Friday, January 31, 2014
Why Is The Fed Tapering? What will unravel? The financial system or American power? Roberts and Kranzler team up again to provide an answer.
Why is the Fed tapering?
January 30, 2014 | Original Here Go here to sign up to receive email notice of this news letter
Why is the Fed tapering?
Paul Craig Roberts and Dave Kranzler
On January 17, 2014, we explained “The Hows and Whys of Gold Price Manipulation.” http://www.paulcraigroberts.org/2014/01/17/hows-whys-gold-price-manipulation/
In former times, the rise in the gold price was held down by central banks selling gold or leasing gold to bullion dealers who sold the gold. The supply added in this way to the market absorbed some of the demand, thus holding down the rise in the gold price.
As the supply of physical gold on hand diminished, increasingly recourse was taken to selling gold short in the paper futures market. We illustrated a recent episode in our article. Below we illustrate the uncovered short-selling that took the gold price down today (January 30, 2014).
When the Comex trading floor opened January 30 at 8:20AM NY time, the price of gold inexplicably plunged $17 over the next 30 minutes. The price plunge was triggered when sell orders flooded the Comex trading floor. Over the course of the previous 23 hours of trading, an average of 202 gold contracts per minute had traded. But starting at the 8:20AM Comex, there were four 1-minute windows of trading here’s what happened:
8:21AM: 1766 contracts sold
8:22AM: 5172 contracts sold
8:31AM: 3242 contracts sold
8:47AM: 3515 contracts sold
Over those four minutes of trading, an average of 3,424 contracts per minute traded, or 17 times the average per minute volume of the previous 23 hours, including yesterday’s Comex trading session.
The yellow arrow indicates when the Comex floor opened for gold futures trading. There was not any news events or related market events that would have triggered a sell-off like this in gold. If an entity holding many contracts wanted to sell down its position, it would accomplish this by slowly feeding its position to the market over the course of the entire trading day in order to avoid disturbing the price or “telegraphing” its intent to sell to the market.
Instead, today’s selling was designed to flood the Comex trading floor with a high volume of sell orders in rapid succession in order to drive the price of gold as low as possible before buyers stepped in.
The reason for this is two-fold: Driving down the price of gold assists the Fed in its efforts to support the dollar, and the Comex is running out of physical gold available to be delivered to those who decide to take delivery of gold instead of cash settlement.
The February gold contract is subject to delivery starting on January 31st. As of January 29th, 2 days before the delivery period starts, there were 2,223,000 ounces of gold futures open against 375,000 ounces of gold available to be delivered. The primary banks who trade Comex gold (JP Morgan, HSBC, Bank Nova Scotia) are the primary entities who are short those Comex contracts. Typically toward the end of a delivery month, these banks drive the price of gold lower for the purpose of coercing holders of the contracts to sell. This avoids the problem of having a shortage of gold available to deliver to the entities who decide to take delivery. With an enormous amount of physical gold moving from the western bank vaults to the large Asian buyers of gold, the Comex ultimately does not have enough gold to honor delivery obligations should the day arrive when a fifth or a fourth of the contracts are presented for delivery. Prior to a delivery period or due date on the contracts, manipulation is used to drive the Comex price of gold as low as possible in order to induce enough selling to avoid a possible default on gold delivery.
Following the taper announcement on January 29, the gold price rose $14 to $1270, and the Dow Jones Index dropped 100 points, closing down 74 points from its trading level at the time the tapering was announced. These reactions might have surprised the Fed, leading to the stock market support and gold price suppression on January 30.
Manipulation of the gold price is a foregone conclusion. The question is: why is the Fed tapering? The official reason is that the recovery is now strong enough not to need the stimulus. There are two problems with the official explanation. One is that the purpose of QE has always been to support the prices of the debt-related derivatives on the balance sheets of the banks too big to fail. The other is that the Fed has enough economists and statisticians to know that the recovery is a statistical artifact of deflating GDP with an understated measure of inflation. No other indicator–employment, labor force participation, real median family income, real retail sales, or new construction–indicates economic recovery. Moreover, if in fact the economy has been in recovery since June 2009, after 4.5 years of recovery it is time for a new recession.
One possible explanation for the tapering is that the Fed has created enough new dollars with which to purchase the worst part of the banks’ balance sheet problems and transfer them to the Fed’s balance sheet, while in other ways enhancing the banks’ profits. With the job done, the Fed can slowly back off.
The problem with this explanation is that the liquidity that the Fed has created found its way into the stock and bond markets and into emerging economies. Curtailing the flow of liquidity crashes the markets, bringing on a new financial crisis.
