Is Silver Short or Standing Tall?
When I think of the money pool I think in terms of a drum. Is it full or is it empty. In the case of a balanced economy the drum is always full. In order to put more money into the drum the size (value) of the money already in the drum has to shrink. It looses spending power. There's a growth in the total money supply, which is inflation, but the drum is the SAME size. All that has happened is that there has been a redistribution of money to the various sectors, be it household, farming, or the production of goods as well as services. The Comex is nothing but a drum with the contents reducing in number. There is deflation in silver. The shorts have been playing the fractional reserve banking system game with silver, betting that the longs (buyers or depositors) would not all take their cash (silver) out on the same day. It is the job of the Comex to make sure there is enough silver in inventory to cover the "reserve" position. They are the central bank of silver. It is the Comex who must ensure that there is not "a run on the bank". Who said silver is not real money? There has been a major miscalculation by the shorts using the fractional reserve banking system model and applying it to silver. Fiat money is only able to come into creation if someone takes on a liability. The only way to make more silver is to get out there and dig it up. There is not a computer on earth that can put 1 troy ounce of silver into my bank account. It has to be physically delivered, and once delivered it is no-one else's liability. I am inclined to think that the battle for silver could be the beginning of the end of the fiat money fractional reserve banking system, as we know it. The naked short position that the banks have taken on will be recognised as a disaster when the depositors want to see their money. It has been an experiment in unregulated greed perpetrated on society by the banks under the guise of "helping" the economy to grow. True growth comes from production, not inflation through the increase of monetary aggregates. When silver breaks free of the Comex it will be of such value that it's "spending power" will be greater than it was under the gold standard for the simple reason that there is a lot less of it. The populations of the Eastern nations understand the true value of silver and gold. Those of us in the West have been duped into believing in paper. Does that make you want to take your money out of the bank and buy physical silver for protection? © 2004 Alan Lunt |
I'm going to come
at this topic from the top, the bottom, the sides and from straight
on. The naked short position in silver on the Comex is nothing short
of a disaster waiting to happen. But first I will talk about money
and the process of it's existence through the fractional reserve
banking system. The reserve to all intents and purposes is the amount
of money held by the banks in the form of unencumbered money, this
money is held in reserve at the central bank. It is there because
people do want to have access to their funds, and historically only
2% of people want their money out at the same time. The rest is a
gamble by the banks that there will not be a run on their funds,
so they loan it out 7 or 8 times and collect interest on it, not
once, but 7 or 8 times. It is the process of fractional reserve banking
that leads to the business cycle of boom and bust. In effect what
happens in a recession is that the banks try to cover some of their
naked short position (lending) by placing a squeeze on liquidity.
They are quite happy to squeeze hard because they know that the central
bank will front up with new funds for them to play with, as the government
cannot be seen to be "doing nothing". All this money creation,
and destruction, is with money that never really existed in the first
place, they were "paper" entries.