Archive for the ‘US Treasury’ tag
Gold gold! Give us our gold! Joseph comments on Germany’s calls to repatriate its gold and it’s implications, and directs your attention to the following articles: Germany’s sovereignty restricted by US and allies, insider’s book claims It Begins: Bundesbank To Commence Repatriating Gold From New York Fed; It Will Take The Fed Seven Years To Return Germany’s Gold.
Wall Street Insider: The Complete January 2012 Interview
Both parts of our January 2012 Interview with The Wall Street Insider….
(Originally published in two parts on January 7th and January 8th, 2012.
UM: So you called me here directly and I believe I detected more than a bit of frustration in your voice over my recent stories involving Ron Paul. Is that correct.
WSI: Yes – quite correct. With all due respect . . . . you are absolutely 100% wrong in your concerns over the Ron Paul campaign – or at the very least, wrong in your seeming dismissal in some of the issues he has quite correctly raised regarding the imminent dangers to America.
UM: Even if that were true, why Ron Paul? There appears to be no real path for him to win the nomination, and if he runs as a third party candidate he would most likely not win there either. I am confused why someone in your position . . . . why the concern over Ron Paul of all people.
WSI: I am not concerned over Ron Paul – I am concerned over your coverage of Ron Paul and how you are wasting precious time and resources attempting to discredit Ron Paul. If -name withheld- set you off in that direction . . . . they were incorrect in doing so and I would urge you to question their motivation.
UM: Right-right . . . . you tell me to watch out for their motivations. They tell me to watch out for your motivations . . . . enough of that sh-t ok? How about we just focus right now, entirely, on the reason behind you calling me in to talk about Ron Paul. I don’t get it. Why would you of all people make what was basically a demand that I come up here to listen to you defend a candidate who has repeatedly voiced his disgust over Wall Street? It doesn’t add up.
WSI: I would beg to differ – not adding up is exactly the reason for my concern – a concern that is not so much about your work . . . . or what seems at the moment to be more of an odd obsession, to reveal some silly truth about Ron Paul . . . . I mean George Soros? Really? And even if true – who cares? That kind of information is secondary to the real and crucial value provided by Ron Paul to the national discussion.
UM: National discussion? Right . . . . enlighten me. Please.
WSI: Sarcasm? Is that your tone? If this is to serve its proper purpose I need you listening – and without judgement.
UM: Sarcasm – guilty as charged. But in my defense, I would call it justifiable sarcasm at this point.
WSI: I was told long ago that what you don’t see with your eyes, don’t invent with your mouth.
WSI: What you don’t see with your eyes, don’t invent.
Jon S. Corzine
One by one, the big banks and investment firms appear destined to go broke. Behind all other crises looms the mother of all bubbles – the derivatives debacle. The worsening situation is simply sped up by the criminal actions of brokerage firm MF Global, so desperate to stay afloat that it sank hundreds of millions of dollars of customers’ money into its losing position and failed. This latest example of crony capitalism will hurt a lot of people, although NESARA will save most of them.
Two articles here, the first one from the New York Times and the second one from Zero Hedge. Someone will have to go to jail, says Zero Hedge. This time I think that very well may happen. Thanks to Luisa and Ramona.
Regulators Investigating MF Global for Missing MoneyBy BEN PROTESS, MICHAEL J. DE LA MERCED and SUSANNE CRAIG
New York Times, Oct. 31, 2011
Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.
The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.
Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.
The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days.
But the investigation, which is in its earliest stages, may uncover something more intentional and troubling.
In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers’ funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.
Neither MF Global nor Mr. Corzine has been accused of any wrongdoing. Lawyers for MF Global did not respond to requests for comment.
Now, the inquiry threatens to tarnish further the reputation of Mr. Corzine, the former Goldman Sachs executive who had sought to revive his Wall Street career last year just a few months after being defeated for re-election as New Jersey’s governor.
When he arrived at MF Global — after more than a decade in politics, including serving as a Democratic United States senator from New Jersey — Mr. Corzine sought to bolster profits by increasing the number of bets the firm made using its own capital. It was a strategy born of his own experience at Goldman, where he rose through the ranks by building out the investment bank’s formidable United States government bond trading arm.
One of his hallmark traits, according to the 1999 book “Goldman Sachs: The Culture of Success,” by Lisa Endlich, was his willingness to tolerate losses if the theory behind the trades was well thought out.
He made a similar wager at MF Global in buying up big holdings of debt from Spain, Italy, Portugal, Belgium and Ireland at a discount. Once Europe had solved its fiscal problems, those bonds would be very profitable.
But when that bet came to light in a regulatory filing, it set off alarms on Wall Street. While the bonds themselves have lost little value and mature in less than a year, MF Global was seen as having taken on an enormous amount of risk with little room for error given its size. By Friday evening, MF Global was under pressure to put up more money to support its trading positions, threatening to drain the firm’s remaining cash.
The collapse of MF Global underscores the extent of investor anxiety over Europe’s debt crisis. Other financial institutions have been buffeted in recent months because of their holdings of debt issued by weak European countries. The concerns about MF Global’s exposure to Europe prompted two ratings agencies to cut their ratings on the firm to junk last week.
The firm played down the effect of the ratings, saying, “We believe that it bears no implications for our clients or the strategic direction of MF Global.”
Even by Sunday evening, MF Global thought it had averted its demise after a disastrous week. Over five days, the firm lost more than 67 percent of its market value and was downgraded to junk status, which prompted investor desertions and raised borrowing costs.
Mr. Corzine and his advisers frantically called nearly every major Wall Street player, hoping to sell at least some of the firm in a bid for survival.
On Friday, the asset manager BlackRock was hired to help MF Global wind down its balance sheet, which included efforts to sell its holdings of European debt. BlackRock was able to value the portfolio, but did not have time to find a buyer for it given the other obstacles MF Global faced, according to people close to the talks.
By Saturday, Jefferies & Company became the lead bidder to buy large portions of MF Global, before backing out late in the day.
On Sunday, a rival firm, Interactive Brokers, emerged as the new favorite. But the Connecticut-based firm coveted only MF Global’s futures and securities customers.
While MF Global was resigned to putting its parent company into bankruptcy, Interactive Brokers was also willing to help prop up other MF Global units, including a British affiliate.
By late Sunday evening, an embattled MF Global had all but signed a deal with Interactive Brokers. The acquisition would have mirrored what Lehman Brothers did in 2008, when its parent filed for bankruptcy but Barclays of Britain bought some of its assets.
