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Momentous events have taken place in global markets. With both the U.S. and EU announcing “open-ended”/”unlimited” money-printing (respectively); the exponentially increasing money-printing taking place in bankrupt Western economies has escalated to simply infinite money-printing.

This is nothing less than a death-knell for all Western fiat currencies, and our final warning that hyperinflation is now an inevitable fate. All that remains is for the (currently) clueless masses to realize that the paper they are carrying in their wallets is (in fact) nothing but paper – and then our own, modern Tulipmania will come to an ignominious end.

Gold and silver prices naturally reacted to this monetary insanity by jumping higher, reflecting the explosion which must take place in most asset prices; as our paper currencies plunge to their real value: zero. However, the rally was halted by a desperate counter-attack on bullion markets – with the result being that bullion prices have now trended sideways to lower for the past several weeks.

It’s important for readers to understand that there is no way the newly-announced money-printing has been (or could ever be) “priced into” metals markets. As the simplest of tautologies, you can never “price in” infinity into any market. Open-ended/unlimited money-printing means nothing less than an endless spiral higher in asset prices – until all this banker-paper meets the same fate as all previous fiat currencies: utter worthlessness.

Obviously, over the short term asset prices have not been allowed to move higher.  The mechanisms for this manipulation are now well-known to sophisticated investors. While manipulative automated-trading algorithms allow the banksters to lead market Sheep around like the Pied Piper; the banksters’ massive derivatives casino literally allows the bankers’ gambling on our markets to dominate the markets themselves.

However, as I have explained on several previous occasions; there is a (huge) price to pay for such manipulation. The low prices resulting from the banker-manipulation in their derivatives casino must lead to the destruction of inventories; with the long-term result being even higher prices than if no manipulation had taken place in the market at all.

This naturally leads inquisitive readers to ask the obvious question: as inventories collapse, how/when will a default occur in bullion markets? Here we must make a broad distinction between the gold and silver markets.

In the gold market, gold’s status as the world’s best money has resulted in near-perfect conservation of this metal. Put another way, it is at least theoretically possible for nearly every ounce of gold ever refined to be collected into a single stockpile. On a practical basis, much (most?) of the world’s gold is contained in precious cultural artifacts and/or heirloom jewelry; and would/could never come onto the market at any price. However, there can be no question that large stockpiles of gold do exist that could come onto the market.

The situation is entirely opposite with the silver market. Nearly a half-century of concerted manipulation of this market has resulted in most of the world’s silver (literally) being “consumed”. It has been used in a plethora of industrial products – generally in tiny amounts – and most of that silver is now scattered around the world’s landfills, in microscopic concentrations.

Understand that it was the under-pricing of silver (i.e. manipulation of the silver market) which has resulted in the destruction of inventories. Had silver been priced at its fair-market value; much/most of this industrially-consumed silver would have been recycled. We know this because only a dramatic increase in recycling could lead to equilibrium in the silver market; and by definition the “fair-market value” for any good is the price which results in market equilibrium.

Thus the destruction of silver inventories – by itself – is conclusive evidence of the manipulation of the silver market; since the magnitude of that destruction can lead to no other possible conclusion. Between 1990 and 2005 alone; global silver inventories plummeted by approximately 90%. Over the past half-century; noted silver expert Ted Butler estimates that global stockpiles of silver plunged from approximately 6 billion ounces to somewhere around (below?) 1 billion ounces.

What has been the consequence of this inventory destruction? The price of silver has moved from the 600-year low (in real dollars) reached in the late 1990’s of under $4/oz to well over $30/oz today – a nearly ten-fold increase. That multiple was significantly higher when the silver market reached its short-term peak of nearly $50/oz in 2011.

Meanwhile, we no longer have access to reliable inventory numbers in the silver market. Since 2005, inventory numbers have been falsified through a clumsy record-keeping sham, so we have no idea of precisely how much silver remains. We do know that inventories continue to plummet, as each year 100’s of millions more ounces of silver are used/consumed than are mined out of the ground.

We also have anecdotal evidence strongly suggesting that silver inventories are already stretched to the breaking point. Outspoken silver-bull Eric Sprott has revealed that silver he has purchased for his Sprott Physical Silver Trust wasn’t even refined until after he had purchased it (and waited many weeks to take delivery).

Seemingly, a bullion-default in the silver market would/will be a very straightforward event. Some day soon (perhaps tomorrow?), we will have an old-fashioned “failure to deliver”. Some large buyer of physical bullion will buy and pay for his order, and even after bankster-stalling; the bullion banks will not be able to scrounge-up enough newly-refined bars to meet that demand.

