damage in leasing is with growing shorts, inadequate longs
the business should maintain an increasing number of long futures contracts for the silver they consumed
thus hedging against a rise in silver price, which would kill their business, dead gone
but they tend easily to view the silver leasing fee as an amortized cost on the books
this works ok as long as price remains extremely stable
why bother with tied up money in long futures contracts?
the cost shows up just fine as leasing fees on the books
the upshot: fewer longs than should be for consuming businesses
the bullion banker is another story
he merely wants to cap the silver price, thus reducing risk of being discovered as a fraud
he is leasing his vaulted silver out unbeknownst to his clients
he has made a dead asset into an interest bearing asset
brilliant, eh? NOT
his short futures contracts are at first backed by real silver
eventually as more silver is leased though, less backing to the short position
and eventually the shorts open interest exceeds his supply
then he is running naked on silver, very slippery
when his vault is nearly empty, he is in big trouble
then he has a large naked short position, which serve as IOU's for his clients
they get pissed and sue his stupid corrupt ass
he gets it from both sides: legal and accounting
fast forward to when the silver supplies are nearly vanished
word gets out in the press
at first from anecdotal evidence
later this Comex reports that supplies are less than believed
the world silver price doubles overnight, nearing the teens
here is where it gets ugly for BOTH sides
the businesses that didnt hedge long sufficiently go bust
maybe just take serious financial hits
what follows is shortages of silver necessary to remain in business
financial hits are endured initially, then continue with employee costs and business winding down, thus declining revenue stream
the bullion banker gets sued for leasing and "losing" his clientele's silver
he holds IOU's in the form of silver short futures
but they are MASSIVELY UNDERWATER
the bullion banker risks going bankrupt
Congress investigates a new scandal, with the Fed at the center
the leasing game is exposed as corrupt and ineffective
press wonders why silver is regulated in price while it disappears from above ground sources
the answer: to sustain the dollar fiat currency system
silver jumps past 20, past 30
speculators climb onboard, bidding up the price further
but no physical silver is available to satisfy the higher price
it continues past 50
reports surface that the world is out of silver
silver is a beautiful metal, but its match with leasing represents a marriage made in hell
we have a commodity with INELASTIC DEMAND
i.e. higher prices do not lessen demand, too essential
we have a leasing system with INELASTIC SUPPLY
i.e. lower supply does not increase price
so the flow continues until the silver is all gone, vanished
meanwhile the silver mines are not in full operation
many are shut down in money losing pricing situation
because price is below production costs
some is mined as byproduct
the shortfall in supply versus demand is made up in leasing
it does not show up as consumption on the books though
that is where the corruption lies
bullion bankers know deep down the leased silver will never be replaced
but the system is engrained deeply
simply unbelievable
the investment opportunity of a generation
silver could easily surpass $100/oz and continue to climb
mines cannot deliver new supply at any price for 18 months
typo in my last message: 50,000 oz silver in example
/ jim |
