One year ago this week, silver was poised to crack 50 bucks an ounce. Those of us, long metals in general and holding physical silver, were about to reap the rewards of our foresight. I had been planning on unloading part of my position.
And then the bastards changed the rules.
The CME hiked margin rates 6 times and nearly 100% in such a short time- that it absolutely ruined the silver market and reduced leverage to an unheard of 6-1. It took every small player out of play. The market has never recovered. Here is a fantastic Reuter's story that really details what the silver manipulators did to stop silver dead in its tracks. You'll note that over a three year period- they hiked margin rates nearly 200%. Think about that for a moment. http://www.reuters.com/article/2011/05/10/silver-margins-idUSN109799720110510
Why? Why did the CME do that to silver? Who gives two shits about silver? Why don't they do that with oil? Everyone uses oil, don't they?
The answer unfortunately, is really very simple. It is all about the golden rule. He who has the gold- makes the rules.
Precious metals are money. They compete against that worthless fiat that the FED dreams up and prints. JP Morgan is a member arm of the FED. So it shorts the entire precious metals complex. In a world not gone completely mad- it should be illegal for banks to short metals. They are actually able to manipulate their competitors and ruin the free market forces of competition. The best metaphor I can draw is this. Suppose I own an auto parts store. The guy across the street opens a store. I am able to pass an ordinance that allows me to price the parts that my competitor sells. Of course, I price everything he sells significantly higher than my own parts which I sell significantly lower. I put him out of business. The CME put rising silver prices out of business.
I wish I could tell you that this metaphor is absurd. But it's not. When you buy silver you are shorting currency. You are saying I believe precious metals have greater value. In a world run by bankers and funny money- they can't allow the masses to do that sort of thing. Oil is a little different animal.
So why don't they hike oil margins 200% and kill the speculators in oil thereby reducing the price? Answer-they don't want to. Unlike silver, everyone uses oil. The great powers, the oil producers and Wall Street would be hopping mad. It makes no sense to ruin oil markets so that a bunch of sheep could get some price relief. Why would they do that? They already have you owned. They get to fleece you at will. And that is precisely what has happened during the last two months. As demand has fallen off a cliff- prices have not budged.
Markets are just as effectively rigged as my auto parts store metaphor. That is the nature of things. Eventually greedy men will take advantage of any system and manipulate it. I think that is absolutely natural. Ultimately precious metals will break free of paper constraints and gap up so significantly it will take your breath away. When banks and governments realize that they can no longer control the precious metals complex- they will have one last desperate attempt to control, tax, seize, or outlaw precious metals. Of course at that point- and historically- most of us will tell them to go fuck themselves.
I just hope it happens in my lifetime. It will be fun to watch.