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Written by Chris Marcus of Miles Franklin

At this year’s Anarchapulco conference, David Morgan, one of the world’s leading experts on the silver market was asked why he thinks the price of silver is as low as it is. And simply put, his answer confirmed what is becoming rapidly more well known within (and outside of) the precious metals community.

In short, his answer was that the banks currently have the ability to make silver just about any price they want. Because the price-setting mechanism is traded in paper, rather than physical metal. Which is rather stunning and amazing in its own right, yet still simple enough to understand, and worth exploring further.

Keep in mind that because silver is traded in paper, you could have the Federal Reserve launched QE 5, 6, and 7 tomorrow, send the world into a gold and silver buying frenzy, and still see the prices trade lower. In fact this amazingly already occurred back on December 12, 2012, when the FOMC announced an increase in the amount of open-ended purchases from $40 billion to $85 billion per month, and silver was actually trading lower by the end of the day.

Because since it’s traded in paper, no matter how many COMEX bids there are, the banks can always sell that amount of paper and more. Which is primarily what they’ve done.

Now if you’re wondering how this could possibly be legal, the answer is that it isn’t. I say this from the perspective of a former equity options market maker and specialist on the New York Stock Exchange, that my understanding was always that if I did anything even remotely similar, I would have been in jail the next day.

Yet a couple of CFTC investigations later, we are once again reminded that the enforcement of financial law is offense sparse at best. To those who may find that hard to believe, just pick up a copy of Harry Markopolos’ book “No One Would Listen.” Where he describes how he sent the SEC detailed documentation that Bernie Madoff’s fund was a Ponzi scheme years before it imploded, only to be completely ignored.

And for anyone who thinks the CFTC might be any different, just keep in mind that the Department of Justice recently received a guilty plea by a former J.P. Morgan trader for manipulating the gold and silver markets. After the CFTC launched several investigations and came away with no conclusive findings (despite how former commissioner Bart Chilton spoke out rather frequently that he did believe the markets were being manipulated).

Personally I find it rather difficult to fathom how this is not being sanctioned at some higher governmental level. We’re not really talking about the most complex crime in history here, and especially with access to the trading records, it’s my belief that a rather solid case could be easily constructed.

But when these agencies refuse to even speak with Ted Butler, who’s widely recognized in the precious metals community as one of, if not the top expert regarding the silver manipulation, or any of the other top silver analysts like David Morgan, it’s difficult to believe there’s really a genuine effort to instill the rule of law in these financial markets.

Yet regardless of who knows exactly what, the evidence, which now includes condemning trader transcripts and guilty pleas is there for anyone who chooses to look.

Certainly I can understand the frustration many share about how long a resolution has taken to manifest. Yet if you’re looking for the positive in the situation, it’s that you still can buy silver at below what it costs many of the primary silver miners to dig it out of the ground. All while the Fed is now indicating that it’s probably done hiking rates, and is far more likely to start lowering than raising going forward.

I personally view David Morgan as one of the top silver experts in the world, and not only do I think he is correct in his assessment of the pricing, but there is also clear evidence to support that is the case as well. How long the current manipulation scheme is able to continue on remains anyone’s guess, although it is rather stunning that no one has forced the issue on this fascinating situation. Which is becoming less of a secret by the day.

Sometimes I’ve wondered why a group like China or Russia’s central bank doesn’t just force the issue. Which would leave precious metals prices substantially higher (also increasing the value of their reserves), while simultaneously further weakening the dollar’s base of power. My best guess is that they’re happy to sit there and accumulate more metal at illogically low prices. All while knowing that they have the ultimate defense to any U.S. political, financial, or military actions.

What I’ve always loved about trading in the financial markets is that it’s a great exercise in distinguishing between what you think is “fair” or “should” happen, versus what will actually ultimately occur. The current 8-year bear market in gold and silver is a great testing ground for this concept, and if you have any questions about why, or about anything else going on in the precious metals markets, as always I look forward to receiving your comments here.

But if you believe David Morgan as I do, and also factor in the growing mountain of evidence supporting his assertion, then any investing funds that can be allocated to precious metals (and silver in particular) stand an excellent chance of getting an incredible rate of return over the long-term.

Chris Marcus

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