Wallace, Idaho — It is fun (is it not?) to observe the wailing and gnashing of teeth over in Coeur d'Alene, that very small burg located just east of Huetter, over the impending departure of Coeur d'Alene Mines from the Lake City's environs to that mining capital of the world, Chicago.
Why anyone would want to move a mining office to the murder capital of the world is beyond comprehension. It sure worked for Boeing, didn't it?
Moving Boeing's executives that far away from Boeing's engineers in Renton, Everett and Seattle produced the new Boeing 787, the so-called “Dreamliner” — “Screamliner” in pilots' sardonic parlance — which fleet is at present grounded worldwide after a few months' operation due to some unexplained nasty battery fires in the all-plastic airplane.
From the gimlet-eyed view of a Wallace denizen, Coeur d'Alene Mines' move out of its namesake city is pure karma. When Coeur and Hecla bailed out of Wallace for the greener grass of Coeur d'Alene in the 1980s, the Lake City cheered and rolled out the red carpet. Little consideration was given by the Coeur d'Alene Chamber of Commerce to the pain visited upon Wallace by these moves. So, no sympathy here.
Actually, Coeur d'Alene Mines wasn't much missed here. It was a storefront, clipping and cashing quarterly coupons from Asarco and not devoting much in the way of talent to the community.
Chicago Mayor Rahm “never let a good crisis go to waste” Emanuel, inarguably the most vicious political hack of this decade and Obama's former chief of staff, has rolled out the red carpet for Coeur the same way the Lake City did decades ago.
A word to the wise from Wallace to Coeur d'Alene: You won't miss Coeur d'Alene Mines. A word to the wise from Wallace to both Coeur d'Alene Mines and Chicago: Be careful what you wish for.
Selah.
Last week we were talking about the weird market for silver — how the supply-demand structure is counter-intuitive and not price-driven. Silver comes out of the ground at a fairly even rate every year regardless of whether it is selling for $35 an ounce or $3.50.
But is silver's price rigged? Do a few central banks short-sell silver (and gold) to supress the price, in order to prop up the tattered U.S. Dollar, the GBP, or the Euro? Or does silver's price fairly reflect market interest, and follow the laws of supply and demand?
Interesting question. Many learned friends of mine, including CPM Group founder Jeff Christian, believe silver is fairly traded and its price reflects reality. Many other learned friends, including Canada's esteemed investment guru Eric Sprott, point to the fact that the equivalent of the annual world's production of silver is traded on paper back and forth among banksters every day in Chicago and New York are convinced the price is rigged.
Me? I'm with with my friends.
What I can tell you, from the perspective of the Wallace gimlet eye, is that silver gets no respect from the mainstream media. It is an article of faith on the business “news” channels that at some point in the late 1970s and early 1980s that the Hunt family tried to corner the silver market and failed, and as a consequence silver jetted to $50 and then crashed to $4.88.
Nothing could be further from the truth.
All the Hunts ever did was ask the exchanges in Chicago and New York to deliver the physical silver their futures contracts entitled them to. This caused a panic in the silver pits. See, you're supposed to keep playing the paper game, rolling over your contracts from one quarter to the next, taking your profits and losses. The poofters at the top of the food chain forget that, once in awhile, someone takes you at your word.
The short-sellers to the Hunts (including their own brokerage, Bache, Halsey Stewart) didn't have the physical silver promised by their contracts: They could not deliver. So there was a worldwide scramble for silver to fulfill the Hunts' orders.
It's kind of like, if you took money from a guy who wanted to buy a house from you in the future, and now in that future he wanted that house but you didn't have a house, now you had to go out and buy one. Other guys who had made that promise are also looking for houses. The price of houses goes up.
Bache was headed for bankruptcy for betting against the Hunts. That would have liquidated the Hunts' silver contracts. So Nelson Bunker and brother Herbert Hunt bought Bache to preserve the integrity of their silver contracts.
The rule back then was that if you bought a public company, you had to hold it for six months.
That's when Fed Chairman Paul Volcker smelled blood. After all, Bunker Hunt had proposed re-introducing silver as a currency in competition with the Fed's IOUs. Faith in the U.S. Fednote was at an all-time low.
So Volcker tweaked the Chicago and New York boys to raise the margin requirements — the down-payments silver players have to put down — beyond the range of the Hunts' ability to pay. Oh, the Hunts had the money all right, but it was tied up in rescuing Bache and under the six-month rule they could not sell Bache could not cover their margins.
The Hunts had to put up their silver as collateral to keep out of debtors' prison. The price cratered, but damn! We saved the dollar.
That's what really happened.
So is the price of silver rigged?
Nah.