However, in our fraudulent/convoluted markets things are rarely as simple as they appear to be; and this is certainly true with the especially flagrant manipulation  of gold and silver markets. The complexity of the dynamics become more apparent when we examine the gold market, where the existence of large stockpiles make a formal failure to deliver a much more unlikely event.

If a gold-default would not occur from an official failure to deliver, what other default-like event could occur as these fraudulent markets finally, inevitably rupture? To answer that question requires taking a closer look at the real, physical bullion market versus the fantasy world of the banksters’ paper-bullion market.

We begin with the revelation of outspoken bullion-basher and head of the CPM Group: ex-Goldman Sachs banker Jeffrey Christian. In testifying before the CFTC, Christian blurted out what had previously been kept secret by the bullion banks: total “leverage” in the bullion market is somewhere at/above 100:1.

In other words, the total size of the “bullion market” exceeds the amount of actual, bullion being traded in these markets by a factor of one hundred. Here it’s important that readers have a more precise understanding of the nature of that leverage. It is not direct leverage. That is, it’s not a simple case of the bankers leveraging bullion positions in the paper futures market by 100:1.

Rather, the vast majority of this leverage exists in the previously-mentioned derivatives casino; where the manipulative bullion banks have permanent, gigantic, and ever-growing bets that bullion prices will decline. Much like the banksters have used their gigantic (multi-trillion dollar) bets in credit default swaps market to manipulate European debt markets – and bankrupt Europe’s governments – the banksters have done much the same in bullion markets with their derivatives bets.

There is, however, one enormous difference between the 100% paper debt markets and bullion markets. The bullion markets require physical bullion to settle all trades where buyers insist on taking delivery, and (as previously mentioned) the long-term consequence of under-pricing bullion is the collapse (to zero) of bullion inventories.

If large gold stockpiles mean that a formal default in bullion-trading could likely be forestalled for a considerable period of time, what other default-like event could detonate the bankers’ fraudulent paradigm of 100:1 leverage? In a word, “decoupling”. In Part II, I’ll explain this concept in detail, and analyze the dynamics which could lead to this event.

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written by Jeff Nielson, October 28, 2012

"No ex ante quantitative limits are set on the size of Outright Monetary Transactions."

You`ve gotta love the language they use. ex ante - before the event, they can create as much money as they like but might get told off about it AFTERWARDS! Just the ECB covering their asses and trying to maintain an increasingly thin veneer of financial responsibility.

"Best of all, "[t]he liquidity created through Outright Monetary Transactions will be fully sterilised." (=Overall supply of Euros will not expand.)"

Best of all!!??? This simply means that the respective governments are allowed to create all the money they like, AS LONG AS THEY SCREW THE PEOPLE.
Sterilisation means transferring money into the hands of the Bankers and their friends and imposing austerity fascism on the masses so that inflation doesn`t get out of hand, all though it IS leaking into the system which is why they need to conceal that too. If sterilisation didn`t occur, we would have hyper-inflation right now as opposed to when they decide to unleash it.

Yes, Dylan I originally resisted the urge to poke fun at the talk of "sterilization" in the earlier comment. However, since you raise the issue AGAIN, I'm going to have to toss in my own two cents as well.

Ultimately, if you sift through the banker double-talk; there is only one way these purchases can be "sterilized" -- i.e. NOT result in increased money-printing. This would be if they can SELL some of their existing holdings to other purchasers, to balance the new purchases they are going to make.

What makes the whole concept of "sterilization" so laughable is that if these EU nations already had willing buyers for their bonds (at current prices) then they wouldn't need this "unlimited bond-buying" program in the first place.

Thus all the rhetoric about sterilization REALLY does is to highlight the fact that these debt-markets are now an open Ponzi-scheme -- where they can only make the system SEEM solvent through use of their own 'Ponzi logic'.

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written by Dylan, October 28, 2012

"No ex ante quantitative limits are set on the size of Outright Monetary Transactions."

You`ve gotta love the language they use. ex ante - before the event, they can create as much money as they like but might get told off about it AFTERWARDS! Just the ECB covering their asses and trying to maintain an increasingly thin veneer of financial responsibility.

"Best of all, "[t]he liquidity created through Outright Monetary Transactions will be fully sterilised." (=Overall supply of Euros will not expand.)"