We offer two explanations for the tapering. One is technical, and one is strategic.
First the technical explanation. The Fed’s bond purchases and the banks’ interest rate swap derivatives have made a dent in the supply of Treasuries. With income tax payments starting to flow in, fewer Treasuries are being issued to put pressure on interest rates. This permits the Fed to make a show of doing the right thing and reduce bond purchases. As a weakening economy becomes apparent as the year progresses, calls for the Fed to support the economy will permit the Fed to broaden the array of instruments that it purchases.
A strategic explanation for tapering is that the growth of US debt and money creation is causing the world to turn a jaundiced eye toward the US dollar and toward its role as world reserve currency.
Currently the Russian Duma is discussing legislation that would eliminate the dollar’s use and presence in Russia. Other countries are moving away from the dollar. Recently the Nigerian central bank reduced its dollar reserves and increased its holdings of Chinese yuan. Zimbabwe, which was using the US dollar as its own currency, switched to Chinese yuan. The former chief economist of the World Bank recently called for terminating the use of the dollar as world reserve currency. He said that “the dominance of the greenback is the root cause of global financial and economic crises.” Moreover, the Federal Reserve is very much aware of the flight away from the dollar into gold, because it is this flight that causes the Fed to manipulate the gold price in order to hold it down and in order to be able to free up gold for delivery.
The Fed knows that the ability of the US to pay its bills in its own currency is the reason it can stand its large trade imbalance and is the basis for US power. If the dollar loses the reserve currency role, the US becomes just another country with balance of payments and currency problems and an inability to sell its bonds in order to finance its budget deficits.
In other words, perhaps the Fed understands that a dollar crisis is a bigger crisis than a bank crisis and that its bailout of the banks is undermining the dollar. The question is: will the Fed let the banks go in order to save the dollar?
Paul Craig Roberts is a former Assistant Secretary of the US Treasury for Economic Policy.
Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.
Monday, January 27, 2014
How to explain our National Security State (NSS) to a passing Martian: "At a cost of nearly a trillion dollars a year, its main global enemy consists of thousands of lightly armed jihadis and wannabe jihadis scattered mainly across the backlands of the planet. They are capable of causing genuine damage -- though far less to the United States than numerous other countries -- but not of shaking our way of life. And yet for the leaders, bureaucrats, corporate cronies, rank and file, and acolytes of the NSS, it’s a focus that can never be intense enough on behalf of a system that can never grow large enough or be well funded enough."
Tomgram: Engelhardt, A Ripley's Believe It or Not National Security State
Posted by Tom Engelhardt at 4:27pm, January 5, 2014. Original Here.
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American Jihad 2014
The New Fundamentalists
By Tom Engelhardt
In a 1950s civics textbook of mine, I can remember a Martian landing on Main Street, U.S.A., to be instructed in the glories of our political system. You know, our tripartite government, checks and balances, miraculous set of rights, and vibrant democracy. There was, Americans then thought, much to be proud of, and so for that generation of children, many Martians were instructed in the American way of life. These days, I suspect, not so many.
Still, I wondered just what lessons might be offered to such a Martian crash-landing in Washington as 2014 begins. Certainly checks, balances, rights, and democracy wouldn’t top any New Year’s list. Since my childhood, in fact, that tripartite government has grown a fourth part, a national security state that is remarkably unchecked and unbalanced. In recent times, that labyrinthine structure of intelligence agencies morphing into war-fighting outfits, the U.S. military (with its own secret military, the special operations forces, gestating inside it), and the Department of Homeland Security, a monster conglomeration of agencies that is an actual “defense department,” as well as a vast contingent of weapons makers, contractors, and profiteers bolstered by an army of lobbyists, has never stopped growing. It has won the undying fealty of Congress, embraced the power of the presidency, made itself into a jobs program for the American people, and been largely free to do as it pleased with almost unlimited taxpayer dollars.
The expansion of Washington’s national security state -- let’s call it the NSS -- to gargantuan proportions has historically met little opposition. In the wake of the Edward Snowden revelations, however, some resistance has arisen, especially when it comes to the “right” of one part of the NSS to turn the world into a listening post and gather, in particular, American communications of every sort. The debate about this -- invariably framed within the boundaries of whether or not we should have more security or more privacy and how exactly to balance the two -- has been reasonably vigorous. The problem is: it doesn’t begin to get at the real nature of the NSS or the problems it poses.
