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August
27
2020

The Silver Market Is Manipulated
Eric Englund

Idaho’s Silver Valley is a short drive from my hometown of Spokane, WA. Perhaps the regional importance of silver mining helps explain my affinity for silver. As a boy, growing up in the 1960s, I enjoyed finding silver dimes, quarters, and half-dollars when receiving change at local stores; and I kept them knowing they were valuable. Shortly after college, when a job transfer moved me to Boise, ID, in 1985, I found myself purchasing 100-ounce silver bars directly from Sunshine Mining Company. To me, it felt right to exchange fiat currency for silver; and, to this day, I view this as saving. Through the years, nonetheless, something was gnawing at me regarding the silver market. Silver’s price action seemed utterly strange; as if there was an invisible, yet officially-sanctioned, hand manipulating it to keep it suppressed. To be sure, there have been highly credible voices claiming manipulation; and they weren’t just voices in my head imploring me to wear a tinfoil hat appropriate for inmates in a loony bin. Many of these voices, recently, have been brought together in Chris Marcus’ terrific new book The Big Silver Short.

During the period of 1990-1993, silver often languished at prices below $4 per ounce. It was great, nonetheless, to stack bars at bargain prices. As for mainstream financial analysts, silver was a laughing stock during these years. A common assertion was that silver, once a monetary metal, was now merely an industrial metal. Hence, by their logic, there would be no difference between stacking ingots of aluminum or stacking bars of silver. I didn’t agree with the mainstream’s bad-mouthing of silver and I continued to view silver as both a commodity and a store of wealth.

Before going into details about The Big Silver Short, it is important to acknowledge public schools indoctrinate students with nonsense that money must be supplied and regulated by government. From grade school to grad school, this was pounded into my head. However, as alluded to above, my instincts said otherwise. Following such instincts, I came to the conclusion mainstream economics is a dead end and that answers, about the nature of money, had to be found elsewhere. Then, lo and behold, a friend introduced me to Austrian economics in 1995.

Upon my introduction, to Austrian economics, one of the first books I read was Murray Rothbard’s What Has Government Done to Our Money? Regarding the emergence of money, here’s what I found on pages 18-19, of this wonderful book:

Historically, many different goods have been used as media: tobacco in colonial Virginia, sugar in the West Indies, salt in Abyssinia, cattle in ancient Greece, nails in Scotland, copper in ancient Egypt, and grain, beads, tea, cowrie shells, and fish hooks. Through the centuries, two commodities, gold and silver, have emerged as money in the free competition of the market, and have displaced the other commodities. Both are uniquely marketable, are in great demand as ornaments, and excel in the other necessary qualities. In recent times, silver, being relatively more abundant than gold, has been found more useful for smaller exchanges, while gold is more useful for larger transactions. At any rate, the important thing is that whatever the reason, the free market has found gold and silver to be the most efficient moneys.

In a single paragraph, Dr. Rothbard demonstrated money emerges, on the free market, from commodities; and, therefore, would emerge with or without the existence of government.

In this book, Rothbard describes the gradual process a government implements to take control of a monetary system. Once gold and silver are eliminated from the monetary system, per Rothbard, “…the way is clear for full-scale, government-run inflation.” (pg. 82). Government, ultimately, becomes a counterfeiter. However, this doesn’t mean a government stops paying attention to gold and silver. Governments and their agents, in fact, rig the prices of gold and silver.

Along these lines, Dr. Ron Paul stated the following about rigging gold’s price:

Ever since the Great Depression, controlling the dollar price of gold and deciding who gets to hold gold was official policy. This advanced the Federal Reserve’s original goal of demonetizing precious metals, which was fully achieved in August 1971. Today, even though the official position of all central banks is that gold is not money, central bankers constantly rig the dollar price of gold, pretending the dollar is stronger than it really is.

In other words, managing the price of gold (to the extent this can be accomplished), is all about managing the perception of the dollar’s soundness.

So, how does silver come into the picture? This is where The Big Silver Short shines. To manage the price of gold entails rigging the price of silver as well. Chapter 4, of Chris Marcus’ book, is an interview of Bill Murphy—who is the co-founder of The Gold Anti-Trust Action Committee. Mr. Murphy perfectly articulates the rationale for manipulating silver’s price (pg. 56):

…gold is what everyone pays attention to in regards to interest rates and the dollar. But because silver is aligned with gold as a precious metal, they realized they would need to rig silver along with gold because they didn’t want a big dichotomy between the two. If gold went one way and silver went the other, people would be able to see they were rigging the gold market.

So they got involved in rigging the silver market too. It’s a smaller and easier to control market, and that’s certainly what they have done.

I came to this same conclusion several years ago. Nevertheless, it is validating to be in the same company with Bill Murphy.

