Many of our listeners are aware that one of our objectives is to expose the nonsense that many of the gold and silver pumpers put out there. We do this, not because we are anti-precious metals, because we have regularly confessed to not only owning both gold and silver, but we are frequent buyers of it too.
We expose these people because of the misinformation they put out there – sometimes mistakenly – we can all make mistakes Afterall – but often deliberately – because some of these pumpers are desperate to sell their gold and silver stocks, wares and programmes.
It has always amazed us that that the very people who advocate that gold and silver are about to go hyperbolic any day now, and that the fiat dollar is going to become worthless, perhaps by tomorrow, are the very people selling, that about to be hyperbolic gold and silver, for fiat worthless dollars – and some even sell it for cryptocurrencies – the very creation which, in the past 5 years, have taken monies away from the gold and silver market.
Anyway, that intro aside, let’s take a brief look at Silver Doctor’s interview of Harvey Organ published on 26th June entitled:
‘$20 silver blows-up the banks before the end of 2019 / Harvey Organ’
The premise of this video is that if silver rises to $20 all of the banks blow up! The reason being that there are so many derivatives held by a number of the major banks that $20 silver is sufficient to cause these derivatives to collapse, and that is essentially the end of our banking system.
So, let’s look at this a little closer.
First of all, a derivative can be defined as an arrangement or product (such as a future, option, or warrant) whose value derives from, and is dependent on, the value of an underlying asset, such as a commodity, currency, or security.
So, we have 3 questions:
- Why should the rising price of an asset which forms part of a derivative be negative for everyone? – after all – from a speculative point of view those who buy these derivatives are hoping that the underlying asset price will rise in the future, whereas those who sold that derivative are hoping that they got the best price for it now. From a hedging point of view, which was the main reason for the creation of derivatives, (though it did subsequently get out of hand with speculators dominating) – any rise or fall will serve the purpose for why it was created. It looks like Harvey is substituting the word derivative for puts and then pretending that financial institutions only sell derivatives and do not buy any themselves.
- Why $20? Why not $21 or $19 – on what arithmetic calculation did Harvey Organ base his $20 on? Even the world’s most eminent economists do not know the exact number of derivatives in circulation, let alone the number of silver derivatives. We are fascinated how Harvey, who is no doubt a mathematical and financial expert – otherwise why would Silver Doctors interview him and not question or push back on any of his statements; as they are clearly in awe of his genius, yes we are fascinated, on how he has come up with this death pill $20 figure. Perhaps you could tell us Harvey?
- Being generous to Harvey we will assume he is right. $20 is the magic silver pill to end the financial system. So, when silver hit $20.21 on 11th August 2016 or $20.71 on 2nd August 2016 – why did the economic system not collapse then? Or earlier, between 2011 and 2013 when it was as high as late $40’s and still in the mid $20’s towards the end of that period? Has the quantity of derivatives risen so much in the past 3 years that it is only now that the $20 death knell kicks in? We suspect not.
OK, Harvey’s next theory is that in the early 2000’s China gave all of its silver to the US and agreed to swap it for cheap gold as the US ran out of silver in 2002.
“China did not know what to do with silver and US ran out of silver in 2002”
He then points out that JPMorgan has been acquiring silver in vaults owned by China in the US with a view to returning it at some very near stage in the future. That’s very kind of JPMorgan isn’t it – ironic too that many conspiracy theorists do not believe JPMorgan holds any silver in its vaults – a paradox really don’t you think?
Now we have tried researching a number of documents dating back to 2002 and cannot find any inclination that the US had run out of silver and that China bailed them out. It could have been a subversive operation, but wouldn’t you think that if there really was a shortage, the price of silver would have been much higher than the average $4.50 oz that the price stood at then?
Harvey then goes on to mention that Deutsche bank are in serious trouble with their derivatives (that is true) and that they are massively short in the silver metal. OK not sure where the evidence for that is, but we are aware they have been accused of precious metal price manipulation, so let’s give him that. But then he adds:
“Deutsche Bank has more derivatives than JPM they made a massive bet on fixed income which destroyed them.”
So, is the problem silver derivatives or fixed income products? We couldn’t actually work that logic out so let’s leave that there for now.
Now our favourite bit:
“COMEX silver is gone – it’s all been hypothecated (took barcode numbers sold it and given a sticky note) – every oz of gold at COMEX is unallocated.”
