Silver Cornered By Hunt Brothers? That's NOT What Happened | Mike Maloney

The Hunt Brothers, Silver, and Potential Gold Market Intervention

Key Concepts:

• Cornering the Market: Attempting to control enough of a commodity’s supply to manipulate its price.
• Fiat Currency: A currency declared by a government to be legal tender, but not backed by a physical commodity.
• Margin Requirements: The amount of equity an investor must maintain in a margin account.
• Position Limits: Restrictions on the maximum size of a position an investor can hold in a commodity.
• Liquidation Orders Only: A trading restriction allowing only the sale of a commodity, prohibiting purchases.
• CPM Group: A commodity research and consulting firm.
• Commodities and Futures Trading Commission (CFTC): The US government agency that regulates the derivatives markets.

The Misconception of the Hunt Brothers’ Silver “Corner”

The speaker challenges the widely held belief that the Hunt brothers “cornered” the silver market in 1980, leading to the price spike. He asserts that this narrative is perpetuated by analysts, like one at Goldman Sachs (as shown in a Bloomberg chart), who lack a thorough understanding of the historical events. He emphasizes his own extensive research, involving a “stack of books almost a foot high,” including the book Manipulation on Trial, to debunk this claim.

Jeff Christian of CPM Group is cited, stating the Hunt brothers likely only added 50-75 cents to the silver price. The speaker argues the primary driver was a shift in public preference from gold to silver, a trend amplified by the increasing accessibility of silver trading globally. He notes that in January 1980, approximately 10% of the world’s population participated in silver trading (primarily in North America and Western Europe where it was legal), compared to 100% today due to population growth and wider access.

Potential Federal Reserve Intervention & Scapegoating

A central argument is that the Hunt brothers were used as scapegoats to control gold prices and protect the US dollar. The speaker posits that Paul Volcker, then Chairman of the Federal Reserve, was involved in the CFTC’s imposition of restrictive rules on the Hunt brothers – raising margin requirements, setting position limits, and ultimately issuing “sell orders only.” He questions the logic of allowing only sales, arguing this inherently forces a price decline.

The speaker theorizes that Volcker intervened because gold was experiencing a “runaway” price increase, threatening the dollar’s stability. He suggests the Hunt brothers’ situation was deliberately exploited to create an example and discourage further gold price escalation, as silver and gold traders often operate in close proximity (literally, with the silver and gold pits being adjacent on trading floors) and would likely react to actions taken in either market. Gold and silver prices peaked on the same day, supporting this interconnectedness.

The Hunt Brothers’ Initial Motivation & Silver Logistics

Nelson Bunker Hunt initially believed the US dollar was destined to fail, given its relatively short history as a fiat currency (eight and a half years at the time). He began accumulating silver, transporting it via three 727 airplanes to LaGuardia Airport in the middle of the night, guarded by his security team (“Circle K Cowboys”), and storing it in underground vaults in Switzerland. This detail is sourced from an article in Playboy magazine called “Silverfinger,” which the speaker deems “highly accurate.”

Silver vs. Gold Market Dynamics

The speaker highlights the significant size disparity between the gold and silver markets in 1980 (originally 300 times larger, though the exact ratio in 1980 is uncertain). This made the silver market easier to manipulate. Furthermore, unlike the gold market, the silver market had a concentrated position held by the Hunt brothers, making them a convenient target for intervention. The speaker believes the intervention in the silver market served as a warning to gold traders, prompting them to also sell, contributing to the simultaneous peak and subsequent decline in both metals.

Critique of Financial Analysts & Propaganda

The speaker criticizes financial analysts at major firms as “bungling idiots” who perpetuate “myths” without proper research. He frames their analyses as “propaganda” that obscures the true historical context.

Notable Quote:

“That anybody can sell silver, but nobody can buy silver. That is an order that says until this order is lifted, the price of silver must fall.” – Speaker, describing the impact of the “sell orders only” rule.

Technical Terms:

• Fiat Currency: Currency not backed by a physical commodity, its value derived from government regulation or law.
• Margin Requirements: The funds an investor must deposit with a broker to cover potential losses in a leveraged trading position.
• Position Limits: Regulatory restrictions on the maximum size of a trading position to prevent market manipulation.

Logical Connections:

The speaker builds his argument by first dismantling the common narrative of the Hunt brothers cornering the silver market. He then presents an alternative theory – that they were deliberately targeted to control gold prices and protect the US dollar – supported by evidence of Federal Reserve involvement and the simultaneous peak and decline of both metals. He emphasizes the importance of understanding the historical context and the dynamics of the gold and silver markets.

Conclusion:

The speaker argues that the conventional understanding of the 1980 silver market events is flawed. He proposes a more nuanced interpretation, suggesting the Hunt brothers were not market manipulators but rather scapegoats in a larger effort to stabilize the US dollar and control gold prices. He stresses the need for critical analysis of financial narratives and thorough historical research.