But in the middle of the night, as Interactive Brokers investigated MF Global’s customer accounts, the potential buyer discovered a serious obstacle: Some of the customer money was missing, according to people close to the discussions. The realization alarmed Interactive Brokers, which then abandoned the deal.
Later on Monday, when explaining to regulators why the deal had fallen apart, MF Global disclosed the concerns over the missing money, according to a joint statement issued by the Commodity Futures Trading Commission and the Securities and Exchange Commission. Regulators, however, first suspected a potential shortfall days ago as they gathered at MF Global’s Midtown Manhattan headquarters, the people briefed on the matter said. It is not uncommon for some funds to be unaccounted for when a financial firm fails, but the magnitude in the case of MF Global was unnerving.
For now, there is confusion surrounding the missing MF Global funds. It is likely, one person briefed on the matter said, that some of the money may be “stuck in the system” as banks holding the customer funds hesitated last week to send MF Global the money.
But the firm has yet to produce evidence that all of the $600 million or $700 million outstanding is deposited with the banks, according to the people briefed on the matter. Regulators are looking into whether the customer funds were misallocated.
With the deal with Interactive Brokers dashed, MF Global was hanging in limbo for several hours before it filed for bankruptcy. The Federal Reserve Bank of New York and a number of exchanges said they had suspended MF Global from doing new business with them.
It was not the first time regulators expressed concerns about MF Global.
By midmorning on Monday, the firm filed for bankruptcy.
Azam Ahmed contributed reporting.
Someone Is Going To Jail For This: MF Global Caught Stealing Hundreds Of Millions From Customers?
Say you are the head back office guy at MF Global, it is the close of trading on Thursday, the firm has already completely drawn down on its revolver, and all the resulting cash in addition to all the firm’s cash at your disposal in affiliated bank accounts, up to and including petty cash, has been used to satisfy margin demands due to declining collateral value, yet the collateral calls just won’t stop, and impatient voices on the other side of the phone line demand you transfer even more cash over immediately or else risk default proceedings commenced against you within minutes.
This is not a fictional tale. This is precisely what very likely happened at MF Global in the past 72 hours. And someone has to go to jail. That someone, if indeed this criminal act is proven to have taken place, should be none other than Jon Corzine himself.
The sad truth of just how low Wall Street has fallen comes to us courtesy of the New York Times:
Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.
The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.
As for the details:
What began as nearly $1 billion missing had dropped to less than $700 million by late Monday. It is unclear where the money went, and some money is expected to trickle in over the coming days as the firm sorts through the bankruptcy process, the people said.
But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.
And just like in the Lehman collapse where tens if not hundreds of international prime brokerage hedge fund clients, due to no fault of their own, found themselves insolvent after their cash ended up being caught at the London Lehman office (the details of how that money was illegally transferred from London to the US is a different topic entirely) and never to be seen again except to satisfy general unsecured claims, so thousands of MF clients are about to realize that money they thought they had, even if completely unencumbered with other assets, read pure cash, read money not at risk, is now gone forever, and they will have to wait years until the bankruptcy process determines if the claim deserves priority status to the unsecured bondholders. Best case: assume a 70% haircut on the money, if it is ever to be seen again at all.
So who can be sued? Who can be blamed for this malicious and purposeful criminal act? Why everyone from the back office clerk presented in the thought experiment above, all the way up to the man at the very top, Jon himself, who, like in every other act of Wall Street impropriety will plead stupidity and deny he ever knew of this crime. Unfortunately, our criminal regulators, who will be just as complicit in clearing him of all wrongdoing, will aid and abet this latest destruction of faith in US capitalism.
What happens next? Why customers at all other brokerages, all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfectly solvent clearers and agents, will proceed to pull their money, as they know they have nobody to trust but their own prudent and forward looking actions. Which in turn will start the kind of liquidity drain that killed not only Lehman, but froze money markets, and with that brought the complete capital markets to a standstill, only to be thawed after the Fed pledged multiples of the US GDP to rescue Wall Street in October of 2008.
And that, dear reader, is called unintended consequences, and how the bankruptcy of a small exchange can avalanche into a crippling Ice Nine of what is left of capital markets all over again, courtesy of crony capitalism, rampant criminality and a regulator and enforcement body that is more fascinated with midget porn than any regulating or enforcing of the very firms it hopes to get an assistant general counsel job from in a few short years.
by Jim Willie
The US Federal Reserve has no monetary options whatsoever. They have been backed into the corner since 2007. It was coerced to reduce interest rates as the subprime mortgage crisis morphed into an absolute bond crisis, as the Jackass loudly stated during that fateful summer. TheUSbank leaders claimed it was contained. It was not. The USFed was backed into the corner in 2009, unable to raise interest rates from near 0% (the Zero Interest Rate Policy disease) and put into effect its propaganda theme of an Exit Strategy. TheUSbank leaders knew the longest period of time for the Fed Funds rate to stick at 0% was nine months, ensuring a future disaster. They saw it. They claimed a move toward normalcy. It did not come. The Jackass called them liars with a message of deception to manage the USTreasury Bond and stock market. They did not hike rates, as their bluff was called. The USFed looked weak as a result. They began to shed thick layers of prestige. The USFed was backed into the corner in 2010, unwilling to use printed money to monetize USTBonds, giving birth to the second dreaded Quantitative Easing disease. They did anyway. So the ZIRP & QE twin scourges became part of the landscape of ruin. The USFed denied they would embark on QE. The Jackass called them liars with a message of deception. They did embark on QE, then QE Lite, then QE2, all replete with denials. The USFed has lost all its prestige, all its credibility, and all its respect for economic analysis. They are actually a central office for the Syndicate. They are the focal point of the failure of the central bank franchise model.
The unfolding drama on Capitol Hill with the USGovt changed the entire picture, thus putting a toxic icing atop a hemlock pie with arsenic candles giving off deadly gas. In private discussions, my full expectation was for no debt default, not even close, with the debt limit extended, the unfolding American Tragedy saga taking place on a global stage. My call was for a path of least resistance to be taken in consensus, but it would involve decision avoidance and political expedience, if not constitutional cowardice. The players in the USCongress, along with the leader himself, were exposed as pusillanimous, deceptive, polarized, destructive, wayfaring fools. They are as much fully equipped squires for both the banking industry and the military establishment. They avoided a debt disaster in default, but they did not avoid a debt rating downgrade. They have given the system license to debase the USDollar further, as Gold has responded in a breakout. The President is so clueless as to believe patent reform can make a difference. The bigger obstacles are poor education, minimal math & science requirements, tendency to play video games & text messages than studying (even inside school classrooms). Of course the debilitation is compounded by theUS lacking a strong industrial base. So better patent protection would mean theUS corporations could more effectively protect their offshore jobs, where the majority of jobs are located.
