Silver Price Discovery and The Illusion of Progress

As of the close of trading Tuesday, silver spot prices have rise through the key 50 day moving average, most likely the result of short covering by the managed money traders - along with new shorts added by the commercial traders.

In other words, the lock-down pattern of price discovery driven by these two speculative classes continues unabated and disconnected from physical reality.

Hence, I’ve chosen the image of this optical illusion to illustrate macro-market, as well as the silver market as a series of repeating of cycles that appear to be cohesive, yet do not represent reality.

Continuing with the theme covered in the last few weekly reviews at the 47Forum, technology evolves geometrically, while societies and their powerful controlling elites cycle between progress and barbarism.

Indeed, during these cycles, belief in progress creates the illusion that all we need to do is double down on the what seemed to ‘work’ before - disregarding the results.

From the highest echelons of academia, there is unwavering faith in human transcendence from our animal natures - which leads to drive for control at all costs.

No better example of this belief gone awry is the so-called advanced technology employed by the big banks, COMEX, and high frequency trading.

Alas, as Robert Oppenheimer said a short while before he died, "It is perfectly obvious that the whole world is going to hell. The only possible chance that it might not is that we do not attempt to prevent it from doing so."

It’s true, many ‘participants’ and ‘professionals’ must maintain their unwavering faith that the invisible hand is always at work despite blatant corruption, manipulation, or price fixing. Without it, they would be lost.

At some point in the cycle, things will break down and the silver price illusion will end.

Buried beneath paper price discovery, is the underlying reality of supply and demand.

For now, moving averages, volume, breadth, and momentum - often graphed in beautiful arrays of seeming rationality - remain the primary markers of technical analysis, the equivalent to the belief in transcendence of economic principles - or simply, supply and demand.

As if markets were rational to begin with.

As an extension of the human civility, they can’t be. But throw in the high priests or pied pipers of finance and the whole thing teeters on becoming an irrational debacle.

For the metals especially, but all commodities in general pricing is the manifestations of the play between two major classes of traders: The giant commercial banks and the large pool of technically oriented hedge funds.

Nothing else is having a significant impact from the outside. Despite a 'murder of crows', there are no exogenous events influencing the decisions of these traders.

Does all of this mean to suggest that we will go back to hard money as currency or barter?

Perhaps for a time, segments of society barter and the use of precious metals will be used as currency in an emergency.

But eventually, a new dawning will lead to new extensions of technology, tethered to the inherent scarcity of resources and commodities.

Technology doesn’t disappear with human digress.

Credit is like any other technology - it can be used for good or ill.

The history of money, barter, wealth transfer has been facilitated by credit technology.  

Technology grows geometrically, along with the power it leads to.

The power given to humanity doesn’t work this way.

As technology gives rise to power, power corrupts using that very same technology.

The telegraph gave enormous advantages to traders more than 100 years ago.

Today, it is not high frequency trading and algorithms that are to blame; it is the abuse of power and influence. The regulators caught up, inept and captured by the abuse.

In the case of the so-called modern era - convenience in fiat has backfired and stalled the underlying growth needed to serve the mountain of debt backed by faith, hope, and promises.

That is where we are now. The underlying disconnect is felt unconsciously by the greater society as a great unease, or anxiety.

A disappearing middle class, with the aged and disenfranchised at the bottom left suffer the fates of inflations.  At the top, the hollowed out elite must hold tight to the illusion that what they have is not ephemeral and therefore subject to implosion from deflation. 

And a belief that we can transcend the laws of supply and demand once again with this new form of electronic alchemy. 

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