Best of all!!??? This simply means that the respective governments are allowed to create all the money they like, AS LONG AS THEY SCREW THE PEOPLE.
Sterilisation means transferring money into the hands of the Bankers and their friends and imposing austerity fascism on the masses so that inflation doesn`t get out of hand, all though it IS leaking into the system which is why they need to conceal that too. If sterilisation didn`t occur, we would have hyper-inflation right now as opposed to when they decide to unleash it.

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written by Jeff Nielson, October 24, 2012

The reality as I see it is that if as little as 10-15 million ounces of silver stand for delivery in any given delivery month, then the game will be over. Several silver analysts point to the greater than usual OI in December as a possible game changer. Others postulate that if it were not for the MFG grand theft last year, a default could have occurred then. Whatever the time frame, a silver default would expose and begin the unraveling of the grand financial Ponzi, and unfortunately, the elites could not allow that to happen. Woe be to the entity that actually stands for delivery of a massive amount of silver; a quick black helicopter trip to GITMO, or less than an adequately explained suicide. Note that the FEDs really had no case against the Hunt Brothers, but threatened them with prision (or worse) regardless.

Apberusdisvet, the "wildcard" in your equation is that we don't even know if the larger, more-sophisticated buyers in this market even WANT to see the game come to an end (and obviously the bankers themselves don't).

We may have some Faustian Deal on our hands, where the Big Buyers either tacitly or even formally commit to not triggering a default -- since that would mean the end of cheap gold/silver for THEM...

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written by apberusdisvet, October 24, 2012

Great post. The reality as I see it is that if as little as 10-15 million ounces of silver stand for delivery in any given delivery month, then the game will be over. Several silver analysts point to the greater than usual OI in December as a possible game changer. Others postulate that if it were not for the MFG grand theft last year, a default could have occurred then. Whatever the time frame, a silver default would expose and begin the unraveling of the grand financial Ponzi, and unfortunately, the elites could not allow that to happen. Woe be to the entity that actually stands for delivery of a massive amount of silver; a quick black helicopter trip to GITMO, or less than an adequately explained suicide. Note that the FEDs really had no case against the Hunt Brothers, but threatened them with prision (or worse) regardless.

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written by RudyVienna, October 22, 2012

hi rme16708,

which part of this is not understandable: "No ex ante quantitative limits are set on the size of Outright Monetary Transactions."

regarding sterilization:

"To the extent that such already existing deposits are simply shifted around and reclassified, the sterilization would be nothing but cosmetics. Overnight funds that are transformed into one week or two week deposits with the ECB are still available as collateral for refinancing operations."
http://www.acting-man.com/?p=19473

Rgds, Rudy

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written by rme16708, October 22, 2012

Yes, that quote is crystalline. But it is incorrect.

Here's a link to the actual statement from the ECB: http://www.ecb.int/press/pr/da..._1.en.html

Note that nowhere in that statement do you find the word "unlimited," with respect to OMTs or otherwise. In fact, the purchases of debt are conditional on fiscal adjustments. But even if Spain, Italy, etc. submit to adjustments, there's still no guarantee the ECB will provide unlimited financing. ("No ex ante quantitative limits are set on the size of Outright Monetary Transactions.") Best of all, "[t]he liquidity created through Outright Monetary Transactions will be fully sterilised." (=Overall supply of Euros will not expand.)

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written by Jeff Nielson, October 22, 2012

This is a direct quote from the September 6th edition of Der Speigel:

"...European Central Bank chief Mario Draghi on Thursday overrode German concerns and announced a program allowing for unlimited purchases of sovereign bonds from struggling euro-zone member states."

Sounds pretty clear to me.

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written by rme16708, October 22, 2012

Well, frankly, I was looking for the source of your "unlimited" statement. If you're basing it on the statements from the ECB in the beginning of September, then I think you misread what they actually said.

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written by Jeff Nielson, October 22, 2012

I'm curious as to your statement that the EU has announced "unlimited" money printing. What, precisely, are you referring to? OMTs?

To be precise, RME16708, what the EU announced was "unlimited buying" of member bonds -- in other words turning their own bond markets into an overt Ponzi scheme.

Since ALL these nations are debtor economies, the only way to FINANCE "unlimited" bond-buying is through unlimited money-printing. It is a necessary inference, and thus I hope you'll excuse the logical short-cut.

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written by rme16708, October 22, 2012

I'm curious as to your statement that the EU has announced "unlimited" money printing. What, precisely, are you referring to? OMTs?

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