This year, 2006, that gong has been rung five times in a concerted effort to sound the death knell for silver's spectacular rise. So far agents of the banking cartel, the COMEX, CBOT, and NYMEX, have been unable to halt its rise. They did it with natural gas bringing it down from $15 to $6.50, and they can and will do it to silver, gold, and any other commodity that threatens their fiat monetary system. They've stalled silver's rise intermittently, but haven't broken it in an effort to reward their co-conspirators that are not only short, BUT ARE SHORT OVER 700 MILLION OUNCES WHICH IS MORE THAN AN ENTIRE YEAR'S PRODUCTION! Can you imagine the financial horror if they tried to match up these derivative instruments! The Big Bang.
Now, don't get me wrong. We are the good guys, and we're looking to protect ourselves from a deteriorating medium of exchange, paper money. Paper currency that is being printed and distributed at a shameful rate from every government of the world, and puts every person at economic, and eventually political risk.
The most effective weapon in the conspirators' arsenal is the margin requirement tool. Short of outright confiscation, tax schemes, and additional regulations placed upon the free trade transfer of the metals between parties, raising margins is the way to go.
Death to "speculators" they'll tell us! Turn in a silver and gold hoarder and earn yourself a bounty. Not yet, but we're getting there. You see, broken down to the lowest common denominator makes it easy to understand these leveraged markets. Gold and silver are money, and that's why you and I want it. We want to delay our consumption. We're looking to the future. We want to save it as a defensive measure, and not risk our family's economic welfare by trusting paper and ink from a government we no longer trust.
As I outlined in a previous article government interference in our markets is something that will shock and awe even the most resilient investor. Our own government is the biggest manipulator in the world's financial markets, bar none. China's renminbi is child's play.
Below, you'll see the margin increases 2006 to date. I didn't go back through 2005 or earlier. You can do that here. You can go to the "News" tab drop down menu and select the year. What we need for a more meaningful mosaic are the contract volumes alongside the COT numbers. Maybe one of you newsletter gurus out there can spend some of your subscriber's money and put this together. It may keep your subscribers solvent so they can re-subscribe for another year.
We won't know the tipping point in the price until it happens. But, be assured you won't win, and will be fortunate to escape with your initial investment. This is an election year and rising silver and gold prices are a clear and understandable tip-off to even the most stupid voter that "inflation" is robbing him of his quality of life. The incumbent's re-election comes way ahead of your welfare.
Yes, you and I know we're right about a critical shortage of silver. But, if you're leveraged (outside of physical silver) beyond common sense you won't be with us to enjoy the runaway blastoff. Think of that image of the downward silver plunge of 1980, and you'll get my meaning. You don't want to be on the downward slope of anything resembling that, even if it's only a toboggan ride from $13 to $9!
I went back to 2000 to obtain the NYMEX silver futures margin requirements history. They are indicated on the following chart. London PM price fixings for the corresponding dates are:
04/27/00 - $4.98
01/08/04 - $6.20
02/19/04 - $6.62
04/06/04 - $8.14
09/16/05 - $7.08 << margin decrease
11/28/05 - $8.27
01/10/06 - $9.04
01/27/06 - $9.69
As anyone can see the pace and frequency of increases has become compressed now with five coming in just the past 4 months. A sense of urgency now prevails. For the years 2000 thru 2005 there were but five increases for this entire 60 month period. One indicated decrease in September '05....isn't that about the time silver began its serious liftoff? Gold futures got a margin decrease from $2,025 to $1,350 on 5/13/05 which could have given underlying support to gold's bull run beginning in early May '05. As you can see they gave no help to silver in the period 2000 thru 2004, content and gleeful that it drifted lower.
So, what does all this mean to us silver bugs?
In my opinion it reveals a sinister and self-serving mechanism is employed to serve the special banking interests. Margin decreases and increases act upon commodities as a collorary to the Fed Funds rate as another tool to expand and contract credit. Margins are able to manipulate the availability and supply of goods to the consumer.
Following the Katrina debacle futures margins were increased dramatically for the energy complex, notably natural gas. By doing so the government crushed prices, but more important restricted the necessary investment sources to ensure adequate supplies in the future. This same meddling mindset currently prevails for silver. Margin increases will suppress the exploration for new mines and development. In effect, they are aggravating an already critical shortage of physical silver. During Katrina (but not 9/11) a force majeure was declared for existing energy contracts. Will this same justified escape hatch be twisted and used to compensate the bankers when the derivative bomb detonates? Yes.
You may have noticed, but in the same CBOT margin increase announcement on silver there were changes to some of the "soft", ie, agricultural commodities. I am not a futures expert by any means, but it appears they are lowering the margins for selected items. I could guess that it's a maneuver to attract hedge fund and investor funds away from precious metals into other areas. Whatever their motives, we should all be outraged that they are meddling and trying to manage our food supplies. People will turn to collectibles of all sorts for haven. In the 70s/80s it was comic books, rare coins, and baseball cards. Antiques and art soared. Real estate plunged as interest rates went higher and higher.
Slamming silver now will simply delay the day of reckoning - just as another hurricane will wreak havoc on our energy supplies again - more silver will not be brought into the supply chain. Mining operating expenses will not be counterbalanced by a predictable and rising price for their gold or silver. They'll know that with each bull cycle move the banking cartel is there ready to knock it back down. How does a miner work his plan with a regulatory environment like this? We are being forced to live and cope with perpetual crises not of our own making.
This is how paper controls the metals, but at some point their system will break down. In an environment which is closing in on hyperinflation our financial markets will be overcome. Their methods will cause shortages in critical commodities. No amount of margin will be high enough to halt silver's explosion. They may have to shut down their paper market, but physical will be nearly unobtainable at any price in dollars. Price controls will be tried again. Some of you will recall your experiences of the '70s when brown supermarket bags disappeared along with, of all things - toilet paper!
So, that's what rising margin requirements on silver futures mean; the real McCoy, certified and genuine silver bugs have the real thing.
And toilet paper.
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