Silver Manipulation, SLV And The Coming Default

By Michael Pennington © Copyright 2010 Pennco Coins

As I have pointed out on many occasions, between 1990 and 2005, official silver inventories plummeted by approximately 90%. It is simple economics that any good which is grossly under-priced will be grossly over-consumed. Faced with the abrupt end to their silver-manipulation (which would make it much more difficult to continue to manipulate the gold market), the bankers fell back upon their oldest and most-favorite swindle: they sold paper to people, and pretended that the paper represented actual silver – and thus “SLV” was born.

This is such an obvious sham that I simply lack the space to go into all of the clearly fraudulent implications of this fund, so I will restrict myself to just a couple of facets. From 2005 to the end of 2008, after silver inventories plummeted by 90% in just 15 years (due to being grossly under-priced), we are supposed to believe that inventories suddenly ‘made a U-turn’ – and tripled over the course of just four years.

Regular readers will be familiar with the following chart, which shows the progression of “official” silver inventories – along with the small caveat attached to the graph. These official inventories include every ounce of ETF-silver, and SLV (by far the largest silver-ETF) was created at the beginning of 2006. As of the beginning of 2009, ETF-holdings represented roughly 2/3 of total “official inventories”.

Anyone with even a slight understanding of markets should recognize the obvious sham here. An “inventory” is the amount of a particular good warehoused and ready-for-sale. Conversely, the units of SLV (and all other bullion-ETF’s) represent privately-owned silver which has obviously been taken off the market. As a matter of elementary logic, it is impossible for even one ounce of silver to be both an “inventory” and an “ETF”. It can be one (silver-for-sale) or the other (privately-owned) but not both.

Thus, at the end of 2008, two-thirds of official, global inventories of silver were nothing but an obvious paper-sham. Of even greater interest, I have been unable to find any more-recent statements of official inventories. Apparently the quasi-official “consultant” (none other than the infamous Jeffrey Christian and The CPM Group) who produced this data has decided that it’s better to simply hide all inventory data – rather than to attempt more clumsy shams of this nature.

Making this massive fraud potentially much more egregious, the supposed “custodian” for most of this silver is JP Morgan, which holds the world’s largest “short” position in silver, the most-concentrated position in the history of commodities markets. In what is obviously not a “coincidence” the total size of the global short position has stayed roughly equal to the (supposed) total holdings of “bullion-ETF’s”. However, those massive short positions are never audited, meaning that JP Morgan (and the other bullion-banks) have never been able to show they have more than half the silver necessary to cover both their short-positions and “custodian agreements” with the ETF’s.

What this directly implies is that as of 2009, as much as 2/3 of total global inventories of “silver” was literally nothing but banker-paper – and we can only assume that their massive fraud has expanded in the time that has since elapsed. While industrial demand for silver helped the banksters in their nefarious (and illegal) schemes for many years, it is now industrial demand which is certain to destroy the bullion-banks.

While a gold-investor might be capable of being duped into buying banker-paper, and mistakenly believe that the banker-paper is “as good as gold”, you can’t use banker-paper to make silver bearings, or silver mirrors, or silver batteries, or silver solar cells, or silver anti-bacterial products. The bankers market-manipulation has progressed from merely dumping the silver which they held, to the much more fraudulent practice of passing off their worthless paper as “bullion”.

In doing so, they have eliminated the possibility of the price of silver merely “correcting”. What has become totally inevitable after 50 years of constant manipulation of the silver market is that this market is poised for the most spectacular default in the history of commodities markets – even more so than in the gold market. Companies which require silver to continue the existence of their businesses will be ready to bid-up the price of the commodity to multiples many times greater than an investor merely making a discretionary purchase.

We can only assume that when a silver default occurs that it will bankrupt JP Morgan. Keep in mind that while the nominal value of JP Morgan’s silver, short position is in the billions of dollars, thanks to the testimony of Jeffrey Christian at the CFTC hearings we know that this short position has been leveraged by somewhere around 100:1. Furthermore, the potential loss on any/every short position is infinite – since there is no “maximum price” which silver could not (theoretically) surpass.

As the old saying goes, “For every winner in a trade there is a loser.” There must be a few investors out there who would like to get on the “winning side” of a trade with JP Morgan?


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