Are we talking gold or silver or both? He seems to move seamlessly from one to the other.
Let’s move on a bit
“Sovereigns will attack for gold. Before they sold it like Canada and Australia – they will attack the exchange for physical. Banks will scurry around the planet looking for metal.”
We thought he was talking about silver?
Let’s move on:
“China – they will stop their rare earths unless they get their silver back.” – ah good back to silver
So China will stop sending their rare earths to the US unless the US returns the silver they borrowed in 2002 because they had run out, for which there is zero evidence of this transaction, and the silver to be returned is currently held by JPMorgan, which some conspiracy theorists believe do not hold any silver, in the very vaults owned by the Chinese. – Yes, that’s clear.
So in summary, we think Harvey is trying to make the point, that COMEX which is predominantly a paper market – we all agree on that – will have to deliver physical silver – because sovereign States will demand the physical as they will lose confidence in the paper contracts.
OK for those new to this area, COMEX is the primary futures and options market for trading metals such as gold, silver, copper and aluminum. Most trades are made simply on the promise of that metal and on the knowledge that it exists. This is not to say that a trader or hedger cannot take delivery of physical metals through the COMEX, but less than 1% of the trades actually go to delivery.
Now Harvey is saying that there is enough potential for COMEX to default on delivery and that at some point, the prices of precious metals must go much higher. According to the imagined scenario, a large number of futures contracts presented for delivery would force the COMEX to go into the spot market to buy the metal it needs to deliver on those contracts.
The extraordinary demand would quickly push gold or silver higher, forcing the COMEX to default when it cannot afford to pay for or even find the gold or silver it needs to fulfil its contractual obligations.
However, the nature of futures contracts and the COMEX rules make this outcome very unlikely and what everyone misses is that in such circumstances, it is possible that the futures exchange could just elect to settle contracts in cash in a worst-case scenario. So that this doomsday scenario situation can actually be resolved with cash.
Now Harvey further comments:
“Have patience certain people are going to take the COMEX on – attack the exchange for physical” and say I’m standing for delivery”
Frankly will have a much more limited effect that he pretends.
Now for some pumping factual errors that Harvey Quotes:
“Demand over supply is 380 million ounces – its huge”
Wrong!
Physical demand over supply in 2018 was 29.2 million ounces not 380 million, and even if you accounted for ETP and Exchange Inventory Build the excess of demand over supply was 80.1 million ounces less than a quarter of what Harvey quoted. In fact, the largest deficit over the past 10 years was in 2013 at 136.6 million physical deficit and 147.9 million total deficit – still a far cry from his exaggerated 380 million which we believe he clearly made up.
Secondly, he states
“India is massively bringing in silver – they are having trouble getting gold – about 400 million oz came in this year to India.”
So, we checked the Silver institutes figures and they quote that India acquired last year:
silver jewellery – 76.5 million ounces
silver investment bars – 69.4 million ounces
silverware – 41.8 million ounces
This accounts for 187.7 million ounces a large amount indeed but less than half of the 400 million ounces that Harvey quotes, unless of course he is also aware of secret ships carrying silver to India as he alleges China did to the US in 2002.
So, in conclusion, Harvey predicts that if silver rises to $20 “all banks will blow up”
He also adds that China is demanding its silver back, and will shortly allow the gold price to rise to $2,000 and then overnight declare it at $10,000 – they will quote:
“Raise the price now to $2,000 and then overnight to $10,000 after a bank holiday – and we are going this year…… I think it’s going this year”
So, there you have it – $10,000 gold this year and Harvey adds that when that happens the gold to silver ratio price will be 10:1 – so it looks like silver will be a $1,000 an oz.
How did the Silver Doctor’s interviewer push back?
With the words:
“We know the physical market is going to blow up the derivatives and it’s the silver market which will cause the blow up. “
Yes, at the time of writing, gold is standing at $1390 an oz and silver at $15.26 a GSR of 91. We are all indeed looking forward to $10,000 gold and a $1,000 silver by the end of 2019, and if he is right, we will produce a video acclaiming his genius but please if gold is around $1500 or less and silver is $15 or less, will you please stop listening to these people?
Though we admit we could be wrongly maligning him after all he does quote in his interview:
“I carry on discussions with a lot of guys……..I’ve been involved with a lot of guys and we’re pretty sure of what is happening.”
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