-- Posted 4 June, 2008 | | Discuss This Article - Comments:

June 4, 2008

Open letter to:

Henry Paulson
US Secretary of The Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Edmond C. Moy
Director of The US Mint
801 9th Street, NW
Room 8S23-3
Washington, D.C. 20220

RE: US Silver Eagles Illegal Rationing

Dear Sirs:

It has come to my attention that 1oz US Silver Eagle coins are being rationed by the US Mint to 13 authorized dealers and not being made available to the public in adequate amounts.
http://www.silverinstitute.org/news/pr29may08.html

According to US Law: 31USC5112(e) this action is illegal and I demand that this rationing program end immediately.

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=browse_usc&docid=Cite:+31USC5112

(e) Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities sufficient to meet public demand, coins which--

        (1) are 40.6 millimeters in diameter and weigh 31.103 grams;
        (2) contain .999 fine silver;
        (3) have a design--
                (A) symbolic of Liberty on the obverse side; and
                (B) of an eagle on the reverse side;
        (4) have inscriptions of the year of minting or issuance, and the words ``Liberty'', ``In God We Trust'', ``United States of America'', ``1 Oz. Fine Silver'', ``E Pluribus Unum'', and ``One Dollar''; and
        (5) have reeded edges.

(f) Silver Coins.—

        (1) Sale price.--The Secretary shall sell the coins minted under subsection (e) to the public at a price equal to the market value of the bullion at the time of sale, plus the cost of minting, marketing, and distributing such coins (including labor, materials, dies, use of machinery, and promotional and overhead expenses).
        (2) Bulk sales.--The Secretary shall make bulk sales of the coins minted under subsection (e) at a reasonable discount.
        (3) Numismatic items.--For purposes of section 5132(a)(1) of this title, all coins minted under subsection (e) shall be considered to be numismatic items."

The law is clear that the silver coins must be supplied to the US public in "quantities sufficient to meet public demand" EVEN IF it means the US Mint drives up the price of silver bullion on the open market in order to obtain the silver needed to produce the US Silver Eagles. That rise in price should, theoretically, decrease the current voracious demand for US Silver Eagles and allow for the true price discovery of silver bullion. That's how our freely traded markets are supposed to function in order to determine the “fair market value” of any asset.

Unfortunately, the rationing of Silver Eagle coins greatly distort the fair market value of both the coins as well as the silver bullion used to make them. By rationing the coins, the US Treasury and US Mint are artificially suppressing the demand for silver bullion thus creating artificial downward pricing pressure on silver. The size of this artificial price/demand loss is unknown BUT given that the 1oz US Silver Eagle is by far the most popular silver coin in the world, I would suggest that the artificial suppression is significant. For example, when the Silver Eagle rationing program started in mid-March 2008, the price of silver bullion immediately dropped from $21/oz to $17/oz thus trimming 20% off its fair market value in only 4 days. Clearly the fair market value is being artificially distorted. As stated in section (f) above, the public is entitled to purchase US Silver Eagle coins at the "market value of [silver] bullion" plus costs associated with production. Currently, that is not the case. I expect you to end the rationing program immediately and fulfill your legal obligation to the people of the United States of America.

The US Mint is not sanctioned to be a market maker or market manager in precious metals. The Mint is, by law, the facilitator of US Silver Eagle supply and that supply is legally designated to be limited only by the willingness of the purchaser to buy. If the Mint receives an order for 10M ounces or 20M ounces or even more it is 100% legally obligated to immediately supply those Silver Eagles from inventory or enter into the physical silver market and purchase the silver bullion and process it. What effect that purchase has on the price of silver bullion should not be of consequence to the Mint since the price is passed on to the purchaser (plus fabrication).

Luckily, for the stability of the silver market, the CFTC has assured the world that there is no silver price manipulation and that there is currently (and apparently always will be) an adequate supply of physical silver to cover any demand that surfaces.

http://www.cftc.gov/newsroom/generalpressreleases/2008/pr5499-08.html

I would also like to point out that the US Silver coin has always had tremendous historical and monetary significance to the citizens of the United States of America. US Silver Eagles represent "honest money" and to witness their continued manipulation is disheartening.

I am also sending this letter to other interested parties below to inform them that another silver crime is in progress.

Sincerely,


Bix Weir
US Citizen

Cc:    Michael Mukasey, US Attorney General
        A. Roy Lavic, Inspector General CFTC
        Senator Dianne Feinstein
        Congressman Ron Paul