Is there a physical silver shortage?
Say what? There’s a silver supply shortage? “Balderdash!” you shout. There’s also rampant manipulation of the silver price by large international banks, I say. “Poppycock!” you add. Furthermore, I continue, the government, particularly the US Commodities regulator, the CFTC, has been compliant in the manipulation by looking the other way and not performing their regulatory duties. “Humbug!” … Hey, who let Mr. Scrooge in here?! Now hold on everybody, let’s take it easy, okay? Let’s just take this a little bit at a time. Let’s try to remember also that we are beginners here…
There are those who walk among us, seemingly human, who use these interesting tools know as facts. These facts are little bits of information, taken to be truth, that allow individuals to make suppositions regarding certain events and situations that we experience. What makes these particular humans special is that they can take a few of these facts, put them together and create another larger fact called a supposition. One of these gentlemen to whom I refer is Ted Butler, who has been writing about silver for longer than I’ve been investing in it. Mr. Butler and his compatriot, Israel Friedman, write persuasively and passionately about these topics and they write much better than I do so I recommend that you check our Mr. Butler’s site and maybe even subscribe. Our mission in this article is to introduce the topic at hand. So here goes…
First off, you need to know that there are actually two markets for silver: the physical market, which is all of the actual silver bullion that exists in refined form on the planet, and paper silver, which exists in the form of ETFs (exchange-traded funds) or futures contracts. Mr. Butler and others contend that there isn’t enough physical silver on the planet to make delivery to all of the owners of paper silver, and this would result in a default at the Comex (where the paper silver is traded). There is documented evidence of the naked shorting of silver paper many times more than even the amount of physical silver that exists. This occurs most obviously when there are huge drops in the paper silver price.
The demand for physical silver has been climbing year after year. Is it not an economic reality that when demand goes up and supply stalls (we’ve actually been depleting our worldwide silver stockpiles year after year), then price should rise? Sure, of course it is, but therein lies the rub. Why isn’t price rising then? This is where the big banks like JP Morgan come in. They have for decades held enormous short positions in paper silver contracts; such large positions as to be able to manipulate the markets by starting well-timed selling programs. (If you’re not aware, a short contract is where someone can make money when a stock or commodity goes down in price.) The bankers have held this concentrated short position for a looong time. Why? Because they’re make literally tons of money on it and it’s still working for them and the government won’t do anything about it. Inflation numbers are fudged, the illusion of stability is maintained, and the banks can continue their shorting for billions program. What will stop it? It could be any type of unexpected event; the Black Swan that many have been waiting for, when things hit the fan and everyone wishes that they had bought gold and silver at those ridiculously depressed prices (aka today).
That was more of a rant than an informative, well-balanced piece. After that, you can tell where I stand on the topic. So, is there really a physical silver shortage or is there a silver shortage myth? To be honest, I don’t really know because I don’t quite have the capabilities to make a completely informed decision on the matter. I will say that I tend to lean toward the former in the argument. But this is just one more reason why I think silver is an excellent investment at this time.
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