Worse, the players on the global debt debate stage exposed the USGovt as Greece times one hundred. The veil of ruin and arrogance has been lifted for all to see, the deep blemishes and skin cancer visible for all to see. The USGovt borrowing costs are near 0% for the same reason that the Greek borrowing costs are at 30%. BOTH NATION’S FINANCES ARE BROKEN. To cap it off, the tombstone on the US Republic will feature a Super Committee to recommend the most difficult of budget decisions. Such fanfare without proper label. The committee is a formalization of the Politburo process, a perverse interwoven political stranglehold fabric that takes the worst of the Weimar Republic and melds with the worst of the Fascist Business Model. Slowly forming is the Fascist Dictatorship that follows logically from nationalization of Fannie Mae and AIG, the home mortgage cesspool and the derivative black hole. The growth of czars will grow dangerously. Look in the near future for a wave of office shutdowns. The USGovt is required to pay its creditors. But it will act with negligence and shut down offices. See the Federal Aviation Agency, which must contend with 70,000 job cuts. It has lost its funding, while the USCongress went on its August vacation. An improvement would have come if the cut in budget came to the Transportation Security Admin (TSA) to alleviate the public from airport assaults that draws tears from old ladies, anger from defiant citizens, and consternation from most everybody. By the way, the planned date for the Super Committee to convene and make its recommendations is in the middle of the Presidential Primary season next summer. Expect a circus.
EFFECT & PREPARATION
Speaking of spineless and pusillanimous, Moodys and Fitch call the debt deal with the USGovt a good first step. They maintain the AAA rating. The brave Lancelot might be Standard & Poor which has delivered a louder firmer threat of debt downgrade if not significant progress to reduce the budget deficit. They all three seem more like boys cracking whips without threat of anything substantial. Their offices might be Oslo’ed if they actually downgraded. The USGovt debt deal accomplished nothing but to raise the debt limit, which means THE USGOVT IS PERMITTED TO DEBASE THE USDOLLAR CURRENCY FOR ANOTHER YEAR OR MORE. It is actually quite funny to watch and listen to hacks on the tube, as their share their shaman wisdom. They told the public that when the debt limit was extended and the crisis was averted, the Gold price would probably subside and relax downward. What nonsense! The Gold demand would continue from free rein to create more money to cover more permitted debt. They know nothing about gold. They seem to find no relevance or importance that theUSmoney supply is rising exponentially, without benefit of even economic flatline stability. The inefficient usage of new money is a story for the ages, a symptom of the ruin in progress. This point is made in the Hat Trick Letter in detail.
The Gold market correctly interpreted the vacant gutless debt pact, a deal to make a future deal, a decision to make future decisions. The Gold price rose on Tuesday by $40 and the Silver price rose the same day by $1.50 per ounce. The damage is more hidden than what is seen in nominal price. The short covering process has begun. The defended $1600 barrier has been breached, smashed, and overrun. Those who recklessly placed their short positions at that level did not anticipate the power of this bull market, or recognize the strong attack from all four flanks. The $40 barrier is also being overrun. Gold will continue to fight the political battles, to bust the cartel phalanx, and to enable the harsh light of truth to shine on the wrecked USDollar and ponzi ridden USTreasury Bond. Silver will continue to run impressive breath-taking strides through the opened pathways. Expect a run past the $50 mark within the next two months, likely sooner. Things always seem to happen more quickly these days. The clock is running faster with all the fever and ruin.
Prepare for continuation in the long drawn out economic deterioration, business squeeze, financial depletion, and systemic failure. The USGovt debt default process is one for the history books, part of a bold Jackass forecast made in the wake of the Lehman, Fannie Mae, and AIG visible disaster in September 2008. At work was the more important but less visible destruction of theUSbanking industry. It has not recovered since the Lehman engineered bust kill job, fully exploited by Wall Street. Expect in the next couple years economic martial law, deep rationing, and economic implosion. Protect from lost life savings, forfeited wealth to the USTreasury Bond monster, and the fast pace of toxic paper spoilage. The answer is Gold & Silver, if not commodity stockpiles and energy deposits. For the small investor, the safest is precious metals with no paper securities and thus no counter-party risk. The GLD & SLV funds are both fraudulent, to be revealed in time, if not already for those with discerning eyes. They should be avoided, unless the investor wishes to miss the climax runup in price. The precious metals Gold & Silver have received zero positive press by the corrupted financial media, as well as very little respect despite being the best performing asset in the last decade. Ignore their deceptive messages, and climb aboard the Gold ship with Silver cabins, and watch the unfolding disaster from the heat tempered windows. The Fiat Paper locomotive has already gone over the cliff. The debt deal only defined a lower crash point in the abyss far below.
THE BIG HIDDEN BOND LEVER
The USGovt has the wonderful benefit of Interest Rate Swap contracts. They produce leveraged magnificent artificial demand for the 10-year USTreasury. Despite huge uncontrollable bond supply for USGovt debt, contrary to standard myopic finance theory promoted in universities (see USFed-funded chairs), the bond yield continues to decline. In no way does migration from stocks to bonds justify the move under 2.60% on the TNX yield. Every time some negative USEconomic news is released, and plenty of such lousy data has come in the last several weeks, a big bond rally comes. It is aided with a vast under-current of Interest Rate Swaps. Between 80% and 86% of the total derivative market is IRSwap contracts. That market was measured at $243 trillion by the Office of Comptroller to the Currency in its 1Q2011 report of the Top25 commercial banks and trust companies. Shockingly, Morgan Stanley added $51 trillion to their derivative book in the first quarter alone, with zero coverage by the sleepy intrepid lapdog financial press. Let the reader decided if $51 trillion in notional value spread over three months would have much effect on USTreasury Bonds.
