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January 31, 2006

The Times They Are A Changing
by Rob Kirby

Bob Dylan wrote about this, perhaps unwittingly - and in doing so immortalized the saying, "and the times they are a changing". Amazing how words written so long ago are and can be so relevant today, no?

Another thing that can be duly said about change is that it's a highly ambiguous term: it could be positive or negative, adequate or inadequate, substantive or nominal. Positive, negative, adequate and inadequate - most would agree - are all terms that people can calibrate in their conscious minds. Substantive or nominal, on the other hand, present a bigger challenge.

At the extreme end of nominal change, for instance, we might speak of imperceptible or negligible variances that would perhaps be chalked up to either rounding error or lack of precision in the instruments doing the measuring.

At the other extreme - substantive - we find quantum change. Quantum change is sometimes described as occurring when epiphanies and sudden insights transform ordinary lives.

Well folks, thanks to the opaque policies of central banks where precious metals [gold and silver] are concerned - [even when clued in] one really has to "really dig" and connect a few dots to get to the core or truth of matters in this regard. In an un-backed fiat monetary system - with central banks around the world working in concert toward a common end [covertly selling, leasing, double counting and otherwise misreporting their stocks of metal] - it's no wonder the average Jane and Joe have little idea as to the fraud, namely unchecked, deliberate, uncontrolled printing of money being foisted upon them.

Uncontrollably rising metal prices are the chief SYMPTOM of excessive money printing/credit creation - period. This symptom has been repressed by perpetrators - unquestionably. The body of evidence supporting this assertion has grown to the point where it is quite simply "overwhelming". In fact, this body of evidence is so large - it's quite simply beyond the scope of this article, but I digress.

From where I sit folks, it would appear that the leadership of Saudi Arabia has had an epiphany. Of this - I am quite certain [though I'm certain it will never be publicly admitted] - let me explain:

Perhaps as far back as 2002, anecdotal evidence suggests that Saudi Arabia bought a significant quantity of physical silver on the LBMA [London Bullion ex-change] - most likely as a means to prudently hedge their significant U.S. dollar exposure/vulnerability. The spike in silver lease rates [see 2002 in chart below] are highly consistent with this assertion.

Rest assured, this spike was a result of a major, strategic and concentrated accumulation of metal in a tight physical market - just as the huge spike in lease rates back in 1998 was perfectly correlated with Warren Buffet's now legendary "massive" physical silver purchase. This categorically means that this particular accumulation was NOT MADE BY a Western Central Bank. Funny thing, due to the size of the accumulation - major players in the trade would necessarily have been aware of what was going on.

Because large quantities of silver are very heavy and cumbersome to ship around the globe - this physical metal was deposited at the Bank of England - in their vaults. Some time afterward, the Saudis requested that this metal be physically "shipped" to them. The Bank of England balked [refused to comply] at this request - because they did not have the metal - it had been leased out - [physically removed from the vault] and subsequently sold again to maintain/continue the active price suppression of silver bullion.

Ed. Note: Has anyone stopped to take stock of how soon thereafter - industry heavyweights Rothschild and AIG exited the precious metals trade, lock stock and barrel?

The Saudis became incensed with this action [epiphanies sometimes have a way of doing this] and "sold the lot" - in effect taking a forced cash settlement and began buying silver again in other jurisdictions where they felt assured of getting delivery of their purchases.

For the uninitiated, what I've outlined above is a precise of this account as it first came to me via Bill Murphy's Lemetropolecafe.com:

**You will recall our London silver source feeding us information about Saudi buying and recently (two and three weeks ago) about small supplies of silver constantly showing up. Here's the story on this as this same veteran dealer knows it ...**

**Twelve to 18 months ago the Saudis acquired sizeable amounts of silver and stored it England. However, when they asked for delivery the Bank of England balked because they didn't have it to ship, or would not ship it out of the country because it may have been used for other (dual) purposes.**

**The angry Saudis dumped this stash in England and began buying elsewhere ... probably Dubai, Turkey, etc., and have been accumulating silver in areas where they have been assured of delivery.**

**The London silver shorts have been dribbling this Saudi silver into the market whenever silver rallied, which is probably why silver has not been able to gain traction until the past few days. Word is this supply has run out. This might account for why the price of silver has finally done what many of us thought it would do earlier. **

**We know the gold shorts are experiencing their own Commercial Signal Failure and a number of them have begun to become panic buyers. It is very likely we are now seeing the same drill in silver. The silver shorts are going to get their lunch handed to them. Makes my day!**

And here's metals lease watcher/expert Rhody's take on the situation:

