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Silver Prices and the Mortgage Market — A Tale of Two Interventions

Commodities / Gold and Silver 2013 Mar 02, 2013 - 12:21 PM GMT

By: Dr_Jeff_Lewis

Commodities

A comparison of two types of intervention has become interesting with respect to silver.  First of all, Central Planning support of the mortgage and housing markets has already reached the supernova stage.

There seems nowhere left to go, as real interest rates are already negative.  Furthermore, over 90 percent of the mortgage market is now backed by Federal agencies.


The Fed has already pledged to buy trillions of dollars in mortgages to help prop up the market artificially.

Results of Mortgage and Housing Market Intervention

The misguided housing ownership meme continues to dominate public thinking, despite the fact that it enslaves people into paying a mortgage for most of their adult life.

Basically, four years of massive official intervention has stripped the mortgage and housing markets of the ability to price risk, capital and assets efficiently. This has created a culture of supreme complacency, as participants have come to believe that interest rates will stay near the zero level for the foreseeable future and that Central Planning intervention is permanent.

In addition, the widespread perception of lower interest rates for the foreseeable future has had the opposite effect of what was intended.  Instead of investors rushing to equities for yield, the average retiree or soon to be retiree, must revise their plans based on a very likely reduction in their anticipated interest income, although few tend to see it this way.

The Manipulated Silver Market

Most investors tend to view silver in much the same way, almost as if the day to day paper silver futures prices has anything to do with the actual, underlying reality of supply and demand for physical silver — other than perhaps determining the retail price for silver.

Nevertheless, the manipulation of the silver market has allowed large interests to keep paper silver prices artificially low by selling futures contracts that do not require shorts to deliver physical.  The resulting volatility, especially to the downside, has also made many investors wary of buying silver.

This situation is actually providing a short term window of opportunity for silver investors. Just ask those who bought silver at $4 per ounce a mere ten years ago — they are very happy campers today.

The Result of Silver Market Intervention

Years of unpublicized — yet effective — intervention in the silver market has resulted in a situation where the commodity is mispriced, overlooked, scorned and commonly ignored by the average investor.

This has increased the danger of a violent and disruptive move to the upside as the risk of an industrial-led buying panic has blossomed. Such a scenario could result in major business disruptions because industrial concerns typically do not take into account the systematic 'mispricing' of silver, and they also remain dependent on just in time delivery.

Furthermore, the results of silver market intervention have been the antithesis of what the intentions seem to be. The strong paper dollar policy was promoted at the expense of radical price control as the money printing presses continue to roll. The destruction of wealth right before the mainstream's eyes has become the norm as inflation is officially permitted and even sometimes promoted as a sign of a ‘healthy’ economy.

Ironically, silver and gold may be considered commodities, but they have never completely relinquished their traditional monetary roles.  The fact is well documented by GATA that the gold price is forever on the minds of central bankers. Nevertheless, Ted Butler's decades-long analysis and clear documentation of the ongoing silver price manipulation remains suspiciously unanswered.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2013 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

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