The hacks who operate at the bond desks have pathetically little knowledge of their own sector. Most bond traders actually believe the IRSwap application has no practical effect on the USTreasury market, with no end product. They are at best stupid and at worst corrupt. As friend and colleague Rob Kirby points out, the IRSwap contract has a real actual end demand in a USTreasury Bill or Note or Bond. Typically, they sell a short-term USTBill in order to buy a long-term USTreasury, like a 10-year note. This is all within the structure of the IRSwap contract. Thus the fast move below 2.60% from 3.00% on the TNX yield.
THE BIG LIE
The USEconomy is stuck in a recession that worsens each quarter. The current recession is measured between minus 5% and minus 6%, is in progress, and is intensifying. The USGovt runs a devious stat lab shop. It uses every scummy trick known to the stat rats. The Jackass is a refined furry stat rodent, not a rat. Consider an honest method with integrity, which is actively avoided. A simple method is to take the nominal data (raw untreated numbers) for a full year and compare them to the nominal data for the previous full year, then adjust by a legitimate reasonable price inflation index. The Shadow Govt Statistics folks do a fantastic job in honest economic estimation, the best on the planet in my opinion. The SGS Consumer Price Inflation was about 9% in 2010 and currently runs about 10%. Anyone with half a brain can attest to the validity of their CPI estimate. The honest assessment of the USEconomy performance is minus 7.5% recession in 2010, much worse for 2009, seen in the red circle. Let’s be conservative and call the valid CPI at 7% last year and 8% this year. Then the recession of 2010 would have been recorded at minus 5.5% last year and worsening in the current year.
The above graph is utterly shocking and calls the entire USGovt stat team liars. Notice how in 2009 (green circle) the nominal GDP growth was minus 2%. Apply any CPI index to register something worse. That bears repeating. The unadjusted economic growth data for full year 2009 was negative, without inflation adjustment. Anything positive for price inflation would mean a worse recession in 2009 than minus 2%. The quarterly method used by the Bureau of Economic Analysis is corrupt and deceptive, intentionally so. They measure quarters in sequence and apply a raft of absurd adjustments led by the hedonic quality lifts, then multiply their gross error by four to annualize. Even Goldman Sachs realizes the economy is sliding into reverse. Even Martin Feldstein must see the poor taste of federal pork on the plate, as he has given a 50-50 chance for a recession reversal. He must not know much about economics, since the recession is in its fourth year.
USFED WITHOUT OPTIONS
The USFed realizes to their dismay that debt monetization does not stimulate the USEconomy. They will be pushed into purchase of USTreasurys for a simple reason. Another big lie of past Quantitative Easing motivated to stimulate the USEconomy has come to light from direct exposure. The QE process will become an integral part of the monetary policy. The purpose for its continuation has been and will continue to be to prevent USTreasury auction failures which would paint a global billboard sign of USGovt insolvency, ruin, and default. The events from this week have profound meaning. The deliberations over the lifted debt ceiling were interwoven in toxic fashion with the budget debate. USGovt expenditures and taxation issues were hotly debated, enough to produce a stalemate that clearly continues. The main message behind the imminent new budget & debt limit deal is that the USGOVT IS GIVEN FREE REIN TO DEBASE THE USDOLLAR CURRENCY, while nothing has been done to reduce the $1.5 trillion deficit. The USGovt debt should lose its AAA rating due to chronic $1.5 trillion deficits, whose lethal continuation was forecasted by the Jackass in 2009. At that time, most people were suffering from deep shock. They were told by captains on the Titanic Helm that the next annual national budget deficit would be under $1 trillion. The Jackass warned of consecutive calamitous $1.5 trillion forecasts. That was a correct call. One third of the $14.3 trillion cumulative USGovt debt is from war adventure. War spending forIraq andAfghanistan since 2001 has totaled $1.3 trillion. An almost hilarious partial solution was offered by the bold Tyler Durden of Zero Hedge, so on point and so sensible as to be funny. Shut down 15% of the USGovt offices and save $150 billion per year, save $1.5 trillion in ten years. My suggestion is to disband the USCongress by referendum, and to replace it with a group of city mayors and county leaders who would block lobbyists to their offices. Let the House of Representatives represent the people from where they live and work, and not represent the banks and corporations whose lobby budgets are huge.
The last two years have proved convincingly that treating insolvency with liquidity solves nothing. The ineffective blunt tool wielded by the USFed has resulted in a rise in the cost structure globally, not just in the United States. The deceptive message promulgated has been to engineer a lower USDollar for the stated purpose of stimulating theUS export trade. This is a great lie! They wish to support the bigUS banks in unending fashion, until the end marred by systemic failure. The USEconomy has inadequate critical mass in the industrial base (see Chinese Foreign Direct Investment since 2002). The excess capacity in factories and workers does not prevent cost inflation (great irony, since lost base), as the clueless cast of US economists has insisted erroneously. TheUS bank sector is insolvent, heavily reliant upon naked USTBond sales and narco money laundering. The story broke in 2009 that the Wall Street firms had over $1 trillion in undelivered USTBonds sold to clients and funds. They are chronically not delivered after 30 days, because they were sold naked illicitly by Wall Street. They are formally called Failures to Deliver. But the good news (at least to Wall Street) was that it was a fertile source of liquidity and revenue generation when investment banking hit the wall. Imagine selling lemonade at a stand but not providing a cup of the tasty product. The money laundering of dirty ‘Agency’ funds through Wall Street is uniformly applied across its pillars to the Syndicate. The process and criminality is out in the open. The laughable part is that no felony charges are ever filed, since deals are cut. Last year Wachovia completed a plea bargain, paid a fine, and walked away. The details escaped the sleepUS financial press. Wachovia paid a mere 1/30-th of one cent per dollar of illegally laundered funds. The funds entered from Mexico. Chalk up a small business cost, a very small cost indeed. This is not a new story.
Back to the mainstream. The housing market is a guaranteed two-ton millstone to depress both households and banks by the neck. My annual forecast is for two more years of housing bear market decline. That always sounds better and more credible than a permanent bear market, which was the private Jackass forecast made privately in 2007. Read: permanent. Each year strong factors such as heavy new home supply and continued job loss make obvious another two years of powerful home price declines. The ugly joke in the bank industry is 3 million homes lie on bank balance sheets, 3 million homes stand in foreclosure, and 3 million line up in default. The overhang is staggering, enormous, magnificent, disastrous, and crippling. To claim theUS housing market is in recovery is the most egregious of lies. The additional hidden supply of homes makes impossible the clearing within the market. The bank balance sheets are still growing, despite their recent decisions to send the REO bank owned homes for sale in the open market. That has resulted in the resumption of the visible price decline, noticed by the dumb slow and half blind analysts who fail to apologize for a skein of wrong forecasts.