This is clearly a default in silver by the BANK OF ENGLAND. When I first read this, I thought the Saudi's had bought futures and then were denied delivery. Nope. The bought actual silver and deposited the metal for safe keeping with the Bank of England. Then they wanted to remove it again, and wonder of wonders, it was no longer there! Could the Saudis have made the mistake of storing their metal in an unallocated account????? If they did, the Bank took the opportunity and leased out the metal, perhaps only on short terms, but the point is, the Bank no longer had the actual metal. The Saudis then wanted their silver, found it was gone, got mad and sold the lot. It looks like the Bank of England took back the leased metal and then sold it again. This capped the silver market at the $8.90-$9.20 range for the last year. Notice the double sale. It was the same metal, but it was first leased and sold, and then got back, and then sold again. You can bet that the metal that the Bank of England did finally get returned was leased from a third party. See how leasing caps prices?? It always entails a double selling of the same ounce, all the while claiming the metal is still in the original vault. In this way, world stockpiles appear stable, yet a hoard of selling manipulates precious metal prices. Add to this the 50 fold selling in the futures markets and it's a marvel that gold prices didn't reach $50/oz back in 1998. I heard Wall Street analysts predict this! I also heard 50 cent silver bandied about.

Well here's the reality. Gold central bank stockpiles are likely down to 12,000 tons, not the 32,000 tons they say they have, and world silver stockpiles are under 200 Moz, and very little of it is held in the official sector. I think there's a 10,000 short (through leasing) in gold and a 1.1 billion ounce short (through leasing) in silver. Of these two shorts, the one in gold may be forgiven by the central banks, but the one in silver, is going to make the original owners real pissed, just like the Saudis, when it isn't returned. Do you think the Saudis learned never to trust a central bank, particularly one in the G8???? You bet, but there are more suckers where the Saudis came from because leasing continues. Here's some investment advice (and you should know by now that I rarely give investment advice), buy real metal (not from a bank) and hold it (not in a bank) till you think its time to dispose of it and then sell it (but not to a ________). This is a fill in the bank question.

So, whether or not you feel I've put forward a solid enough case to make the claim that The Bank Of England defaulted on an obligation, you be the judge, but I would like you all to now take a look at the following graph [with my explanation/interpretation underneath]:

Chart compliments: www.kitco.com

Interpretation:

Jan. 02 - Sept. 03	Silver begins climbing out of basing pattern in response to tight physical market and Saudi buying for diversification purposes
Sept. 03 - Jan. 04	Saudis begin asking for their metal to be shipped to them
Jan. 04 - May 04	BOE acknowledges to Saudis they do not have metal - refuse delivery [This timing just happens to be coincidental with Rothschild and AIG exiting the precious metals markets - lock, stock and barrel - me wonders if they might have "sold" subject metal to Saudis?]
May 04	Price of silver plummets as Saudi sells physical [cash settlement]
Sept. 04 - present	Effects of Saudi dump wear off and Saudis resume buying

So, there you have it folks, the times - they really are "a changing". I would have it that in the very near term - the situation outlined above combined with GATA's efforts as well as the commencement of trade of the Iranian Oil Bourse [Quantum change] - could likely and logically lead to a Paradigm Shift - where the rest of the world's sovereigns have their epiphanies too - signaling the "undoing [end] of U.S. Dollar hegemony".

In 1962, Thomas Kuhn wrote The Structure of Scientific Revolution, and fathered, defined and popularized the concept of "paradigm shift" (p.10). Kuhn argues that scientific advancement is not evolutionary, but rather is a "series of peaceful interludes punctuated by intellectually violent revolutions", and in those revolutions "one conceptual world view is replaced by another".

Think of a Paradigm Shift as a change from one way of thinking to another. It's a revolution, a transformation, a sort of metamorphosis. It just does not happen, but rather it is driven by agents of change.

Furthermore, I would suggest that conventional technical analysis will completely and utterly fail to accurately predict this event. Technical analysis is comprised of largely "linear thought and assumptions". My sense is what we are about to experience is quantum or paradigm shift. Existing means of measurement are as meaningful as holding a ruler up in the night sky to measure the diameter or mass of a star. My best guess is that the "lie that fiat currency has become" will not end on a good note. Deceptions or scams this large seldom do.

The reality is that so few of these paradigm shifts ever occur to give anyone the opportunity or reason to analyze them. Ironic isn't it - it's the ultimate speculation.

Barring war with or invasion of Iran - I'd bet a roll of quarters this could all go down by [or about] March 20, 2006. In any case - whether or not Bob Dylan was really right when he said, "the times, they are a changing"? Who knows? The real answer is probably blowing in the wind.

Rob Kirby
Kirby Analytics