-- Posted Friday, 13 September 2013 | | Disqus
By Dr. Jeffrey Lewis
The silver and gold market has been rife with speculation about ongoing price manipulation. Most investors are now familiar with this concept, and even the mainstream has admitted that undue market influence has occurred.
Nevertheless, ending this unfortunate fact of life for precious metal investors and allowing prices to rise to their fair value would probably create a U.S. Dollar panic.
Furthermore, terminating precious metal market manipulation by officials — such as the CFTC for example — is virtually impossible because they would be incriminating themselves.
The Big Bullion Manipulators
The big manipulative bullion banks themselves are not directly concerned about a fiat currency collapse because their balance sheets are denominated in U.S. Dollars.
These big banks are expected to buy Treasuries as part of the age-old financial repression theory, but this has never been tried with a reserve fiat currency like the U.S. Dollar.
Of course, such financial institutions are acting as an official proxy for the U.S. government. They are also the primary dealers of the Federal Reserve.
Furthermore, the privately owned Fed basically owns the U.S. government that pays interest to borrow from the Fed to print its own currency so that it can fund its increasing ever-deficits, which are now approaching 40 percent of expenditures.
The Fiat Reserve Currency Experiment
Interestingly, a fiat reserve currency had never been tried before then-president Nixon unilaterally took the U.S. Dollar off the gold standard in 1971.
That outrageous event — widely known as the Nixon Shock — prompted the eventual breakdown of the longstanding Bretton Woods system of fixed exchange rates that used the gold-backed Dollar as its lynchpin.
A bet that this fiat Dollar experiment will "work" is a bet against the eventual demise of the hundreds of fiat currencies that went before it. The death of the fiat Dollar therefore seems to be just a matter of time.
Some interesting statistics include that the current world debt to GDP ratio is more than 300%, representing $223 trillion as of May 2013. Furthermore, derivatives totaled $1 quadrillion before the BIS reclassification, and the outstanding amount is currently estimated at around $500 Trillion.
The Future Loss of Faith
Faith and confidence in fiat currency are the only things keeping its value afloat, and they will ultimately end with the separation of physical precious metal pricing from the paper futures markets caused by excessive money printing.
Fear over official confiscation, taxes, or making the ownership or trade of precious metals illegal will be offset by the simple need to survive and preserve at least some wealth.
Of course, some people who find it difficult to value precious metals seem to love the example of what they would be worth when a person is faced with dehydration: the price of a cup of drinking water versus an ounce of gold.
Most people would be willing to barter with whatever it takes in a time of hyperinflation no matter what their government decries as illegal. The difference between the spirit of the law and the letter of the law would become immediately apparent, and it has always happened this way.
Of course, gold and silver futures contracts and other paper derivatives traded on the LBMA and the COMEX are really bets on gold and silver "nothings" because physical delivery is not required of the sellers. That is the root of the problem.
Cannot Happen? Think Again
If you think this scenario cannot happen, just look what the Fed’s taper talk did to the cost of U.S. Treasury debt. What so many have feared seems to be materializing as China and Japan have been leading the record outflows from Treasuries over the past few months.
Some observers have even called derivatives “weapons of mass destruction” when it comes to a financial system, but the truly deceptive and destructive weapons are actually the vaporous paper gold and silver contracts traded on the fake metals exchanges in London and New York.
Those futures exchanges are really highly manipulated price fixing platforms that are in the process of collapsing since they are not valid price discovery mechanisms for intrinsically valuable precious metals.
Look for much higher physical precious metal prices as these exchanges’ demise nears along with the death of the fiat currencies they use as a yardstick.
For more articles like this, including thoughtful precious metals analysis beyond the mainstream propaganda and basically everything you need to know about silver short of outlandish price predictions, check out http://www.silver-coin-investor.com
-- Posted Friday, 13 September 2013 | Digg This Article | Source: GoldSeek.com