The Big Silver Short is a compilation of 15 interviews of the world’s top silver experts. Each interview comprises a chapter of the book. Before reading this book, I was familiar with the writings a few of these experts. Upon finishing the book, I had no doubt Chris Marcus selected wisely as to whom he interviewed. Chris opens each chapter by providing background information regarding each expert and then proceeds with thoughtful questions and commentary to draw out thought-provoking information from each interviewee. Here’s the list of interviews by chapter and expert:

• Chapter 1 – Dave Kranzler
• Chapter 2 – David Morgan
• Chapter 3 – Craig Hemke
• Chapter 4 – Bill Murphy
• Chapter 5 – Bix Weir
• Chapter 6 – Bart Chilton
• Chapter 7 – Keith Neumeyer
• Chapter 8 – Ned Naylor-Leyland
• Chapter 9 – Chris Powell
• Chapter 10 – Andy Schectman
• Chapter 11 – Jeff Clark
• Chapter 12 – Ted Butler
• Chapter 13 – Maurice Jackson
• Chapter 14 – Andrew Maguire
• Chapter 15 – Rick Rule

Chapter 16, the final chapter, is written by Chris Marcus. He ties together important information conveyed by these experts; and revisits some of the more stunning revelations uncovered in the interviews. Consequently, I am not surprised by his choice to emphasize the importance of the late Bart Chilton’s interview. It truly is the “smoking-gun” interview and unquestionably exposes J.P. Morgan to be at the heart of silver’s manipulation.

Bart Chilton, at the time of the Global Financial Crisis (GFC), was a commissioner of the Commodities Futures Trading Commission (CFTC). Therefore, he had a front-row seat to watch silver get hammered from $21 down to $9. Silver’s price behavior was the exact opposite of what one would expect during a financial crisis. So here is part of Chris Marcus’ summary of what Bart Chilton stated in his interview (pg. 310):

First is Bart’s confirmation that when Bear Stearns failed in March of 2008, they did indeed have a large silver short position.

He also confirms that position was transferred to J.P. Morgan during the takeover deal.

And he goes on to mention that after the takeover, the combined position was so large, that it violated the position limit.

To which the CFTC responded by giving them a temporary waiver period, during which they were supposed to reduce the position.

But instead, they made it even larger!

Hence, in the teeth of the GFC, J.P. Morgan defied the CFTC and increased its silver short position at the exact time silver was plunging from $21 to $9—cause and effect, to be sure. This was criminal behavior which must have made the bankster community proud. Chilton, unfortunately, did not have support from the CFTC’s other four commissioners to do anything about this behavior.

Here’s another gem from the concluding chapter. Understanding the COMEX serves as the primary clearinghouse for gold and silver futures contracts, the COMEX is the epicenter of the silver suppression scheme. Chris Marcus pens the following to demonstrate how extreme silver’s manipulation has become (pg. 323):

Yet we’re talking about a market where the price has been repeatedly suppressed by large amounts of short paper. To the extent that many experts now agree that for every ounce of physical silver, there’s somewhere north of 500 paper claims to it. With silver guru David Morgan mentioning that when derivatives are added in, it’s likely even larger than that.

One of the most interesting indicators, of silver manipulation, pertains to the gold to silver ratio. Simply put, this ratio indicates how many ounces of silver it would take to purchase one ounce of gold. Today, for example, it would take 72 ounces of silver to purchase one ounce of gold; meaning the gold to silver ratio is 72 to 1. Regarding this ratio, here’s what David Morgan stated in his interview (pg. 22):

What’s the proper ratio? I don’t know, but Franklin Sanders did a great study on it in the book Silver Bonanza. In that book he points out that if you look at the gold to silver ratio over centuries, if every century was one foot in length on a scroll you rolled out, it would be 35 feet long, and it would be the last foot where the gold to silver ratio got above 16 to 1. The USGS (United States Geological Survey) says the natural ratio is 9 to 1, and we’ll take them at their word. But no one knows the exact number.

Although correlation does not mean causation, I don’t believe it’s merely a coincidence that the Federal Reserve was launched a little over a century ago and the gold/silver ratio has severely vaulted away from the ratio which naturally emerged over the 34 centuries prior to the Fed’s founding. In my mind, this is another clear indicator silver is officially manipulated.

For those interested in silver as an asset class, let’s bring the definition of “mean reversion” into the picture. Per Investopedia: “Mean reversion is a theory used in finance that suggests that asset prices and historical returns will revert to the long-run mean or average level of the entire dataset.” Factoring in silver’s 35-century dataset, in relationship to gold, a powerful argument can be made that silver’s price should be 4.5 times higher today.

A notable interview was that of Keith Neumeyer. He is the president, CEO, and founder of First Majestic Silver Corp. Of the fifteen interviewees, Mr. Neumeyer is the only silver miner in the group. First Majestic Silver is one of the world’s leading silver miners and does sell fabricated silver directly to the public. I’ve watched several of Keith Neumeyer’s interviews and have tremendous respect for him; as he is one of the few silver and gold mining company executives willing to assert gold and silver markets are rigged. Per his March 26, 2019 interview (pgs. 127-128):

I worked for banks in my early career in the ‘80s, and that’s my background. So I not only have years of experience on the silver side, I also have experience on the banking side. So I understand how the financial markets work, and I know that metal prices are being depressed. I know the reasons why, and it all makes perfect sense.

