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Millions of people have heard the official story of how the larger -than-life Hunt brothers drove the

price of silver from under $2 an ounce to over $50 in an attempt to corner the market. At one point, the two colourful Texas oilmen owned the rights to more than half the worlds silver supply. But then it all came crashing down on Silver Thursday, March 27, 1980, when silver fell to under $11 an ounce. Instead of making billions, the richest men in America ended up losing the bulk of their familys fortune.
The Hunt BrothersSacrificial Lambs in Wolfs Clothing

Ive been studying the Hunt Brothers, and I have a different take on what really happened. Because of the way they flaunted their wealth, because of ties they had to the Middle East, and because they did invest so heavily in silver, the Hunt brothers were the perfect scapegoats for the anger and frustration most Americans felt towards the lagging economy of the day. I believe that Bunker and his brother were used by the Federal Reserve, in collusi on with COMEX and the Chicago Board of Trade (CBOT), to cap the price of gold YES, GOLDand save the U.S. dollar.

Inflation Indignation

The period leading up to silvers spike was fraught with inflation, stagnant economic growth, and political upheaval. In 1965, President Johnson increased deficit spending to finance his Great Society programs, tax cuts, and an unpopular war in Vietnam. In 1971, realizing that the U.S. Treasury didnt have enough gold to redeem all the dollars held by foreign governments and investors, President Nixon pulled the United States off the Bretton Woods monetary system the last vestiges of a pseudo gold standard. This action effectively created a worldwide fiat currency system that continues to this day.

OPEC-generated oil shortages, along with real food shortages, fueled public fears that the U.S. economy was in crisis. By the late 1970s, inflation had become public enemy number one.
The Hunt for Silver

The Hunt brothers could see the writing on the wall. With their great wealth being steadily eroded by skyrocketing inflation, they needed an asset to which they could safely anchor their massive oil fortune. At first, they thought of gold historys safe haven. But in 1973, U.S. citizens were not allowed to own gold, and Bunker Hun t thought the gold market was too easily manipulated for government purposes.1 So the Hunt Brothers turned to silver, and started buying it at about $2 an ounce. Total world silver production was dropping, while industrial silver consumption was exploding. And once government and private silver stocks ran out, the shortfall between supply and demand was certain to drive the price of silver skyward. By early 1974, the Hunt brothers had purchased futures contracts (agreements to purchase commodities in the future at a pre-determined price) for another fifty -five million ounces of silver. This was on top of the massive hoard of physical silver they already owned.2 In April, Bunker Hunt stopped in New York to visit the COMEX trading floor for the first time. Whe n he walked onto the floor, the normal frenzy of activity came to a screeching halt. Who was this fat Texan in thick plastic glasses and a cheap blue suit? Rumours began floating that the Hunt brothers were attempting to corner the market. The Hunt brothers used their positions in silver futures to acquire more of the physical metal. Aware that cash was continually losing value due to inflation, they settled their futures contracts with physical delivery of bullion, instead of cash, as a hedge against the g overnment currency monopoly and global turmoil. Bunker kept quiet about his silver investments. But he made no secret of his distaste for the dollar: Just about anything you buy, rather than paper, is better, he said. If you dont like gold, use silv er, or diamonds or copper, but something. Any damn fool can run a printing press.
If Youre Losing, Change the Rules

By October 3, 1979, silver hit $17.88 an ounce.4 The two major U.S. exchanges, COMEX and CBOT, started to panic: They held a measly 120 mi llion ounces of silver between them, an amount typically delivered in a busy month.5 With silver prices pushing to new heights as new buyers rushed in, the exchanges became fearful that a default (inability to deliver) was imminent. The silver rush continued to accelerate, led by the Hunt brothers and their Saudi Arabian business partners. The Commodity Futures Trading Commission (CFTC), the governments futures watchdog, had become seriously alarmed at the prospects

of a shortage on the exchanges, and tri ed persuading Bunker Hunt to sell some of his silver. The billionaire resisted, believing that silver was a long -term play with an integral role in the future global economy. The CBOT, backed by the CFTC, finally decided to put a stop to the Hunt brothers buyingby changing its rules. Margin requirements were suddenly raised, and traders could hold no more than 3 million ounces of silver futures; those holding more were placed in forced liquidation. Bunker Hunt cried foul, accusing exchange board members o f having a financial interest in the markets an accusation that would later be proven true. Then, the U.S. Federal Reserve and its chairman, Paul Volcker, added to the Hunt brothers troubles by strongly encouraging banks to stop making loans for speculative activity.
When Silver Sneezed, Gold Caught the Cold

On January 7, 1980, the other major U.S. exchange, COMEX, changed its rules also. Investors were limited to 10 million ounces in futures contracts, and any amount above that had to be liquidated by Fri day, February 18.6 On the very next trading day, Monday, January 21, as silver reached a record high of $50 an ounce, the Hunt silver hoard peaked at a mind -boggling $4.5 billion, (thats $43.5 billion in Shadowstats CPI-adjusted 2011 dolars!)5 On the same day that silver hit $50 and silver futures topped out at $52.50, golds price set a new record of $850 and gold futures peaked at $892. COMEX, terrified that it would be forced into default, announced with the backing of the CFTC that trading in silver would be limited to liquidation orders only, eliminating any buyers. With no new buyers, the price of silver could not go up. So this rule was basically the same as saying, Until this rule is lifted, the price of silver will only go down. Of course, silver began to plummet, and on that same day so did gold. Was it just a coincidence that gold and silver peaked at the same time? Could it be that many large silver traders also held gold? Wouldnt the gold traders on the exchanges have known what happened to the silver traders and said to themselves, Oh my Godif they can do that to silver, then gold is probably next?