NO MONETARY POLICY OPTIONS
The USFed has no monetary options whatsoever. The USFed realizes debt monetization does not stimulate economy. But it does prevent USTreasury auction failures. The painful direct impact of USFed response to crisis and taken action is a uniformly rising cost structure. Price is determined by Supply & Demand, but also the USDollar. The current budget patch deal will result in further dampers. The termination of extended jobless benefits, part of the latest debt deal, has a direct obvious effect. The Austerity Pills have begun to come to the US throats. The low USTreasury yields mean the Interest Rate Swap machinery is working overtime. The low bond yields force low saving yields for certificates of deposit at banks. The result is a damper effect on the USEconomy, not a stimulus. The only stimulus is to the stock market, which has become heavily reliant upon the Working Group for Financial Markets, which does its work at 10am and 3pm in the form of miraculous market index recoveries. The propaganda continues in mindless fashion. The public is told that the policy is in place, it needs time to work, and the second half recovery is to be expected. We are not morons!! The second half of 2011 will feature a massive powerful headline Gold & Silver breakout rally that reflects the broken USDollar, the broken USGovt finances, the broken USEconomy, and the broken USFed leadership. The rally will capture global attention and encourage additional investment demand. Even the USMint badly aggravates the Silver shortage domestically.
The gold price is driven by certain immutable principal themes, each powerful in its own right. Combined, they form the basis for a global Paradigm Shift in wealth transfer. Gold has run roughshod over the $1600 supposed barrier. When it reaches $1700, it will make quick strides and long strides in a sudden move to $2000. The overriding themes are:
- ultra-low interest rates, the 0% scourge that urges asset protection
- lost faith in sovereign bonds, ruined on periphery, moving to core
- exploding government deficits, made worse each year.
Most every Gold bull market has been triggered by ultra-low interest rates. The term is Negative Real Rates, which means the prevailing interest rate is way below the prevailing price inflation rate (in the real world). Since 2009, the USFed has held the Fed Funds rate near 0%. It is a signal of ruin, not stimulus, verified by its chronic continuation. All major currencies will fall together versus Gold, as in the USDollar, the Euro, and the British Pound. The Hat Trick Letter in the last two months has shown vivid detail of the broad Gold bull market breakout. A contrary wind is also detected. The Swiss Franc, the Japanese Yen, the Aussie Dollar, and the Canadian Dollar have risen versus the more broken major currencies. What they have in common is grand mineral and resource wealth. Their still fiat paper currencies are indirectly supported by the commodity riches, making them much more favorable to FOREX traders. The best that central banks can achieve is stability among the major currency exchange rates. This theme is their next propaganda plank of deception. They can claim stability while ignoring the resumed rising cost structure. The mantra must be recognized. Inflate or die means more rising costs, without benefit of increased wages.
Nothing changed since the COMEX ambush of naked shorting in early May, the avalanche that prompted the parade of deceptive analysts to proclaim the end of the Gold trade, the end of the Anti-US$ trade. They were wrong, loud wrong, and we called them wrong. Mark Twain defined ‘dogmatic’ as wrong at the top of the voice. How true! How appropriate! Nothing changed on the endless spew of debt, the endless spew of bank welfare, the endless spew of budget deficits, the endless spew of wrecked toxic sovereign bonds, the relentless rise of costs, the relentless lost job security, the relentless assault on households. The debt crisis has moved into new ground, with the USGovt debt moving onto the same stage as Greece, Portugal, and Ireland. The next broken legs to walk on stage will be Italy and Spain. The biggest surprise will be the entry on stage by France, which looks much more like a PIGS nation than the others. A simple cluster analysis (nifty multi-variate statistical technique) would reveal France as part of the PIGS pen easily. See the debt ratio charts of the past for a basic pattern. They might lead the PIGS in a Mediterranean Central Bank with a common devalued Latin Euro currency. It would be devalued at least 30%, maybe 50%. A split is coming to the Euro Monetary Union, since the PIGS nations cannot carry such Euro currency in their tortured insolvent tattered wallets any longer. The July Hat Trick Letter covered the split in detail. My belief is firm that France will remain with Germany, since the German financial firms own 95% of French Govt debt, a dirty secret that never is mentioned. The Germans will need squires to carry their bags to meetings.
After the EMU split occurs, look for 20 Lehmans to go bust in Europe, as their large banks are badly exposed and heavily damaged. The key is Italy, and tethered Spain. The cross-border debt exposure is magnificent. Bear in mind that Italy is the #8 biggest economy in the world. Italy is responsible for 17% of all European sovereign debt. The practical implications are immediate, as the Italian Treasury must roll over 69 billion Euros in August and September. The Italian Govt debt due between July and end 2011 totals 175 billion Euros, whose financing simply will not happen.Italy must find buyers for a staggering 500 billion Euros in new securities by the end of 2013.Italy will break the Euro, period! A massive Gold Rush will come when money flees supposedly safe haven sovereign funds. The big European banks will drop like wrecked pillars.
WOW ON JAPANESE YEN
Check out the Japanese Yen currency breakout. This was forecasted by the Jackass in April as a paradox concept. The Japanese financial institutions, insurance firms, and central bank are selling USTreasury Bonds in order to pay for grand Reconstruction costs. The J-Yen blew through the 130 level this week. It translates to under 76 on the Dollar/Yen index. That prompted Bank of Japan action, but it will prove futile. They called 78 a line in the sand to defend. It was overrun. The Japanese financial firms are selling USTreasurys on a massive scale. As reported in the Hat Trick Letter two months ago, sale of USTBonds is a better alternative than more fiscal deficits or more debt monetization. Instead of prompting more domestic price inflation, they will take their risk with a rising Yen exchange rate, and watch the export damage. Never overlook the rampage of Yen short covering, as the Yen Carry Trade continues to shut down after 20 years of abuse. The USEconomy will import price inflation from Asia, a diverse effect. See Wal-Mart already on this factor. My view is that the next pact (just like in April with the hasty G-7 Meeting) to halt the J-Yen rise will be the guts of GLOBAL QE. The central banks in the next several months will drop their transparency initiative. Hyper monetary inflation is not a message they wish to provide gory details for.
