How The CBOT, Comex And CFTC Coordinated To Break The Last Silver Price Surge

Submitted by Tyler Durden
05/06/2011 19:08 -0400
46 comments

Just like QE is nothing new in the monetary arena, and has seen some incarnation at least since the early 80's primarily in Japan, so parabolic commodity price surges have occurred periodically, most notably in 1980, when Bunker Hunt brought the price of silver to over $50. However, unlike any time before, never in the history of the world have we seen a coordinated worldwide monetary stimulus via relentless credit money "printing" courtesy of global central banks. In that regard, this time really is different, as there is no other remaining backstop to the world financial system: the global banking cartel has used up all its bullets and now can only double down in the most nightmarish Martingale system ever conceived, where each iteration means further fiat absolute value destruction (on a relative basis it simply means a race to the currency bottom, whereby definition only one can be in the lead at any given moment: usually the one with the biggest printing press, and greatest deflationary threat). And while many still believe that QE2 will be the last of domestic US monetary easing episodes, as Bill Gross noted earlier, it is very possible that the US may be headed into a triple-dip recession, for which the only prescription will be another QE round (with political gridlock in DC at unseen levels no fiscal stimulus is even remotely possible). If this happens, precious metals will once again surge. The only question is what will the exchanges do after the next gold and silver spike? Indeed, as we suggest, margin hikes are just the beginning. For a complete playbook of how the CME may proceed after the margin hike approach fails, we once again go back to the curious case of Bunker Hunt. Below, from the Playbook biopic of the Texas billionaire we posted yesterday, we present the walk through of how the CBOT, Comex and CFTC tried to break silver's back. Back in 1980 they succeeded. Have they, and will they succeed this time?

...The CFTC and the officials of the two exchanges decided to have a little talk with the Hunts. Explaining that they feared a squeeze, the exchange officials asked them if they would consider selling some of their silver. The brothers’ answer was no. What was more, they said, they intended to keep buying silver and to keep taking delivery on it. They thought silver was still a good buy, even at the new high prices. Besides, as Bunker put it with typical understatement. “If you sell, you get into a tax problem.â€