In Jim Cook's Archive


It’s been a long dry spell for those of us who own silver. We can bemoan the fact that silver has tried our patience or we can look for something positive coming out of this lengthy period of depressed prices. Silver analyst Theodore Butler has proven conclusively that heavy short selling on the COMEX has depressed the price of silver. This has acted very much like a price control. A number of unfortunate consequences derive from controlling prices (remember the long lines for gasoline in the 1970’s?).

Today’s low silver price has discouraged production of the metal. If silver were $100 an ounce, new mines that produce silver would be under construction, existing mines would be expanding and aggressive exploration would be turning up new silver discoveries. The melting of silver jewelry and scrap recovery would be a booming business. In other words, there would be a lot more silver stockpiled above ground than there is today. Going forward this could easily contribute to a silver shortage. Furthermore, it will take a long time to ramp up silver production from today’s low level.

Because the price has stayed low, no industrial user has bothered to look for a substitute. That means that no matter how high the price of silver goes the industrial users still must have it. In fact, the low price of silver has encouraged its use far more than would be the case if it were a lot higher.

When a price control ends, the controlled item shoots up in price. At the end of World War II, controls were lifted on foodstuffs, oil, construction material and commodities. In the second half of 1946, prices exploded. Monthly inflation rates were as high as 17%. The inflation rate for 1947 was over 14%. The low prices had reduced the supply of goods and the increased demand for them drove up prices.

According to Ted Butler, the price suppression engineered by the big short seller JPMorgan enabled them to acquire a vast hoard of physical silver at a cheap price. This has further reduced the amount of physical silver available for industrial users and investors. When this big bank ends its manipulative short selling all the bullish factors that are the consequences of price controls will come into play. Inevitably, silver must explode upward in price as it reacts to the laws of economics. Mr. Butler insists that a buying panic will be the ultimate result of the controlled price.

Never in history, from the price controls of Diocletian in Roman times to the present has there ever been a huge hidden buyer heavily accumulating the controlled item. That is until today’s silver hoarding by JPMorgan. They are still picking up this cheap silver at bargain basement prices while the rest of the world looks elsewhere. Their goal must certainly be to harvest a gargantuan profit. That’s why Mr. Butler insists you will get rich if you own enough silver.

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