FIRST STRONG DOLLAR & NOW WEAK DOLLAR
The Strong Dollar Policy of the 1990 decade resulted in a gutting of US industry. Many jobs were sent off-shore. The primary emphasis became the clean industry behind the financial sector, whose size grew markedly, leading up to the 2000 tech telecom bust. Then came the housing bubble then bust, and the deadly aftermath of insolvency that plagues the nation. The Weak Dollar policy engineered in the last two years as part of the Quantitative Easing programs has resulted in more gutting of US industry. The great majority of households and businesses are suffering from a uniformly rising cost structure, but not rising wages. The support of the banker largesse bailouts and USTreasury Bond debt monetization has lifted the entire cost structure. What is missing clearly is a Sound Fair Dollar Policy. But the Gold Standard is considered a third rail with heavy electric current to kill anyone who touches it. The standard will emerge from the ruins that befall theUnited States in its economy, its financial structure, and its political morass.
Gold rises from threat of chaos amidst debt default. Gold rises from continued debasement of the USDollar and other major currencies. Gold rises from the powerful current of price inflation. Gold rises from strong investment demand, side by side with Silver investment demand amidst chronic annual deficits. Gold rises from the increasingly recognized ruin of sovereign bonds. Where are the stooges who shot their mouths off in May?? Do they merely preach as spokesmen for the Syndicate on the financial news channels?? Bring them back to explain where they went wrong. Start with two hacks named Dennis Gartman and Nouriel Roubini.
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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com. For personal questions about subscriptions, contact him at JimWillieCB@aol.com
For those foolish enough to fall for the government propaganda that a recovery is underway, caution and reconsideration are in order. All that governments have left is to promote the illusion of a recovery. They have exhausted their money, creditability and citizens’ patience.
Gerald Celente described their actions:
From the onset of the financial crisis that began in August 2007, and through the ensuing Panic of ’08, Washington, the Federal Reserve and central banks have managed to forestall a Great Depression-grade meltdown by way of a variety of multi-trillion dollar rescue packages, bailouts and stimulus programs. For three years the programs were able to induce an illusory and superficial recovery that, barring a major external geopolitical jolt, might have continued to run its course until the inevitable denouement.
Governmental attempts were doomed from the beginning. All that is left now is duplicity designed to buy time. A collapse is inevitable, all as a result of government economic interventions. Continued interventions provide no hope of avoiding the inevitable. They merely represent an attempt to push off Cairo or Tripoli type demonstrations from coming to the streets of America. Deferral may be possible; avoidance is not.
Bill Bonner ridicules this charade and Tim Geithner in particular:
Now, how did that work again? The banks were shown to be insolvent during the crisis of ’07-’09. They had too much bad debt and not enough capital. And now they’re healthy, right?
Well, what happened to the bad debt? Most of it was backed by real estate. Did real estate go up? It didn’t?
Then, what happened to make the bankers rich again?
The Fed bought their bad debt – about $1.25 trillion worth. But not only did it relieve the banks of their mistakes, it also connived with the US Treasury, now run by the aforementioned Geithner, to make sure the bankers made a lot of money. The Fed lent to them at next to zero interest rate. Then, the US Treasury borrowed the money back at 4%. Even a banker could make money with that deal.
But wait, there’s more…
Government deficits and money printing may mean eventual ruin to a nation’s finances, but they do wonders for the financial sector.
Bonner, in an attempt to educate Geithner (and Bernanke) cites Ludwig von Mises:
Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not a real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth [i.e. the accumulation of savings made available for productive investment]. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later, it must become apparent that this economic situation is built on sand.
Timing may be uncertain, but the end result is not. I believe that we are nearing the end, but institutions like countries, governments and the like take longer to die than logic suggests. Bells are not rung providing a warning when the unthinkable is about to happen. The 1987 stock market crash came out of nowhere as did the dot-com and housing collapses. So did events in the Middle East and Africa. When conditions change, they do so at dramatic pace.
No one can predict timing with reasonable accuracy. Yet things don’t feel right and Celente warns: “Be prepared conditions are spinning out of control.”
Is Wisconsin the trigger or will something else start the avalanche?
by Bob Chapman
Massive creation of money and credit is destroying the capital structure and the dollar.
February 18, 2011
Rather than have designation to what the Fed is doing we believe to a great extent the term quantitative easing will fade from the major media and Fed announcements, probably to be replaced by a term such as accommodation. As time passes more and more professionals and investors will realize that this massive creation of money and credit is destroying the capital structure and the dollar. Other countries are emulating the Fed in various ways and degrees and that is why the USDX, the dollar index versus six major currencies has not plunged as it should have. It is lower, but it is not a true reflection of what is really in progress. Gold has spent the last 2-1/2 years directly competing with the dollar for supremacy as the world’s reserve currency and hands down the dollar has lost in an accelerating flight to quality to gold and silver. Over the past ten years versus nine other major currencies the dollar’s loss in value over each of those years has averaged 15-1/4% and versus silver 20-3/8%. If you widen the spectrum to 50 currencies, the currencies value versus gold and silver have had an even greater fall. The longer the Fed, and other central banks continue to work this charade, the worse the final outcome is going to be. Every step that has been taken since 2000 to extend the problems rather than solve the problems has been futile and makes the final deflationary depression more gruesome.
The Fed has done a dreadful job, as has other central bankers and the public has become aware of that over the past few years. In the US polls they show 70% of the public wants the Fed replaced. This is significant because understanding what the Fed does is not easy for most people. We have been trying to expose the Fed Ponzi scheme for more than 50 years with only limited success. Then about 15 years ago along came talk radio and the Internet and they both opened the information spigot, allowing the average person to understand what the Fed was all about.
During this learning process people are outraged at what the Fed have been doing for many years. The owners of the Fed are always in possession of inside information because they create such information, thus, in an ongoing basis they can never be losers. As a trader for 25 years we know you cannot have three months of trading without a daily loss and produce unbelievable profits without this information. These banks and brokerage houses simply cannot lose and you get to pay the bill one way or another. People now understand and that is one of the prime reasons Rep. Ron Paul just won 30% of a Republican-conservative straw pool. Romney in 2nd place pulled 24%, one of the main elements of Mr. Paul’s platform is to end the Fed, so that had to be a strong element in his victory.