If I were to instruct that stray Martian lost in the nation’s capital, I might choose another framework entirely for my lesson. After all, the focus of the NSS, which has like an incubus grown to monumental proportions inside the body of the political system, would seem distinctly monomaniacal, if only we could step outside our normal way of thinking for a moment. At a cost of nearly a trillion dollars a year, its main global enemy consists of thousands of lightly armed jihadis and wannabe jihadis scattered mainly across the backlands of the planet. They are capable of causing genuine damage -- though far less to the United States than numerous other countries -- but not of shaking our way of life. And yet for the leaders, bureaucrats, corporate cronies, rank and file, and acolytes of the NSS, it’s a focus that can never be intense enough on behalf of a system that can never grow large enough or be well funded enough.
None of the frameworks we normally call on to understand the national security state capture the irrationality, genuine inanity, and actual madness that lie at its heart. Perhaps reimagining what has developed in these last decades as a faith-based system -- a new national religion -- would help. This, at least, is the way I would explain the new Washington to that wayward Martian.
Imagine what we call “national security” as, at heart, a proselytizing warrior religion. It has its holy orders. It has its sacred texts (classified). It has its dogma and its warrior priests. It has its sanctified promised land, known as “the homeland.” It has its seminaries, which we call think tanks. It is a monotheistic faith in that it broaches no alternatives to itself. It is Manichaean in its view of the world. As with so many religions, its god is an eye in the sky, an all-seeing Being who knows your secrets.
Edward Snowden, the man who in 2013 pulled back the curtain on part of this system, revealing its true nature to anyone who cared to look, is an apostate, never to be forgiven by those in its holy orders. He is a Judas to be hunted down, returned to the U.S., put on trial as a “traitor,” and then -- so say some retired NSS warriors (who often channel the opinions and feelings of those still in office) -- hung by the neck until dead or swung “from a tall oak tree.”
Al-Qaeda is, of course, the system’s Devil, whose evil seed is known to land and breed anywhere on the planet from Sana'a, Yemen, to Boston, Massachusetts, if we are not eternally and ever more on guard. In the name of the epic global struggle against it and the need to protect the homeland, nothing is too much, no step taken a point too far. (As the Devil is traditionally a shape-shifter, able to manifest himself in many forms, it is, however, possible that tomorrow’s version of him may be, say, China.)
The leaders of this faith-based system are, not surprisingly, fundamentalist true believers. They don’t wear long beards, wave the Koran, shout “Death to the Great Satan,” or live in the backlands of the planet. Instead, they speak bureaucratically, tend to sport military uniforms and medals, and inhabit high-tech government facilities. Fundamentalist as they are, they may not, in the normal sense, be religious at all. They are not obliged to believe in the importance of being “born again” or fear being “left behind” in a future End Times -- though such beliefs don’t disqualify them either.
They issue the equivalent of fatwas against those they proclaim to be their enemies. They have a set of Sharia-like laws, both immutable and flexible. Punishments for breaking them may not run to stoning to death or the cutting off of hands, but they do involve the cutting off of lives.
Theirs is an implacable warrior religion, calling down retribution on people often seen only poorly by video feed, thousands of miles distant from Washington, D.C., Langley, Virginia, or Fort Meade, Maryland. It’s no mistake that the weapons fired by their fleet of drone aircraft are called Hellfire missiles, since it is indeed hellfire and brimstone that they believe they are delivering to the politically sinful of the world. Nor is it a happenstance that the planes which fire those missiles have been dubbed Predators and Reapers (as in “Grim”), for they do see themselves as the annointed deliverers of Death to their enemies.
While they have a powerful urge to maintain the faith the American public has in them, they also believe deeply that they know best, that their knowledge is the Washington equivalent of God-given, and that the deepest mysteries and secrets of their faith should be held close indeed.
Until you enter their orders and rise into their secret world, there is such a thing as too-much knowledge. As a result, they have developed a faith-based system of secrecy in which the deepest mysteries have, until recently, been held by the smallest numbers of believers, in which problems are adjudicated in a “court” system so secret that only favored arguments by the national security state can be presented to its judges, in which just about any document produced, no matter how anodyne, will be classified as too dangerous to be read by “the people.” This has meant that, until recently, most assessments of the activities of the national security state have to be taken on faith.
In addition, in the service of that faith, NSS officials may -- and their religion permits this -- lie to and manipulate the public, Congress, allies, or anyone else, and do so without compunction. They may publicly deny realities they know to exist, or offer, as Conor Friedersdorf has written, statements “exquisitely crafted to mislead.” They do this based on the belief that the deepest secrets of their world and how it operates can only truly be understood by those already inducted into their orders. And yet, they are not simply manipulating us in service to their One True Faith. Nothing is ever that simple. Before they manipulate us, they must spend years manipulating themselves. Only because they have already convinced themselves of the deeper truth of their mission do they accept the necessity of manipulating others in what still passes for a democracy. To serve the people, in other words, they have no choice but to lie to them.
