Here are the first two paragraphs of a three page letter that Ted Butler sent to the U.S. Attorney General in 1989.
“April 25, 1989
The Honorable Dick Thornburgh,
United States Attorney General
Department of Justice
Washington, D.C. 20530
Dear Attorney General Thornburgh:
I respectfully request that you look into a matter of national concern. For almost three years, I have tried to expose and eliminate, through the proper channels, a massive fraud and manipulation in one of our leading commodity markets. This criminal activity has cheated hundreds of thousands of individuals and companies directly, and all U.S. citizens indirectly, as one of our country’s most valuable assets is being disposed of by our Government at prices that have been fixed artificially low. [The U.S. sold off all its silver.]
The price of Silver, since 1983, has been depressed due to economically unjustified and excessive short sales on the Commodity Exchange, Inc. (COMEX). In all of financial history, we have never witnessed, except in COMEX Silver, a total short position that is greater than either total world stocks, total world annual production, or total world annual consumption. In sanctioning of sales contracts of a commodity which cannot possibly be fulfilled, the COMEX has permitted short sellers of paper silver contracts to illegally set the price of real Silver.”
It’s obvious why Ted Butler is the world’s preeminent expert on silver. He’s been immersed in it for almost 25 years. His conclusions are breathtaking, his logic unassailable. Recently he pointed out two bullish factors that I hadn’t fully comprehended. I found them electrifying. Since 1983 the price of silver has been artificially suppressed. That means that low prices for silver have increased many of the uses for silver. The cheaper a valuable commodity the more the demand for it grows. At the same time low prices discourage the growth in supply from mining and recycling. If the free market were at work in silver the price would be higher and the supply would be greater. This means that the world’s available supply of silver has shrunk to unnaturally low levels. Literally, billions of ounces that once existed above ground are used up and gone.
The U.S. alone sold off four to five billion ounces of silver since World War II. Incredibly, those huge silver stockpiles were exhausted but the price refused to rise. Phenominal increases in industrial demand driven by new technologies that used up silver had no impact on the price of silver. The low price meant that the world’s vast supply accumulated through thousands of years of mining production was used up. The money of the ages, hoarded and treasured, disappeared forever. Such are the ravages of surreptitious price controls.
Over a long period of time the shrinking supply and increased demand led to a shortage. It’s inevitable. Price suppression leads to a supply crisis. Ted Butler thinks we are at that point now. On top of growing industrial demand low prices attracted investors who begin to gobble up silver and create a boom in investment demand. The Law of Supply and Demand worked with a vengeance in silver. Suddenly there may not be enough silver to meet the demand.
On top of a physical shortage of real silver we may also have a shortage of paper silver. The total short interest on the COMEX stands at 450 million ounces. For every long contract there’s a short contract. As new buyers come into the futures market, who is going to take the short side? Who in their right mind is going to short silver when all around them margin calls are felling the existing shorts? The shorts can only extricate themselves by purchasing long contracts. Who will go short and sell to them? At what price will anyone sell hundreds of millions of ounces of silver on paper?
Insights like this are what makes Ted Butler tick. He’s alerted me to what I believe is the opportunity of my lifetime. I would prefer that silver go up slowly over a long period of time. However, I might not get my wish. Remember how those Apollo rockets used to come off the launch pad: so slowly at first and then higher and higher, faster and faster. That could be silver, especially if enough people have the same epiphany that I have had and that Mr. Butler’s writings encourage.