TED BUTLER COMMENTARY

August 8, 2006

A BLIND MAN’S WORLD

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

I can’t remember the first time I heard it, or who might have said it, but it’s a thought I’ve pondered for many years, namely, the question of how would you describe color to someone blind from birth? Or music to someone deaf? Just the notion of it brings about the perspective that we take many basic gifts for granted for which we should be profoundly grateful, and how our hearts go out to those deprived of life’s blessings.

What makes it impossible to describe color to the blind or music to the deaf is the profound and overwhelming condition that blindness and deafness entail. These are conditions so overpowering as to almost defy description. The blind and the deaf must overcome their afflictions by relying on, and developing, their other senses to adjust to life. It is no easy task.

This may seem to be an unusual start to an article that will attempt to convince you to buy silver, but I ask you to bear with me. I will attempt to get you to consider silver in a way much different from any conventional analysis. In fact, it is as unconventional as it gets.

You see, when it comes to silver, we are all blind – you, me, the producers, the industrial consumers, the government, the silver analysts, and even the short manipulators. Just like those who have been born without God’s gift of sight or sound, we have all been born blind to silver. It doesn’t matter if you are 20 years old or 90. What we are blind and deaf to, when it comes to silver, is this simple fact – no one alive has ever witnessed a free market in silver.

Let me repeat that - no one alive has any practical experience with silver in a free market. Now that I think of it, no one dead had any experience with silver in a free market either. How could they? Silver has never been free. Not now, not ever. Please allow me to explain, and in doing so, hopefully convince you to buy as much silver as you can possibly afford.

The reason we are all blind in silver is that a variety of forces have converged over hundreds and thousands of years that prevented silver from being freely traded. The most dominant force was silver’s historical role as money. (Many still hold that silver still has a monetary role, but I am not one of them.) For many centuries, silver functioned as money and governments regularly assigned rigid prices. Government-assigned or controlled prices are the antithesis of a free market. Anyone who lived through the hundreds and thousands of years that these assigned prices prevailed, never knew a free market in silver.

More recently, say over the past 100 years or so, government policies, particularly in the U.S., precluded silver from free market statues. In the beginning of the last century, the U.S. Government was acquiring hundreds of millions, and even billions, of ounces of silver due to the Sherman Act. This act was a result of political influence from the western states, where silver was mined. If the government didn’t acquire silver at predetermined fixed prices, the price would have been much lower. Thus no free market.

Later, over the past 60 years, due to influence from the Silver Users Association and coinage programs, the silver acquired by the government, measured in the billions of ounces, was systematically released to the market, again at fixed prices. Thus, still no free market.

Now, after more than 100 years, the U.S. Government is finished acquiring and disposing of billions of ounces of silver at fixed prices. But silver has continued to be fixed, or manipulated in price, by leasing and the concentrated short selling on the COMEX. Once again, this means no free market price for silver. Therefore, no one reading these words has ever experienced a free market in silver. We are all blind to experiencing a free market in silver, you, me, and everyone.

But, just like those born blind or deaf, it doesn’t mean we can’t adjust to our condition and make the best of it. Just as they must rely on their other senses to experience life, we have to rely on our minds and our common sense to compensate for our lack of experience with a free market in silver.

The very first thing you must do is to decide if what I’ve told you so far is correct. Does any independent reading of history suggest that silver has been in free market ever, or particularly in the past hundred years? Did not the U.S. Government first acquire billions of ounces of silver and then dispose of it, all at fixed prices? Has there not been the practice of leasing, and documented evidence that an unusual and extremely large concentrated short position exists?

Once you have agreed what I’ve said is true, it should take you no time to conclude that we have not had, in our lifetime, anything that remotely resembles a free market in silver. So, what does this mean? Please remember, I am not trying to trick you or misstate anything. I am admitting openly, that even though I have studied silver intently for more than 20 years, I have no practical hands-on experience with dealing in silver in a free market. It has not been possible. I am as blind as anyone.

If silver has never been in a free market, it would be a mistake to pretend otherwise. We must not assign free market characteristics to something that is not in a free market. Thus, if we know silver has not been in a free market, we must not rely on the free market rules and interpretations for investing in it. The concept that I am trying to convey is for you to recognize the reality that silver has been, and is still, manipulated, and to deal with it on that basis. I’ve invested a lot of time and energy in trying to end the manipulation in silver, but that is not my purpose here. My purpose here is to show you how the manipulation is your greatest ally for investing in silver right now.

The reason the manipulation in silver is your best friend, as an investor, is that the price of silver is artificially depressed. However, all manipulations must end. You cannot distort the law of supply and demand forever. When manipulations end, there is always a violent move in the opposite direction of the manipulation. Since silver has been manipulated downward for more than half a century, we know it will explode upward once the manipulation is ended. The trick is timing. If a manipulation is still likely to last for years, or even decades, that would prove to be too long a wait for most investors.

How long must we wait for the silver manipulation to end and for prices to explode? I’ll give you my opinion, but you have to decide for yourself. I think that the silver manipulation is going to end very soon. Let me give you my reasons.

The main force behind the silver manipulation has been the dumping of billions of ounces of silver inventories by governments and others, by straight sales, leasing or common coinage minting and then melting. This silver was dumped on the market and was consumed. These billions of ounces no longer exist, as confirmed by inventory statistics. The short-selling scam on the COMEX also appears to be on its last legs. I base this on how obvious the concentrated short selling has become and the inability of any regulator to adequately defend it. Without continued physical silver to dump on the market, and the paper short sellers on the defensive, the silver manipulation is on its last legs, in my opinion.

When the silver manipulation ends, as it must, we will suddenly and violently begin the era of free market silver. This is an era that will last forever, from whatever day it begins. For the first time in history, silver will be freely priced. Please try to visualize this. I know I am making an outrageous statement. I am telling you that for the first time in thousands of years, silver will suddenly be freely priced. There will be no force that can contain it. It will be as shocking as if a blind man could suddenly see.

Precisely because there are no longer billions, or hundreds of millions, or even tens of millions of ounces of silver on the hands of governments available to be dumped on the market, for the very first time in world history, the manipulation must end soon. There are hundreds of millions of ounces of silver in the world, of course, but these ounces are not available for dumping on the market. These remaining ounces are now held by investors looking for much higher prices to sell, not for dumping at current prices.

Precisely because the COMEX short selling scam has reached such obviously manipulative levels, it will end soon. Manipulations can’t thrive under the light of day. With no big available supplies to be dumped on the market, and with the paper short sellers under the spotlight, it is hard not to conclude that the manipulation will soon end and the price of silver will launch towards the heavens. Then the bargain basement, low-risk buy levels will be gone, quite literally forever.

When the manipulation ends, as it surely must, attention will be turned to how high the price might climb. This is what we all have no experience with. This is where we are all blind. Maybe it is to $50 or $100. Maybe, as my silver mentor Izzy believes, it will exceed the price of gold. As crazy as that sounds, we are talking about a profound change in silver, from a manipulation existing for hundreds of years to an era where silver can never be manipulated again. After all, we are very clearly running out of silver, whereas we are not running out of gold.

The perfect time to buy silver is the day before the manipulation ends. If it were possible to know when that day might be, I would tell you. But it is impossible to know exactly when. What is possible to know is that day is coming, and coming soon. What is possible to know is that it will be better to be fully invested long before that day arrives, and not one day after.