Keith Neumeyer then goes on to discuss the gold/silver ratio (pg. 128):

Show me a mining company that’s actually increasing their silver production. I don’t know one out there that’s doing it. It’s just a function of silver being a lot more rare than people think it is. A shocking stat to me is that while the current gold to silver ratio is about 85 to 1, we’re only mining it at about 8 to 1. How does that continue? I just don’t know.

In other interviews, Mr. Neumeyer has made the case for silver to go well above $100 per ounce.

Having read the works of the great Austrian economist, Murray Rothbard, I came to understand government, the Federal Reserve, and our banks intertwine to form a vast criminal enterprise. I firmly believe Rothbard would have enjoyed The Big Silver Short. After all, what’s not to like about reading fifteen engaging interviews covering a monetary metal that is being manipulated; with the criminal organization, J.P. Morgan, in the middle of this scheme. I’ve only scratched the surface of what is conveyed in this book; as it covers much more than silver’s manipulation. One thing is certain, just as the London Gold Pool failed, so will the present-day manipulations of gold and silver. The Federal Reserve’s crazed policies will see to this failure. And for those who embrace a key message from Chris Marcus’ book, a reversion to the mean, of the gold/silver ratio, assures spectacular results.

I am an ardent believer in a 100% gold standard and, thus, I am an adherent to Austrian economics (the pro-market, anti-statist school of economics). I firmly believe that a free society can exist only under conditions that include an absolute respect for private property rights, the right to self-ownership, a negative rule of law, and a 100% gold standard. It is no wonder why I am a paleolibertarian. My intellectual heroes include Austrian economists Ludwig von Mises, F.A. Hayek, Murray N. Rothbard, Hans-Hermann Hoppe, and Roger Garrison.

In 2000, I wrote a lengthy paper about the interesting similarities between Austrian economics and the emerging science of complexity (which seeks to understand spontaneous order). Human prosperity (thanks to capitalism) is at its maximum when Adam Smith's "invisible hand" (a metaphor for a capitalistic spontaneous order) is not tied by the shackles of central planning (which includes monetary central planning as practiced by the Federal Reserve). In other words, a free-market/capitalist society is a spontaneous phenomenon. Therefore, in turn, less government means more prosperity/liberty and vice versa. Along these lines, I must include a fabulous quote from Murray N. Rothbard (as found in his book Man, Economy, and State):

Directly, voluntary action - free exchange - leads to the mutual benefit of both parties to the exchange. Indirectly, as our investigations have shown, the network of these free exchanges in society - known as the 'free market' - creates a delicate and even awe-inspiring mechanism of harmony, adjustment, and precision in allocating productive resources, deciding upon prices, and gently but swiftly guiding the economic system toward the greatest possible satisfaction of the desires of all the consumers.  In short, not only does the free market directly benefit all parties and leave them free and uncoerced; it also creates a mighty and efficient instrument of social order.  Proudhon, indeed, wrote better than he knew when he called 'Liberty, the mother, not the Daughter, of Order'.

With the U.S. government's reckless spending and massive debt accumulation, I see economic chaos just around the corner. How in the world can the United States' government meet its massive debt and entitlement obligations? One thing is for sure, no fiat currency experiment has ever succeeded. Thus, the dollar will meet the same fate as all other fiat currencies; death by inflation. Indeed, these obligations will be met by printing massive amounts of dollars. The invisible hand will be amputated to rescue the body politic. People will suffer. 

Perhaps my bringing back into print TheHyperinflation Survival Guide: Strategies for American Businesses, will help alleviate human suffering. Dr. Swanson (the book's author) and Harry E. Figgie, Jr. (the book's sponsor) deserve a lot of credit as they understand that businesses must survive in order to continue serving people. There will be economic instability, as wrought by inflation, and this book will prove to be a valuable manual to help businessmen survive the chaos.

I look back upon my education with fondness. I have a B.A. in Business Administration (Cum Laude) from Washington State University and also have an MBA (4.0 GPA) from Boise State University. With the intellectual "tools" provided to me by Austrian economics and paleolibertarianism, in retrospect, I chuckle at the pro-statist biases exuded by the professors at the two aforementioned universities. In turn, I have gone through a process of "unlearning" the pro-central planning/Keynesian curricula that dominated most colleges and universities when I was in school (and are ever more so today). Nevertheless, my experiences at WSU and BSU, were wonderful due to the excellent people I met in the wonderful communities of Pullman, WA and Boise, ID. 

Every once in a while, I get the urge to write an article. To date, I have had articles published by LewRockwell.com, by KarenDeCoster.com, and by The Tocquevillian. 

In the meantime, my day job is that of a surety bond underwriter. This has been my profession since 1984.

Contact Eric Englund

www.hyperinflation.net