The elitists own the media and the Fed, so it seldom gets any bad press. They also own 95% of Congress and the court system. Taking down the Fed will also destroy the power of these elitists to control America and end the move by these people to create a corporatist fascist government. The Fed is on the way out. It is now only a question of when. Elitists are already planning an alternative, but they won’t be successful. Throughout America the Fed, bankers and Wall Street are held in contempt and by changing the name of the game is not going to fool anyone.
The choices open to the Fed since June of 2003 have been limited. After that date there was no turning back. The die has been cast for a last all out policy of creating a world government. The Fed and others knew there would be no return. It was either victory or a disastrous defeat and exposure, which is something the cabal can ill afford. There is absolutely no way out of the trap they are in. They have extended the time line by expanding money and credit, swaps and quantitative easing. First, temporarily bailing out Wall Street and now they are doing the same for the US Treasury. They are being copied by the UK, Europe, China and many other countries worldwide, all of which are destined to meet the same ignoble end.
In essence the Fed has lost control because the only option it has is to create money and credit, which in the final analysis is self-defeating. The only way out is to classically purge the system, but if the Fed and the elitists do that, they are taking the problem to the very end, hoping for the best. This is not 1348 and the collapse of the Lombard System or the collapse of the Hanseatic League in the 1600s. Today there is the Internet and talk radio, which is projecting the truth worldwide. Why do you think we are seeing demonstrations, which we believe will spread worldwide including the US, UK, Europe and China and many other countries. The major changes have only just begun.
Interest rates worldwide are creeping up in the real market. In the US despite efforts to suppress real interest rates the Fed is slowly loosing control. On the short end rates have doubled and using the 10-year T-note the yield has risen over five months from 2.20% to a high of 3.75%. That doesn’t in any way denote control and shows us that over time higher rates will unfold. That means the real estate problem can only worsen with lower prices and sales indefinitely. Worse yet, the inventory held by banks will grow and grow either taking them down or resulting in home nationalization. In the meantime worldwide price inflation, a result of QE1, envelops the globe. Wait until the affects of QE2 hit a year from now. Our question is when will QE3 begin? We will guess at early next year.
We are headed toward 14% inflation this year, which is currently close to 7%. That means 2012 could send the economy into hyperinflation. As we said long ago the Fed will end up buying almost all of the Treasury and Agency bonds, which will create losses of well over $1 trillion, as rates rise. Monetization will be in full swing. The banking system is headed for renewed insolvency, as is the Fed. The effects of quantitative easing will unfortunately become manifest. Wall Street and Washington will continue to lie about it, but the Internet and talk radio will tell the public the truth. Again, your only hedge against the effects of these oncoming events to to own gold and silver related assets, such as shares and coins. All the clever deceptions are not going to work. The US, UK, European and other economies are going to come apart at the seams.
The economists behind the scenes and Front man Bernanke are not dumb or clueless; they know exactly what they are doing. Their tactics and policies are designed only to prolong the system to keep it from total collapse. On one end we see the administration desiring higher taxes for the middle class and the wealthy on the other we see endless extended unemployment benefits and food stamps. These experts have put America into a death spiral from which there is no return, and they know that. The only question is when will they finally pull the plug and what will be the final outcome?
This demoralizing economic and financial picture is accompanied by unbridled fraud, theft and criminality on Wall Street. Massive naked short selling that the SEC absolutely refuses to do anything about. Insider trading prosecutions, none of which touches the Illuminist inner sanctum. A CFTC that also refuses to stop and discipline the major firms, such as JPM, HSBC, GS and Citi for cornering the gold and silver markets. Flash trading, better known as front-running, proceeds apace with no interference from the SEC. We have a government that has killed free markets under the Executive Order called, “The President’s Working Group on Financial Markets.” Then we have black box manipulation used to take markets up and down as Wall Street pleases.
The foregoing is not a happy story, but it is the reality of our times. It will eventually bring down our present financial system. When the end comes it will be violent and very damaging. Your only respite will be gold and silver related assets, something Americans are yet to discover.
The silver markets are rigged. Every day. Every trade. Every option. Every derivative. The silver markets have been rigged since the early 1970’s when Alan Greenspan introduced computer market trading systems to the world beginning the long term commodity market rigging operation.
Since that time there has not been a day when the silver markets have been “freely traded”. Nobody, and I mean NOBODY, knows the true “Fair Market Value” of silver!
But like all price suppression schemes, the silver manipulation must come to an end and we are on the brink of that moment. The only remaining question should be “What is the true value of silver in terms of money?”
First a little background to set the stage.
Computer Commodity Trading
Beginning in the early 1970’s, computers were introduced to control the order flow in financial markets. Order processing was drastically changed with the New York Stock Exchange’s “designated order turnaround” system (DOT, and later SuperDOT) which routed orders electronically to the proper trading post to be executed manually, and the “opening automated reporting system” (OARS) which aided the specialist in determining the market clearing opening price (SOR; Smart Order Routing).
Today we have algorithmic trading, auto trading, algo trading, black-box trading, robo trading…and the list goes on. Algorithmic Trading is widely used by pension funds, mutual funds, and other buy side institutional traders, to divide large trades into several smaller trades in order to manage market impact, and risk. Sell side traders, such as market makers and hedge funds, claim to provide “liquidity to the market”, generating and executing orders automatically. In “high frequency trading” (HFT) computers make the decision to initiate orders based on information that is received electronically, before human traders are even aware of the information.
Over the years computers have played an increasingly important role in everything related to our “free and open market system” such that today’s financial markets CANNOT function without computers. The Federal Reserve, US Treasury, Wall Street insiders and the Exchanges were all instrumental in the integration of computers but they also gained access to secret trading information before the order hit the open market. This information coupled with the fastest computers on earth made market manipulation easy.
This power, the power to control markets, was too much for anyone to resist. Over time those who were given the official key to the back office operations have used and abused their position to its manipulative fullest. Although some of the time they used this power in an official capacity (for the good of the country), more often than not it was used in an unofficial capacity… for the good of themselves.
Bernie Madoff, the ex-head of the NASAQ, was a great example of this public to private transition as his private trading firm was all computer algorithm based market rigging operations. There are many other ex-Exchange/Wall Street officers that went on to open computer trading operations. Many continue to thrive such as EWT, LLC which became a dominant trading/market making firm using “state-of-the-art technology and algorithmic models”. EWT was founded by Vincent Viola (ex NYMEX Chairman) and David Salomon (reported to Robert Ruben at Goldman Sachs) and are also an “Authorized Participant” in the iShares Silver ETF (SLV).