Like other religious institutions in their heyday, the NSS has also shown a striking ability to generate support for its ever-growing structure by turning itself into a lucrative global operation. In a world where genuine enemies are in remarkably short supply (though you’d never know it from the gospel according to them), it has exhibited remarkable skill in rallying those who might support it financially, whether they call themselves Democrats or Republicans, and ensuring, even in budgetary tough times, that its coffers will continue to burst at the seams.
It has also worked hard to expand what, since 1961, has been known as the military-industrial complex. In the twenty-first century, the NSS has put special effort into subsidizing warrior corporations ready to enter the global battlefield with it. In the process, it has “privatized” -- that is, corporatized -- its global operations. It has essentially merged with a set of crony outfits that now do a significant part of its work. It has hired private contractors by the tens of thousands, creating corporate spies, corporate analysts, corporate mercenaries, corporate builders, and corporate providers for a structure that is increasingly becoming the profit-center of a state within a state. All of this, in turn, helps to support a growing theocratic warrior class in the luxury to which it has become accustomed.
Since 9/11, the result has been a religion of perpetual conflict whose doctrines tend to grow ever more extreme. In our time, for instance, the NSS has moved from Dick Cheney’s “1% doctrine” (if there’s even a 1% chance that some country might someday attack us, we should strike first) to something like a “0% doctrine.” Whether in its drone wars with their presidential “kill lists” or the cyber war -- probably the first in history -- that it launched against Iran, it no longer cares to argue most of the time that such strikes need even a 1% justification. Its ongoing, self-proclaimed global war, whether on the ground or in the air, in person or by drone, in space or cyberspace (where its newest military command is already in action) is justification enough for just about any act, however aggressive.
Put all this together and what you have is a description of a militant organization whose purpose is to carry out a Washington version of global jihad, a perpetual war in the name of the true faith.
A Practical Failure, A Faith-Based Success Story
Looked at another way, the national security state is also a humongous humbug, a gigantic fraud of a belief system that only delivers because its followers never choose to look at the world through Martian eyes.
Let’s start with its gargantuan side. No matter how you cut it, the NSS is a Ripley’s Believe It or Not of staggering numbers that, once you step outside its thought system, don’t add up. The U.S. national defense budget is estimated to be larger than those of the next 13 countries combined -- that is, simply off-the-charts more expensive. The U.S. Navy has 11 aircraft carrier strike groups when no other country has more than two. No other national security outfit can claim to sweep up “nearly five billion records a day on the whereabouts of cellphones around the world”; nor, like the National Security Agency’s Special Source Operations group in 2006, boast about being capable of ingesting the equivalent of “one Library of Congress every 14.4 seconds”; nor does it have any competitors when it comes to constructing “building complexes for top-secret intelligence work” (33 in the Washington area alone between 2001 and 2010). And its building programs around the U.S. and globally are never-ending.
It is creating a jet fighter that will be the most expensive weapons system in history. Its weapons makers controlled 78% of the global arms market in 2012. When its military departed Iraq after eight years of invasion and occupation, it left with three million objects ranging from armored vehicles to laptop computers and porta-potties (and destroyed or handed over to the Iraqis countless more). In a world where other countries have, at best, a handful of military bases outside their territory, it has countless hundreds. In 2011 alone, it managed to classify 92,064,862 of the documents it generated, giving secrecy a new order of magnitude. And that’s just to dip a toe in the ocean of a national security state that dwarfs the one which fought the Cold War against an actual imperial superpower.
Again, if you were to step outside the world of NSS dogma and the arguments that go with it, such numbers -- and they are legion -- would surely represent one of the worst investments in modern memory. If a system of this sort weren’t faith-based, and if that faith weren’t widespread and deeply accepted (even if now possibly on the wane), people would automatically look at such numbers and the results they deliver and ask why, for all its promises of safety and security, the NSS so regularly fails to deliver. And why the response to failure can always be encapsulated in one word: more.
After all, if the twenty-first century has taught us anything, it’s that the most expensive and over-equipped military on the planet can’t win a war. Its two multi-trillion-dollar attempts since 9/11, in Iraq and Afghanistan, both against lightly armed minority insurgencies, proved disasters. (In Iraq, however, despite an ignominious U.S. pullout and the chaos that has followed in the region, the NSS and its supporters have continued to promote the idea that General David Petraeus’s “surge” was indeed some kind of historic last-minute “victory.”)
