Confirmed Treasury Silver Manipulation?
By - November 12, 2008

Silver market analyst Ted Butler has obtained a letter from the U.S. Commodity Futures Trading Commission to U.S. Rep. Gary G. Miller, Republican of California, that virtually confirms Butler's speculation in September that the smashing of the silver price this year involved JPMorganChase's takeover of Bear Stearns in March. Butler writes: "Bear Stearns held the largest concentrated short position in COMEX silver (and gold) futures at the time of its forced merger with JP Morgan in March. That position was not discovered until the publishing of the August Bank Participation Report followed by the October 8 letter from the CFTC to Congressman Miller. Furthermore, Bear Stearns had no legitimate backing to the short silver position, either in actual metal or cash. Otherwise it could have been delivered against or bought back, just as would have happened were it a long position. The price of silver at the time of Bear Stearns implosion was $20 to $21 an ounce. A free-market covering of a concentrated short position of this size would have driven silver prices to the $50 or $100 level and would have exposed the long-term manipulation. Rather than let the free market deal with the required short covering of such an uneconomic and unbacked short position, government authorities arranged to have the short position transferred to JP Morgan. This was undertaken by the U.S. Treasury Department, along with taxpayer guarantees against loss to Morgan worth billions of dollars. This was done, no doubt, to save the financial system from imploding. This was also patently illegal, as it aided and abetted the silver manipulation. That is, it is now virtually certain that the big silver short (and the big gold short) is the U.S. government's New York bank, JPMorganChase. Butler's new commentary is headlined "The Real Story" and you can find it at GoldSeek's companion site, SilverSeek. – GATA

Dominant Social Theme: This cat was not supposed to escape the bag.

Free-Market Analysis: We have been fairly straightforward about our belief there is something fishy as regards the price of gold and silver. We think in a normal environment the price would have gone higher, and sooner. Of course such a suspicion demands a motive. The motive, fairly obviously, is to retain the perceived supremacy of fiat money. Were gold or silver to get out of hand pricewise, then it becomes more difficult to retain a fiat money regime. There are relationships between gold and interest rates, for instance.

We don't have hard facts, of course, though Butler, above, suggests that he has deduced some. Beyond whatever can be absolutely proven, however, there is a pattern that suggests precious metals price manipulation that goes back a long ways.

Maybe the most damning evidence of all, when it comes to price suppression, is the existence of central banks themselves. To debate whether money is manipulated is pointless given that central banks set short-term interest rates and print money at will. What else is that, after all, but a blunt and obvious money manipulation?

Of course, general money-supply manipulations have evidently increased as of late. Basically, (obviously) the issuance of trillions of dollars from taxes and via printing presses is a gigantic manipulation as well, to accompany the ongoing manipulations of fiat money that have occurred regularly. With the international monetary system of the West involved in this kind of effort as part of a "bailout" of previous manipulations, debating whether or not the price of gold and silver are being artificially suppressed by the banking elite seems a bit unnecessary.

We remember back in the 1990s, when central banks continually announced gold sales that never occurred. We also wonder why open and public audits of the gold in America's Fort Knox have never been granted. We question the general opaqueness of central banking accounting when it comes to gold reserves. We have a suspicion that gold has generally been lent out at low prices and that additional price suppression occurs at the COMEX.

Lately, a new spate of justifications have emerged for the low prices of gold and silver. This has to do with the prevalence of deleveraging and deflation. Precious metals prices, so the theory goes, are an accurate reflection of the lack of inflation and people's correct perception that real inflation is not currently on the horizon. But this perception avoids a number of inconvenient facts, however, chief among them the issue of the strong dollar that has accompanied metals' weakness.

It is the strong dollar that is so difficult to believe when it comes to this scenario. The United States' public debt alone is around $10 trillion, and the country is involved in two wars and facing what appears to be a general industry collapse. It is about to lose its entire automobile industry and has been plowing through a US$700 billion bailout administered by the Treasury. There are much larger issues, generally, of course, including murky derivatives markets in the hundreds of trillions. Given all this, the idea that the dollar remains an attractive "safe haven" seems questionable at best. Gold and silver, on the other hand, are traditional safe havens, and have served as store of value during such fiat money failures as we are now witnessing.

After Thoughts

To us, it begs credibility that the dollar is currently perceived as strong while gold and silver continue to languish, relatively speaking. Yet, the thing about price manipulations is that sooner or later they cease. The lower the price of a good or service, the less is available. Price stimulates demand. Eventually, the demand becomes imperative and the price breaks upward. The so-called rebound effect is directly proportionate to the suppression. We think the suppression of gold and silver has been fairly energetic. We would not be surprised by a severe price break to the upside at some point. We have more questions about the behavior of authorities when that takes place than we do about the inevitability of higher prices for honest money.

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