Silver Prices and The Management of Perception

Silver prices and the management of perception economics, that's basically what MOPE stands for. I'm not sure if it was Jim Sinclair that coined that acronym. I think it was, but that's where I heard it for the first time. 

It's appropriate to have a subsection of propaganda for economics and finance, so this management of perception economics. It’s basically a system or an extension of generalized propaganda. You can also call it social engineering. You could call it a public relations campaign. In fact, public relations is just a PC term for propaganda. The specific type of propaganda that is associated with finance and economics is this management of perception economics. 

You might also call it behavioral economics or Keynes-ism. Behavioral economics is really a pseudo- ... It's a psychology of why people make certain decisions, human behavior and the assumption that if we can create the conditions that people will behave in a consistent way.

It's quite absurd, almost as absurd as the underlying foundation for all of this. The need for this is because we have a system that is dependent on exponential growth and is fed by synthetic inputs. That's just probably a too-fancy of a way of saying basically we have this system that the only way that it can keep going is if we keep printing. 

Synthetic inputs are money printing, or it could be credit, or it could be all sorts of basically essential ingredients or instruments of this great financial-ization that has occurred since we've lost the tether, since currency has become purely fiat. 

It has led to the evolution and the growth of this massive system that must have this continuation of inputs. Therefore, because it's so detached, it needs some sort of mechanism, some sort of behavioral system that can keep everyone in line so that the players who are involved can whistle past the graveyard even though many of them know what's going on. Because they have a vested interest, they won't say what's really happening.

Basically, there are a number of ways that it manifests in the commodities markets or in silver, for example. First of all, it enables the interaction that we've been discussing between the commercial banks and the managed money traders while allowing the regulator to look the other way. 

In fact, it creates a revolving door where you've enabled this interaction. Now you have this revolving door where regulators are writing the laws, these complicated laws. These regulators write the laws. The laws are so big and complicated that they're then hired by the banks in order to interpret the laws. That’s the revolving door. They're basically the same group of people.

It also incites investment banks to bet against the rise of commodity prices. We've talked about this from Peter Warburton's essay. It's a key ingredient for what the Fed is involved in doing. The reason this is important is that this incitement to bet against the rise of commodity prices ... Commodity prices would rise in a natural world based on all these synthetic inputs that are being put in, but they are prevented from rising because they're incited to bet against this rise and that leaves the independent observer, the 99.9%, confused and unsure about the value or having no benchmark in order to value what the underlying currency is worth. That leads to this perpetual confusion.

What this also does is, this management of perception economics, it justifies intervention and that intervention could be anything from the exchange stabilization fund which was created in the aftermath of World War II. It has direct influence on the gold market. 

Today we have the plunge protection team or the president's working group that evolved out of the late 80's in order to intervene in the markets. They sound like conspiracy theories, but they’ve been written into law. They're part of the system, so this whole behavioral economics, this MOPE system, justifies this intervention.

It also creates these veils of obscurity. We have closed door meetings. I don't know if any of you have ever done this, but I found myself, I couldn't believe it. The other day, I was doing a little bit of research for this and I happened upon the Federal Reserve's website. They have an archive section with transcripts from meetings that occurred 5 years ago. They don't release them until it's been 5 years, but you can read the transcripts of these meetings that occur 8-10 times a year. I decided to read the one from the meeting that is usually the most important meeting, occurs in December. I read the one from December in 2008 and I was blown away. Whether it was a distraction, maybe, I spent an hour. It was a 242-page transcript of this discussion and most of the discussion, 90% of it was, "How do we convey this to congress? How do we present the message for the public? How do we present the message for the banks?" It's all about messaging. It's all about this management of perception. I couldn't believe it.

I suggest if you have some time and you're interested, it's actually quite fascinating to read this and to realize that these are not omnipotent people. These are academics having these discussions. This was in the midst of a crisis, but there was a lot of confusion and a lot of uncertainty about what they could do. It's actually quite insightful to go back in time, read those transcripts, and with the knowledge of what's happening right now, to go back there and check them out. I suggest doing that.

Another thing that management of perception economics enables, really, is control. I mentioned this, the whistling past the graveyard. It extends this whole system, this Ponzi into the future. We pretend. We pretend like ... Not "we," but people, the people who are involved pretend like nothing's wrong. “This is all quite normal. You should do this with your money. Your money should go into the stock market. Bonds are the place to be”. When in reality, we're always walking on this tight rope. 