After 12 long years in Afghanistan and an Obama era surge in that country, the latest grim National Intelligence Estimate from the U.S. intelligence community suggests that no matter what Washington now does, the likelihood is that things there will only go from bad enough to far worse. Years of a drone campaign against al-Qaeda in the Arabian Peninsula has strengthened that organization; an air intervention in Libya led to chaos, a dead ambassador, and a growing al-Qaeda movement in northern Africa -- and so it repetitively goes.
Similarly, intelligence officials brag of terrorist plots -- 54 of them! -- that have been broken up thanks in whole or in part to the National Security Agency’s metadata sweeps of U.S. phone calls; it also claims that, given the need of secrecy, only four of them can be made public. (The claims of success on even those four, when examined by journalists, have proved less than impressive.) Meanwhile, the presidential task force charged with reviewing the NSA revelations, which had access to a far wider range of insider information, came to an even more startling conclusion: not one instance could be found in which that metadata the NSA was storing in bulk had thwarted a terrorist plot. “Our review,” the panel wrote, “suggests that the information contributed to terrorist investigations by the use of section 215 telephony meta-data was not essential to preventing attacks.” (And keep in mind that, based on what we do know about such terror plots, a surprising number of them were planned or sparked or made possible by FBI-inspired plants.)
In fact, claims of success against such plots couldn’t be more faith-based, relying as they generally do on the word of intelligence officials who have proven themselves untrustworthy or on the impossible-to-prove-or-disprove claim that if such a system didn’t exist, far worse would have happened. That version of a success story is well summarized in the claim that “we didn’t have another 9/11.”
In other words, in bang-for-the-buck practical terms, Washington’s national security state should be viewed as a remarkable failure. And yet, in faith-based terms, it couldn’t be a greater success. Its false gods are largely accepted by acclamation and regularly worshiped in Washington and beyond. As the funding continues to pour in, the NSS has transformed itself into something like a shadow government in that city, while precluding from all serious discussion the possibility of its own future dismantlement or of what could replace it. It has made other options ephemeral and more immediate dangers than terrorism to the health and wellbeing of Americans seem, at best, secondary. It has pumped fear into the American soul. It is a religion of state power.
No Martian could mistake it for anything else.
Tom Engelhardt, a co-founder of the American Empire Project and author of The United States of Fear as well as a history of the Cold War, The End of Victory Culture, runs the Nation Institute's TomDispatch.com. His latest book, co-authored with Nick Turse, is Terminator Planet: The First History of Drone Warfare, 2001-2050.
Follow TomDispatch on Twitter and join us on Facebook or Tumblr. Check out the newest Dispatch Book, Ann Jones’s They Were Soldiers: How the Wounded Return From America’s Wars -- The Untold Story.
Copyright 2014 Tom Engelhardt
The FBI, having bungled 9/11, has now decided to rebrand its primary function as "national security" -- at the expense of cutting their white-collar-crime unit now that Wall Street and bankster crime is running rampant. And what more can they do than NSA, which confessed under oath that by spying on everyone for years they have uncovered ZERO terrorist plots?
FBI Drops Law Enforcement as Primary Mission
BY JOHN HUDSON | JANUARY 5, 2014 -- 9.49 PM ORIGINAL HERE
The FBI's creeping advance into the world of counterterrorism is nothing new. But quietly and without notice, the agency has finally decided to make it official in one of its organizational fact sheets. Instead of declaring "law enforcement" as its "primary function," as it has for years, the FBI fact sheet now lists "national security" as its chief mission. The changes largely reflect the FBI reforms put in place after September 11, 2001, which some have criticized for de-prioritizing law enforcement activities. Regardless, with the 9/11 attacks more than a decade in the past, the timing of the edits is baffling some FBI-watchers.
"What happened in the last year that changed?" asked Kel McClanahan, a Washington-based national security lawyer.
McClanahan noticed the change last month while reviewing a Freedom of Information Act (FOIA) request from the agency. The FBI fact sheet accompanies every FOIA response and highlights a variety of facts about the agency. After noticing the change, McClanahan reviewed his records and saw that the revised fact sheets began going out this summer. "I think they're trying to rebrand," he said. "So many good things happen to your agency when you tie it to national security."