From Billions to Bust

On Silver Thursday, silver dropped from $15.80 to $10.80 an ounce. The stock market also crashed, fuelled by rumours that the Hunt brothers would liquidate stocks in order to cover their silver losses. Because most of their silver bullion had been purchased at under $10 an ounce, the Hunts were still a head of the game on their physical silver. But in the futures market, where their average purchase price was near $35 an ounce, it was a different story. It became easy for the government to label the Hunt brothers as market manipulatorsboth in the court of law and in the easily swayed court of public opinion. Bunker Hunt filed for personal bankruptcy and was charged with trying to corner the silver market. He settled with the IRS for $90 million and was fined an additional $10 million by the CFTC.7 Why were the Hunt brothers torn down? Gold and silver are the canaries in the coal mine: Their spiking prices reflected the publics loss of confidence in fiat currencies like the U.S. dollar. So, the government and banking establishment had a vested interest in keeping gold and silver prices from exploding. Do you think its possible that the Federal Reserve may have realized they could suppress the price of gold and save the dollar while making it look like they were really protecting everyone by going after the Hunt brothers? After scrutinizing the evidence, my conclusion is that the Hunt brothers were sacrificial lambs. The Hunt brothers broke no laws. The CFTC, COMEX and CBOT simply changed the rules in the middle of the game. And the U.S. government, eager to stop the rush to gold and silver that threatened the credibility of its own fiat currency, had no problem looking the other way. But a greater factor which the western economists did not accept, and refuse to acknowledge even today was the tsunami of s ilver which flowed from India and

destroyed the Hunts. The Hunts and their Middle East partners had assumed that India which held the largest stocks of silver in private hands would never ever become an illegal exporter. But the unheard happened! Huge quan tities of silver found their way into the international markets and confronted with outbound smuggling, the Government of India, post the imposition of emergency brought silver within the purview of section 11 of the Customs Act. These amendments were brought in to curb the smuggling of silver out of India. The legal provisions are reproduced below.
THE CUSTOMS ACT, 1962 (52 of 1962)
CHAPTER IVB PREVENTION OR DETECTION OF ILLEGAL EXPORT OF GOODS
SECTION 11H. Definitions. In this Chapter, unless the context otherwise requires, (a) illegal export means the export of any goods in contravention of the provisions of this Act or any other law for the time being in force; (b) intimated place means a place intimated under sub-section (1), sub-section (2) or subsection (3), as the case may be, of section 11J; (c) specified area includes the Indian customs waters, and such inland area, not exceeding one hundred kilometers in width from any coast or other border of India, as the Central Government may, having regard to the vulnerability of that area to smuggling, by notification in the Official Gazette, specify in this behalf : Provided that where a part of any village, town or city falls within a specified area, the whole of such village, town or city shall, notwithstanding that the whole of it is not within one hundred kilometers from any coast or other border of India, be deemed to be included in such specified area; (d) specified date, in relation to specified goods, means the date on which any notification is issued under section 11-I in relation to those goods in any specified area; (e) specified goods means goods of any descripton specified in the notification issued under i section 11-I in relation to a specified area. SECTION 11I. Power of Central Government to specify goods. If, having regard to the magnitude of the illegal export of goods of any class or description, the Central Government is satisfied that it is expedient in the public interest to take special measures for the purpose of checking the illegal export or facilitating the detection of goods which are likely to be illegally exported, it may, by notification in the Official Gazette, specify goods of such class or description. SECTION 11J. Persons possessing specified goods to intimate the place of storage, etc. (1) Every person who owns, possesses or controls, on the specified date, any specified goods, the market price of which exceeds fifteen thousand rupees shall, within seven days from that date, deliver to the proper officer an intimation containing the particulars of the place where such goods are kept or stored within the specified area.

(2) Every person who acquires (within the specified area), after the specified date, any specified goods, (i) the market price of which, or (ii) the market price of which together with the market price of any specified goods of the same class or description, if any, owned, possessed or controlled by him on the date of such acquisition, exceeds fifteen thousand rupees shall, before making such acquisition, deliver to the proper officer an intimation containing the particulars of the place where such goods are proposed to be kept or stored after such acquisition :

Provided that a person who has delivered an intimation, whether under sub-section (1) or subsection (2), in relation to any specified goods, owned, possessed, controlled or acquired by him, shall not be required to deliver any further intimation so long as the specified goods are kept or stored at the intimated place.

