy the silver it sells, or, if it does buy it, leases out or sells 99 ounces for every 1 ounce in the vault; 3) Bank gets paid "storage fees" from all its customers, even though their silver is not in the vault; 4) Bank profits are equal to 99 times what it sells initially, and then, the value of the stream of storage fees after that. Nice work if you can get it.
- But, then there's the downside. 1) The market might discover your scam and you'll need to deal with investigations; 2) Leverage so high that, if discovered, it is a recipe for disaster; 3) Courts may deem the arrangement a fraud, in spite of disclaimers that say otherwise, and whereby customers waive liability for fraud; 4) the market will inevitably punish you severely with heavy losses after discovery of the scam.
Tomorrow I will outline details of that Silver storage scam mentioned in this Seeking Alpha story and how it is that this fraud has become public knowledge.
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