Although a spokesman with the agency declined to weigh in on the timing of the change, he said the agency is just keeping up with the times. "When our mission changed after 9/11, our fact sheet changed to reflect that," FBI spokesman Paul Bresson told Foreign Policy. He noted that the FBI's website has long-emphasized the agency's national security focus. "We rank our top 10 priorities and CT [counterterrorism] is first, counterintel is second, cyber is third," he said. "So it is certainly accurate to say our primary function is national security." On numerous occasions, former FBI Director Robert Mueller also emphasized the FBI's national security focus in speeches and statements.
FBI historian and Marquette University professor Athan Theoharis agreed that the changes reflect what's really happening at the agency, but said the timing isn't clear. "I can't explain why FBI officials decided to change the fact sheet... unless in the current political climate that change benefits the FBI politically and undercuts criticisms," he said. He mentioned the negative attention surrounding the FBI's failure in April to foil the bomb plot at the Boston Marathon by Dzhokhar and Tamerlan Tsarnaev.
Whatever the reason, the agency's increased focus on national security over the last decade has not occurred without consequence. Between 2001 and 2009, the FBI doubled the amount of agents dedicated to counterterrorism, according to a 2010 Inspector's General report. That period coincided with a steady decline in the overall number of criminal cases investigated nationally and a steep decline in the number of white-collar crime investigations.
"Violent crime, property crime and white-collar crime: All those things had reductions in the number of people available to investigate them," former FBI agent Brad Garrett told Foreign Policy. "Are there cases they missed? Probably."
Last month, Robert Holley, the special agent in charge in Chicago, said the agency's focus on terrorism and other crimes continued to affect the level of resources available to combat the violent crime plaguing the city. "If I put more resources on violent crime, I'd have to take away from other things," he told The Chicago Tribune.
According to a 2007 Seattle Post-Intelligencer investigation, the Justice Department did not replace 2,400 agents assigned to focus on counterterrorism in the years following 9/11. The reductions in white-collar crime investigations became obvious. Back in 2000, the FBI sent prosecutors 10,000 cases. That fell to a paltry 3,500 cases by 2005. "Had the FBI continued investigating financial crimes at the same rate as it had before the terror attacks, about 2,000 more white-collar criminals would be behind bars," the report concluded. As a result, the agency fielded criticism for failing to crack down on financial crimes ahead of the Great Recession and losing sight of real-estate fraud ahead of the 2008 subprime mortgage crisis.
In many ways, the agency had no choice but to de-emphasize white-collar crime. Following the 9/11 attacks, the FBI picked up scores of new responsibilities related to terrorism and counterintelligence while maintaining a finite amount of resources. What's not in question is that government agencies tend to benefit in numerous ways when considered critical to national security as opposed to law enforcement. "If you tie yourself to national security, you get funding and you get exemptions on disclosure cases," said McClanahan. "You get all the wonderful arguments about how if you don't get your way, buildings will blow up and the country will be less safe."
Thursday, January 23, 2014
Former Assistant Secretary of the Treasury, Paul Craig Roberts, and former Wall Street bond trader, Dave Kranzler, deduce how and why the Fed has been manipulating the price of gold, and they come to the stunning conclusion that the Fed has been stealing gold bullion loaned to them by foreign banks and selling it cheap to China. They further believe that the Fed has very little physical gold left, the selling of which has been the source of their cash to continue Quantitative Easing. When they finally run out of gold the "too big to fail" banks will fail anyway, and the currency markets will depreciate the dollar, making Chinese products much more costly for American consumers. Take heed America ...because you will not hear this from the "mainstream" media until it is too late.
Is the Fed’s ability to manipulate the price of gold running out?
January 21, 2014 | Original Here Go here to sign up to receive email notice of this news letter
Is the Fed’s ability to manipulate the price of gold running out?
Paul Craig Roberts interviewed on USAWatchdog by Greg Hunter
Blogger's Note: The following video is what you would find, together with selected text, at the link above. It is long and chatty. By contrast, the article below the video is long only because it treats the highly detailed evidence of gold-market rigging by the Federal Reserve. Both are on the same subject, so take your choice.
The Hows and Whys of Gold Price Manipulation
January 17, 2014 | Original Here Go here to sign up to receive email notice of this news letter
Paul Craig Roberts and Dave Kranzler.
The deregulation of the financial system during the Clinton and George W. Bush regimes had the predictable result: financial concentration and reckless behavior. A handful of banks grew so large that financial authorities declared them “too big to fail.” Removed from market discipline, the banks became wards of the government requiring massive creation of new money by the Federal Reserve in order to support through the policy of Quantitative Easing the prices of financial instruments on the banks’ balance sheets and in order to finance at low interest rates trillion dollar federal budget deficits associated with the long recession caused by the financial crisis.