Think of it as all these little bubbles that we've experienced as just little bubbles within this much bigger bubble, this larger bubble that grew out of.  

What happened in 1971 was the end point of a gradual move away from a commodity-backed currency. We haven't been on a real gold standard since the late 1800's and so it's been a gradual move away from that over time and this is what we're left with today.

A couple of things that I thought that would be interesting, some examples of how this management of perception economics works, there's 2 examples. 

Many of you probably heard, maybe in 2007-2008, during maybe in 2009, we had this during the crisis. There was this idea being floated about. It was the idea that because the markets had crashed, many people had lost a good portion of their retirement money, like if you had a 401(k) and you lost half of its value in the market, that wouldn't have been uncommon. There was this idea floated around and mostly it was picked up by the fringe, the people who were discussing this kind of stuff. 

The idea was that you can take your account and convert it into a government account or a government bond program and get a fixed rate. It's safe. It's a safe haven. You don't have to worry about the volatility of the market and we can do that for you. It was this radical idea that people laughed at and thought there's no way that they would ever do this, but lo and behold, that was part of a system, a system that was announcing early, floating a concept, and then eventually that's basically what myRA, the new government IRA program, the My IRA program that was announced about a year ago, it may be 2 years by now. Time flies. Essentially, that issue was floated as an idea. It was thought of as a conspiracy idea. No one would ever think to do that, but now this program exists and it is a way of capturing more of the so-called low-hanging fruit, the retirement money that's out there, the trillions of dollars that could be used instead of these synthetic inputs to keep the whole Ponzi alive. 

You can actually use this low-hanging fruit. That's the confiscation, the willing confiscation in a sense because you can use behavior to convince people that they need to do this out of fear or out of their, for their own good, or for their own safety. That brings up another issue that I want to share with you about something that I've been researching and I want to present to you in a format like this because I think it's fascinating and has a direct relationship to silver, to where we may go as things begin falling apart.

There has been this call and it's getting louder and louder, to abolish cash, to abolish paper money from the system, to make all money electronic. I know many of you have heard this, probably another announcement from some high, from some figure in the upper echelons of academia comes out. It's probably once a week or even more than once a week, the two major figureheads Ken Rogoff and Willem Buiter, who's at Citigroup, have written op-eds for the Financial Times and also the Wall Street Journal. This is coming as the Fed has run out of tools. They're talking about raising interest rates, but really, they've hit the lower bound. They can't go below zero. 

QE doesn't work because the real issue with quantitative easing was that it was competing for the collateral, the treasury bonds that are used for collateral in the repo market. They were causing an underground liquidity crisis. Most people didn't see it, but it was happening. The treasury borrowing advisory committee was raising red flags for months and so that program ended and now they're talking about negative interest rate policy. Of course, I should come back. Forward guidance, this idea that CPI and unemployment could be the gauge where decisions are made, everyone just about knows that CPI and unemployment are just complete farces just in terms of the way that they use them, so they're not really great policy tools anymore. I think most people are aware of that.

Negative interest rates, which is also an absurd idea to begin with, they seem to be floating this as an idea that's coming. The only way they can really get away with it is if they can prevent people from taking money out of the bank, because if you're going to be punished for keeping your savings in a bank or anyone is going to be, ultimately people will begin pulling money from the bank and just keeping it at home. To prevent them from doing that, one idea is just to abolish cash, but the way that they're presenting this is that they're presenting it in conjunction. They're using the arguments. They're bringing in the war on terror or the war on drugs: drug dealers use cash predominantly, a terrorist could use cash, justifying this as a way to protect you, as a way to keep everything safe, when obviously there are many things that can go bad, go wrong with this. 

Obviously, privacy is gone because now any transaction that you make is monitored. What are people going to do? What would the impact be on small businesses? How are people who are not comfortable using electronic money? The point of this is that this is being floated. This is something that I believe they will try to seriously use a kind of intervention or as a policy tool in the future. The irony of all this is, like many of these tools, they will backfire because if cash is suddenly made completely electronic where they abolish it all together, what are people going to be faced with? There's always going to be people who realize they need to move around the system or be out of the system and it could be a way to stoke investment demand, which the last thing any of the powers that be want is to awaken the masses to the underground investment demand that always exists for the precious metals.

With that said, I will end that right there and take any questions that you have. I appreciate you for listening and going through those stories with me, so I'm going to check in with you. 

For more information and ongoing discussion, check out or the The Lewis Mariani Silver Letters

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