6. Speculation That Created an Asset Bubble
The Hunt brothers’ speculation caused the price of silver to spike by over 800%, from $6 an ounce in early 1979, to over $50 by early 1980. The rich siblings grew even richer, and made about $4 billion in paper profits. In reality, however, they had simply created a huge asset bubble that was bound to burst sooner or later. The Hunts’ speculation created a global silver craze. As silver prices doubled, trebled, quadrupled, and continued to rise, people around the world began melting silverware.
Thieves went on a silver stealing spree. Tiffany’s ran ads that attacked the brothers’ speculation for making silver unaffordable to consumers. The Hunts created a bubble market for silver. It was a bubble in which they themselves, as the world’s biggest silver hoarders, were most at risk. The Federal Reserve, whose mission includes averting such bubbles, stepped in and issued a rule specifically targeted against the Hunts. It banned banks from lending to precious metal speculators. As a result, the bubble swiftly burst.