The Fed’s policy of monetizing one trillion dollars of bonds annually put pressure on the US dollar, the value of which declined in terms of gold. When gold hit $1,900 per ounce in 2011, the Federal Reserve realized that $2,000 per ounce could have a psychological impact that would spread into the dollar’s exchange rate with other currencies, resulting in a run on the dollar as both foreign and domestic holders sold dollars to avoid the fall in value. Once this realization hit, the manipulation of the gold price moved beyond central bank leasing of gold to bullion dealers in order to create an artificial market supply to absorb demand that otherwise would have pushed gold prices higher. The manipulation consists of the Fed using bullion banks as its agents to sell naked gold shorts in the New York Comex futures market. Short selling drives down the gold price, triggers stop-loss orders and margin calls, and scares participants out of the gold trusts. The bullion banks purchase the deserted shares and present them to the trusts for redemption in bullion. The bullion can then be sold in the London physical gold market, where the sales both ratify the lower price that short-selling achieved on the Comex floor and provide a supply of bullion to meet Asian demands for physical gold as opposed to paper claims on gold.
The evidence of gold price manipulation is clear. In this article we present evidence and describe the process. We conclude that ability to manipulate the gold price is disappearing as physical gold moves from New York and London to Asia, leaving the West with paper claims to gold that greatly exceed the available supply.
The primary venue of the Fed’s manipulation activity is the New York Comex exchange, where the world trades gold futures. Each gold futures contract represents one gold 100 ounce bar. The Comex is referred to as a paper gold exchange because of the use of these futures contracts. Although several large global banks are trading members of the Comex, JP Morgan, HSBC and Bank Nova Scotia conduct the majority of the trading volume. Trading of gold (and silver) futures occurs in an auction-style market on the floor of the Comex daily from 8:20 a.m. to 1:30 p.m. New York time. Comex futures trading also occurs on what is known as Globex. Globex is a computerized trading system used for derivatives, currency and futures contracts. It operates continuously except on weekends. Anyone anywhere in the world with access to a computer-based futures trading platform has access to the Globex system.
In addition to the Comex, the Fed also engages in manipulating the price of gold on the far bigger–in terms of total dollar value of trading–London gold market. This market is called the LBMA (London Bullion Marketing Association) market. It is comprised of several large banks who are LMBA market makers known as “bullion banks” (Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorganChase, Merrill Lynch/Bank of America, Mitsui, Societe Generale, Bank of Nova Scotia and UBS). Whereas the Comex is a “paper gold” exchange, the LBMA is the nexus of global physical gold trading and has been for centuries. When large buyers like Central Banks, big investment funds or wealthy private investors want to buy or sell a large amount of physical gold, they do this on the LBMA market.
The Fed’s gold manipulation operation involves exerting forceful downward pressure on the price of gold by selling a massive amount of Comex gold futures, which are dropped like bombs either on the Comex floor during NY trading hours or via the Globex system. A recent example of this occurred on Monday, January 6, 2014. After rallying over $15 in the Asian and European markets, the price of gold suddenly plunged $35 at 10:14 a.m. In a space of less than 60 seconds, more than 12,000 contracts traded – equal to more than 10% of the day’s entire volume during the 23 hour trading period in which which gold futures trade. There was no apparent news or market event that would have triggered the sudden massive increase in Comex futures selling which caused the sudden steep drop in the price of gold. At the same time, no other securities market (other than silver) experienced any unusual price or volume movement. 12,000 contracts represents 1.2 million ounces of gold, an amount that exceeds by a factor of three the total amount of gold in Comex vaults that could be delivered to the buyers of these contracts.
This manipulation by the Fed involves the short-selling of uncovered Comex gold futures. “Uncovered” means that these are contracts that are sold without any underlying physical gold to deliver if the buyer on the other side decides to ask for delivery. This is also known as “naked short selling.” The execution of the manipulative trading is conducted through one of the major gold futures trading banks, such as JPMorganChase, HSBC, and Bank of Nova Scotia. These banks do the actual selling on behalf of the Fed. The manner in which the Fed dumps a large quantity of futures contracts into the market differs from the way in which a bona fide trader looking to sell a big position would operate. The latter would try to work off his position carefully over an extended period of time with the goal of trying to disguise his selling and to disturb the price as little as possible in order to maximize profits or minimize losses. In contrast, the Fed‘s sales telegraph the intent to drive the price lower with no regard for preserving profits or fear or incurring losses, because the goal is to inflict as much damage as possible on the price and intimidate potential buyers.