Are you beginning to see the problem? He who has the biggest, fastest and smartest computers (or programmers) can set the price and will ALWAYS WIN! No longer is there any kind of true supply/demand factors related to commodity exchanges or prices. Computer trading should be outlawed…the convenience and efficiency it provides does not offset the detrimental effects and potential for total and complete market manipulation.
CFTC Created to Cover Up the Manipulation
When the computer rigging programs were implemented there needed to be some kind of cover to ensure secrecy and maintain a false confidence in free markets. In 1974 Congress passed the Commodity Futures Trading Commission Act that overhauled the Commodity Exchange Act and created the CFTC as an independent agency with powers greater than those of its predecessor agency, the Commodity Exchange Authority.
From that moment the CFTC has been run by board appointees that showcased a revolving door of Wall Street insiders ensuring that the computer market rigging operations were not interfered with. The only notable exception is Brooksley Born who was fired by President Clinton when she found out the truth about our supposed “free markets” and tried to warn everyone. (see The Warning)
Listen to Brooksley Born explain the problems in her own words when she accepted her JFK Profiles in Courage Award in August 2009.
A while back I gave up my fight against the CFTC as I determined that they were NOT protecting the best interest of the investor but rather they were protecting the computer market rigging operations and the people involved. Here is one of my last articles on the subject:
Road to Roota III — Who’s the little man behind the curtain?
Now that you have some background let’s get back to $6,000 Silver!
Historically, when any price rigging operation stops the violence of the ensuing price changes are determined by the length and scale of the manipulation as well as the underlying fundamentals of the item being rigged. Take for example the famous 1980’s case of the Hunt brothers trying to corner the silver market. From early 1974 the Hunt brothers started accumulating silver which ultimately drove the price from $6/oz to $50/oz until January 21, 1980 when the CFTC finally pulled the plug on their operation. Within 2 months the price of silver plummeted from $50/oz to $10/oz and the silver price was back under control of the US Government and Banking Cabal. An excellent account of what transpired can be found here:
This account shows what can happen to the price of a manipulated commodity when the price manipulation is ended. In the case of the Hunt Brothers the manipulation lasted 6 years and involved approximately 130M oz of physical silver and 90M oz of COMEX silver contracts. This was an attempt at a Long Silver price manipulation but it was going on while the Short Silver Official manipulation was going on trying to keep the price down. The only way the Hunt’s accumulated so much silver without the price heading into the many thousands of dollars was the official computer price suppression operation.
The manipulation was ended when the CFTC stopped all COMEX Silver purchases and allowed only silver liquidation sales instantly driving the price down. In 1980 the US Government held 3B oz of silver and in order to maintain the lower silver price levels they sold the entire stock of silver into the market over the next 25 years. That excess supply combined with other governments divesting their silver was enough to continue the price suppression scheme for almost 40 years. That supply is now gone.
One Bank has the Hot Potato
So here we are 40 years after the official manipulation of silver began and the world is finally awakening to the situation. The CFTC, having investigated silver manipulation allegations twice previously, has had an open investigation into silver market manipulation for almost 2 years. They have even stated that the investigation was moved to the “Enforcement Division” within the CFTC which pretty much tells you what the conclusion of the investigation revealed. The FBI has separately stated that they are investigating JP Morgan for silver market manipulation. These two facts and the absolute SILENCE from JP Morgan are strong indicators that the long term manipulation of silver is about to end.
Ted Butler of Butler Research has been exposing the official manipulation of Silver for the past 25 years. His research was instrumental in exposing the gold/silver leasing operations and the massive concentrated short positions in both gold and silver. On September 3, 2008 Butler published a report entitled Fact Versus Speculation where he showed how one bank, JP Morgan Chase, took over the Bear Stearns Silver COMEX Short position of 30,000 contracts or 150M oz.
Since this report was published JP Morgan has continued its silver market rigging antics in an effort to get out of this precarious short position. After Butler exposed JPM as the culprit there have been wild orchestrated swings in the price of silver as JPM attempts to cover their massive COMEX short position. The price of silver has risen from $13 to currently over $20 in this time frame and the size of the short position held by JP Morgan has gyrated wildly between 30k and 40k contracts as they desperately try to shake the longs to cover their shorts. But even with this rise in price the short position is STILL above 30k contracts according to the CFTC’s latest Bank Participation Report.
Add to this various silver market manipulation tools such as naked shorting silver ETF’s, falsifying COMEX warehouse data, unallocated silver, leasing and swapping metal and you have a situation that dwarfs the Hunt brothers case.
Of course, JP Morgan is no ordinary bank because they are also the LARGEST derivative holder in the WORLD at $75.3 TRILLION! Do remember Warren Buffett calling derivatives “Weapons of Mass Financial Destruction”? Well, JP Morgan holds the mother load when it comes to silver too with $8.4 BILLION of Silver derivative contracts!
(OCC Report table 9: Classified as “PREC METALS”… might be a little platinum but not much).
This report was for the quarter ending June 2010 when the price of silver was $18.50. That translates into over 450 MILLION OUNCES of notional silver derivative contracts that remain open!
COME ON PEOPLE! I’m starting to think my $6,000/oz silver call is too conservative!
What’s going to happen when JP Morgan’s derivative monument comes crashing down…which it almost did in September 2008?
So here’s where I get to $6,000 per oz for silver.
1) I know silver has not been freely traded in 40 years so today’s price if irrelevant.
2) I, like many, estimate there is only about 1B ounces in above ground physical silver for investment purposes.
3) I, like many, estimate there is only 5B ounces of above ground physical gold for investment purposes.
4) If the price of gold is not manipulated, like the banks claim, then the price of silver should be 5x the price of gold due to its supply/demand fundamentals.
CONCLUSION: The price of gold is around $1,200/oz so the true Fair Market Value of Silver should be around $6,000/oz in a FREE market!
It’s simple, if you remove ONE BANK from the supply side of the equation the price of silver will SKYROCKET overnight.
ONE BANK controls the price of silver.
ONE BANK controls the fate of our monetary system.
ONE BANK is behind the curtain pulling the silver manipulation levers.
ONE BANK has control over a nation that was founded by “We the People”.
ONE BANK MUST GO AWAY TO SAVE OUR LIBERTY!
May the Road you choose be the Right Road.
– Bix Weir