(3) If any person intends to shift any specified goods to which sub-section (1) or sub-section (2) applies, to any place other than the intimated place, he shall, before taking out such goods from the intimated place, deliver to the proper officer an intimation containing the particulars of the place to which such goods are proposed to be shifted.

(4) No person shall, after the expiry of seven days from the specified date, keep or store any specified goods to which sub-section (1) or sub-section (2) applies, at any place other than the intimated place.

SECTION 11K. Transport of specified goods to be covered by vouchers. (1) No specified goods shall be transported from, into or within any specified area or loaded on any animal or conveyance in such area, unless they are accompanied by a transport voucher (in such form and containing such particulars as may be specified by rules made in this behalf) prepared by the person owning, possessing, controlling or selling such goods : Provided that no transport voucher shall be necessary for the transport, within a village, town or city, of any specified goods the market price of which, on the date of transport, does not exceed one thousand rupees. (2) Notwithstanding anything contained in sub-section (1), where the Central Government, after considering the nature of any specified goods, the time, mode, route and the market price of the goods intended to be transported, the purpose of the transportation and the vulnerability of the specified area with regard to the illegal export of such goods, is satisfied that it is expedient in the public interest so to do, it may, (i) by notification in the Official Gazette, specify goods of such class or description and of a market price exceeding such sum as that Government may notify; and different sums in relation to the specified goods of the same class or description, or different classes or descriptions, may be notified for the same specified area or for different specified areas, and (ii) direct that no person shall transport any goods so specified unless the transport voucher in relation to them has been countersigned by the proper officer.

SECTION 11L. Persons possessing specified goods to maintain accounts. (1) Every person who, on or after the specified date, owns, possesses or controls, within a specified area, any specified goods of a market price exceeding fifteen thousand rupees, shall maintain (in such form and in such manner as may be specified by rules made in this behalf) a true and complete account of such goods and shall, as often as he acquires or parts with any specified goods, make an entry in the said account in relation to such acquisition or parting with, and shall also state therein the particulars of the person from whom such goods have been acquired or in whose favour such goods have been parted with, as the case may be, and such account shall be kept, along with the goods, at the place of storage of the specified goods to which such accounts relate : Provided that it shall not be necessary to maintain separately accounts in the form and manner specified by rules made in this behalf in the case of a person who is already maintaining accounts which contain the particulars specified by the said rules. (2) Every person who owns, possesses or controls any specified goods to which the provisions of sub-section (1) apply, and who uses any such goods for the manufacture of any other goods, shall maintain (in such form, in such manner and containing such particulars as may be specified by rules made in this behalf) a true and complete account of the specified goods so used by him and shall keep such account at the intimated place.

(3) If at any time, on a verification made by a proper officer, it is found that any specified goods owned, possessed or controlled by a person are lesser in quantity than the stock of such goods as shown, at the time of such verification, in the accounts referred to in sub-section (1), read with the accounts referred to in sub-section (2), it shall be presumed, unless the contrary is proved, that such goods, to the extent that they are lesser than the stock shown in the said accounts, have been illegally exported and that the person owning, possessing or controlling such goods has been concerned with the illegal export thereof.

SECTION 11M. Steps to be taken by persons selling or transferring any sp ecified goods. Except where he receives payment by cheque drawn by the purchaser, every person who sells or otherwise transfers within any specified area, any specified goods, shall obtain, on his copy of the sale or transfer voucher, the signature and full postal address of the person to whom such sale or transfer is made and shall also take such other reasonable steps as may be specified by rules made in this behalf to satisfy himself as to the identity of the purchaser or the transferee, as the case may be, and if after an inquiry made by a proper officer, it is found that the purchaser or the transferee, as the case may be, is not either readily traceable or is a fictitious person, it shall be presumed, unless the contrary is proved, that such goods have been illegally exported and the person who had sold or otherwise transferred such goods had been concerned in such illegal export : Provided that nothing in this section shall apply to petty sales of any specified goods if the aggregate market price obtained by such petty sales, made in the course of a day, does not exceed two thousand and five hundred rupees. Explanation. - In this section petty sale means a sale at a price which does not exceed one thousand rupees.

Silver Linings: What the Hunt Brothers Can Teach Us Today The Hunt brothers got into trouble because they exposed themselves to a huge amount of risk through their leveraged investments. Leverage makes a bigger impact when youre losing than it does when youre winning: It can be as blunt as a bowling ball on the way up, but as sharp as a surgical laser on the way down. The fundamental error the Hunts made was, theres simply no substitute for physical ownership of your own gold and silver. Whether the Hunt brothers were victims of their own greed, the greed of board members on the exchanges, a desperate attempt by the Fed to save the dollar, or some combination of these things, its clear that the fall of silver in 1980 brought gold down with it and bought the dollar some extra time. We have no way of knowing how high gold and silver would have gone if the government and banking establishment hadnt gone after the Hunt brothers. Well never know if the dollar would have survived. We do know that gold peaked when silver peaked, and we know that gold fell when silver fell. In the near future, both of these metals may again start taking off into the stratosphere , and knowing the weakening of the Western economies and the rise of the Asian, it is inevitable that Nelsons law of gravitation may yet be disproved.