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Chilton—Price Manipulation?

I found Commissioner Bart Chilton's comments about possible silver market price manipulation on October 26, 2010 to be most interesting, especially since the Commodity Futures Trading Commission (CFTC) has not commented to the public about this subject in the past.  Most of the information on this subject comes from a Mr. Theodore Butler, who, for the past twenty years, has been trying to blow the whistle on an alleged silver futures market  manipulation.  If one can believe Mr. Butler, there has been a sort of conspiracy to keep silver prices artificially low for some time. Mr. Ed Steer also talks of this price manipulation and ofttimes refers, in his newsletter, to the perpetrator of this manipulation as a non-profit entity.

All of this makes one wonder, who would want to keep prices low. Could it be manufacturers who use silver? I suppose, but the silver market is so small that it seems hard to believe that silver manufacturers would carry that much clout. Futhermore, silver manufacturers could simply raise their prices (like everyone else does) if silver prices were to rise gradually. Why keep them artificially low? In the long run, an artificially low price wouldn't call out more silver supplies, thus ensuring a shortage and possible panic buying at some point.

Who could this non-profit entity that Mr. Steer refers to be? Could it be the U.S. government? What reason would it have to keep silver prices artificially low? According to the Gold Anti-Trust Action Committee (GATA), the U.S. government has been trying to keep gold and silver prices artificially low for some time to keep the value of its fiat money artificially high. Apparently, gold and silver are in competition with fiat paper money. And the more the various central banks print their paper money (or issue it via a computer keyboard), the less it is worth relative to all the scarce goods in the markets. And so the trick is to expand the fiat money supply while keeping its purchasing power up (Propaganda 101). Unfortunately, as the dollar supply rises, given the same demand, the price declines (Economics 101). Of course, most people see this decline in the value of paper money as a rise in the prices one must pay for goods whose prices are denominated in that currency. The same phenomenon occurs in Euros, Japanese yen, even Zimbabwe dollars (oops, I guess Zimbabwe dollars are already gone).

Could it be that these people who have been on the fringe for some time are on to something? It will be interesting to see what the CFTC comes up with. Are the silver and gold futures markets really being manipulated? If they are being manipulated indirectly by various governments around the world, what can the CFTC do about it? How do you slap your boss on the wrist? Could they/would they require the largest silver shorts to cover their positions, thus pushing silver prices through the roof? If there really is a shortage of silver, the silver shorts will eventually lose their grip on their short positions anyway (when they fail to deliver on their short positions) and the price of silver will go up regardless of what the CFTC does. The market will win in the long run.

It seems to me that the CFTC is merely trying to justify its existence by exposing the silver market manipulation before the cash markets reveal the 20-year-long building silver price manipulation. Could this be another case of government ineptitude? Could this be the CFTC's Bernie Madoff? It will be interesting to watch this saga unfold! Explain away, CFTC!

Robert F. Sennholz

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