Reddit might be “coming for silver,” Reuters reports this morning, but the wire reckons a short squeeze is “unlikely” — never mind Thursday’s headline on Reddit that blared silver could be the “biggest short squeeze in the world.” We’re not here to make any predictions. The news, though, certainly takes us back — to the early 1980s, when we found ourselves at breakfast with Nelson Bunker Hunt.

Hunt was the Texas billionaire who sought to corner silver in the 1970s. We were then just back from overseas and starting as an editorial writer of the Wall Street Journal. Whenever in a new city, we had a practice of inviting someone newsworthy for a meal. In Dallas, we extended an invitation to the oil baron. We didn’t — and don’t — trade or own silver. We were interested in the metal as the original constitutional money.

Our breakfast, the two of us, turned out to be a memorable meal. It took place at a hotel called the Mansion on Turtle Creek, which was owned by Hunt’s sister Caroline Rose Hunt. It laid a worthy repast. We don’t have a clear recollection of the exact date of the meal. We do have clear recollection that every time we asked Hunt about his journalistic critics, he growled: “They’re just shilling for the shorts.”

We felt a pang of sympathy for him, though that’s not uncommon with us. We view the corner that Hunt and his brothers were attempting on silver in the context of what had been done by another Texan 15 years earlier. That was when President Lyndon Baines Johnson signed the Coinage Act of 1965, which, in the first fundamental change in our coinage since 1792, stripped most of our coins of their silver.

Before signing the law in the Rose Garden, LBJ signaled our descent into fiat money. “The new dimes and the new quarters will contain no silver,” he confessed. “They will be composites, with faces of the same alloy used in our 5-cent piece that is bonded to a core of pure copper. They will show a copper edge. Our new half dollar will continue our silver tradition. Eighty percent silver on the outside and 19 percent silver inside.”

Huh? A quarter of a dollar would have no silver but a half-dollar coin would have some silver? So how would one compute a dollar’s value in the specie in which Congress originally defined our unit of account? “If anybody has any idea of hoarding our silver coins, let me say this,” LBJ warned, “Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin.”

It was a vain boast. When LBJ signed the 1965 act, silver was at $1.29 an ounce, meaning the dollar was valued 77 hundredths of an ounce of silver — roughly what it was in 1792. It’s not our intent to suggest that what happened next was entirely on account of the Hunts, even if they did start buying silver in the 1970s. By January 1980, though, silver had soared to almost $50 an ounce, i.e., the silver value of a dollar had plunged 97%.

Soon, the commodities exchange tightened its margin rules. Then, in March 1980, came “Silver Thursday,” when the price of silver collapsed, meaning the value of the dollar began to recover. Bunker Hunt and his brothers ended up seeking protection under the bankruptcy laws. They would lose a chunk of their fortune, even if the family remained enormously wealthy.

Which brings us back to the current excitement. Sometimes the scandal is not what’s illegal but what’s legal. Would the Hunt brothers have attempted their corner if LBJ hadn’t signed the 1965 coinage act, a default by any other name? Would the Hunt brothers have attempted their corner if the president of America hadn’t made an absurd boast that the government could protect the dollar while stripping it of silver?

It would be inaccurate to suggest that market manipulation doesn’t happen under a proper monetary system. We can’t help but wonder, though, if what we’re seeing today in silver and in shares would be happening were our government not financing its trillion-dollar deficits by creating out of nothing trillions of irredeemable electronic paper ticket dollars to lend to itself. Congress seems loath to rein in the market populists. What about reining in itself?

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Image: Cartoon, ‘A Downhill Movement,’ 1896, by Charles Jay Taylor, via Wikipedia.