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When Silver Sneezes, Derivatives Will Catch a Cold

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Published : July 12th, 2013
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( 7 votes, 4.4/5 ) , 4 commentaries
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Category : Gold and Silver

What would a silver market default look like? Look no further, because a silent default is happening now. The cash settlement mechanism for the default has been well-established and put in place for that purpose.

Cash settlement for now, nevertheless, without physical delivery for industrial users, would send shock waves throughout the industry. The drama is enough to trigger a panic, despite any ability of some users to switch or find substitutes.

Like all financial defaults, the break in confidence is what leads to the inflection point. Once the infection point is reached and people realize how much they have been taken for, a serious catalyst could trigger major defaults.

CDSs and the Derivative Bubble

Why would it trigger Credit Default Swaps? Basically, with derivatives amounting to trillions of dollars in paper assets, once the first domino falls, the entire world financial system will be in jeopardy.

What would it trigger? A financial and economic disaster the likes of which would make the experienced of 1920s Germany, Argentina and Zimbabwe to name only a few, seem like a walk in the park. Once the real value of fiat currency (ink and paper) is reflected in a loss of public confidence, all hell will break loose.

Of course, as most of you know, market manipulation can be effective at maintaining the disconnect — as long as it is profitable for those who control or enable it. Their plan, which we see unfolding before us, seems to be to shake out as many holders of real wealth as possible, with the intention of hoarding metals at lower prices.

What we are seeing now in silver, based solely on trading structure in what remains the most important price determining exchange, is a major shift perceived by most as a preparation for higher prices. Big shorts make a killing on buying back short positions at a profit, allowing the managed shorts to maintain an even larger position after covering and shorting again.

The monetary masters (authority) who care not about inflation— in fact, they benefit from it — because not only do they get first dibs on cheap credit, they control sentiment about its distribution (playing both from the buy side and sell side) - they also get to grow their balance sheets larger and larger.

This makes them the perfect partners of government who also benefit from the cheap money (low interest rates) and the protection of their legal tender. Which is why criminals like Corzine and Rich walk away scott-free.

Why Silver is not Allowed to Rise

If silver were "lost" to fundamentals, inflation fears would increase, putting (natural) pressure on interest rates. Higher rates would decimate economic activity and further compromise the already weakened economy.

Higher rates could also trigger interest rate derivative bets placed when the Fed demonstrated control by telegraphing low rates well into the future. Truthfully, they never had absolute control.

Always tenuous and dependent on how well they could capture their own member banks, convincing them to buy bonds, along with institutional investors, pension funds, etc. Ultimately, a derivative implosion would very likely distract most from the resulting return of fundamentals driving price.

Data and Statistics for these countries : Argentina | Germany | Zimbabwe | All
Gold and Silver Prices for these countries : Argentina | Germany | Zimbabwe | All
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In addition to running a busy medical practice, Dr. Jeffrey Lewis is the editor and publisher of, where he provides practical information for precious metals investors.
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You forgot the rules:

1. The casino never loses.
2. When the casino loses follow rule 1.

When you own the game it is easy to change the rules at will and trample anybody who is successful when THEY play by the rules. Worry about the day when governments send their central bankers to your door to confiscate your gold and silver at a price determined by them. Of course this will never happen...........will it??
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Confiscation will never happen................if you listen to at least one of the usual commenters on here. Huh-hum! I suppose those people think asset and dollar confiscation of all kinds will never happen either, even though its happening now. Nevertheless, I will continue to keep (if any) gold and silver I own hidden and to myself.
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I agree.

Have you heard that the bail in fiasco happening in Cyrus whereby banks are permitted to steal some of the money its depositors have in the bank is now spreading. Apparently the G20 group are moving this type of legislation around to other nations. So it looks like if a bank goes sour because of mismanagement then depositors are now responsible. I am wondering if the writing on the wall with regard to money printing money printing means that banks are looking ahead and positioning themselves to steal everybody's money. It looks like it. A good future for physical gold and silver if this happens.
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Oh, yes, I know about the Cyprus "Bail In". And, you are correct about the other central banks possibly following this practice. But it could never happen here, right???? The Feds are already stealing peoples cash savings by inflating it away. I know, the Fed says inflation is minimal but the fed doesn't live in the real world where a paycheck goes to buy less and less.
And just look at all the down votes we get for speaking the truth. Is that because of denial, or just plain willful ignorance?
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Oh, yes, I know about the Cyprus "Bail In". And, you are correct about the other central banks possibly following this practice. But it could never happen here, right???? The Feds are already stealing peoples cash savings by inflating it away. I  Read more
samking73 - 7/15/2013 at 5:20 PM GMT
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