The Fed also actively manipulates gold via the Globex system. The Globex market is punctuated with periods of “quiet” time in which the trade volume is very low. It is during these periods that the Fed has its agent banks bombard the market with massive quantities of gold futures over a very brief period of time for the purpose of driving the price lower. The banks know that there are very few buyers around during these time periods to absorb the selling. This drives the price lower than if the selling operation occurred when the market is more active.
A primary example of this type of intervention occurred on December 18, 2013, immediately after the FOMC announced its decision to reduce bond purchases by $10 billion monthly beginning in January 2014. With the rest of the trading world closed, including the actual Comex floor trading, a massive amount of Comex gold futures were sold on the Globex computer trading system during one of its least active periods. This selling pushed the price of gold down $23 dollars in the space of two hours. The next wave of futures selling occurred in the overnight period starting at 2:30 a.m. NY time on December 19th. This time of day is one of the least active trading periods during any 23 hour trading day (there’s one hour when gold futures stop trading altogether). Over 4900 gold contracts representing 14.5 tonnes of gold were dumped into the Globex system in a 2-minute period from 2:40-2:41 a.m, resulting in a $24 decline in the price of gold. This wasn’t the end of the selling. Shortly after the Comex floor opened later that morning, another 1,654 contracts were sold followed shortly after by another 2,295 contracts. This represented another 12.2 tonnes of gold. Then at 10:00 a.m. EST, another 2,530 contracts were unloaded on the market followed by an additional 3,482 contracts just six minutes later. These sales represented another 18.7 tonnes of gold.
All together, in 6 minutes during an eight hour period, a total amount of 37.6 tonnes (a “tonne” is a metric ton–about 10% more weight than a US ”ton”) of gold future contracts were sold. The contracts sold during these 6 minutes accounted for 10% of the total volume during that 23 hours period of time. Four-tenths of one percent of the trading day accounted for 10% of the total volume. The gold represented by the futures contracts that were sold during these 6 minutes was a multiple of the amount of physical gold available to Comex for delivery.
The purpose of driving the price of gold down was to prevent the announced reduction in bond purchases (the so-called tapering) from sending the dollar, stock and bond markets down. The markets understand that the liquidity that Quantitative Easing provides is the reason for the high bond and stock prices and understand also that the gains from the rising stock market discourage gold purchases. Previously when the Fed had mentioned that it might reduce bond purchases, the stock market fell and bonds sold off. To neutralize the market scare, the Fed manipulated both gold and stock markets. (See Pam Martens for explanation of the manipulation of the stock market: http://wallstreetonparade.com/2013/12/why-didn’t-the-stock-market-sell-off-on-the-fed’s-taper-announcement/ )
While the manipulation of the gold market has been occurring since the start of the bull market in gold in late 2000, this pattern of rampant manipulative short-selling of futures contracts has been occurring on a more intense basis over the last 2 years, during gold’s price decline from a high of $1900 in September 2011. The attack on gold’s price typically will occur during one of several key points in time during the 23 hour Globex trading period. The most common is right at the open of Comex gold futures trading, which is 8:20 a.m. New York time. To set the tone of trading, the price of gold is usually knocked down when the Comex opens. Here are the other most common times when gold futures are sold during illiquid Globex system time periods:
- 6:00 p.m NY time weekdays, when the Globex system re-opens after closing for an hour;
- 6:00 p.m. Sunday evening NY time when Globex opens for the week;
- 2:30 a.m. NY time, when Shanghai Gold Exchange closes
- 4:00 a.m. NY time, just after the morning gold “fix” on the London gold market (LBMA);
2:00 p.m. NY time any day but especially on Friday, after the Comex floor trading has closed – it’s an illiquid Globex-only session and the rest of the world is still closed.
In addition to selling futures contracts on the Comex exchange in order to drive the price of gold lower, the Fed and its agent bullion banks also intermittently sell large quantities of physical gold in London’s LBMA gold market. The process of buying and selling actual physical gold is more cumbersome and complicated than trading futures contracts. When a large supply of physical gold hits the London market all at once, it forces the market a lot lower than an equivalent amount of futures contracts would. As the availability of large amounts of physical gold is limited, these “physical gold drops” are used carefully and selectively and at times when the intended effect on the market will be most effective.
The primary purpose for short-selling futures contracts on Comex is to protect the dollar’s value from the growing supply of dollars created by the Fed’s policy of Quantitative Easing. The Fed’s use of gold leasing to supply gold to the market in order to reduce the rate of rise in the gold price has drained the Fed’s gold holdings and is creating a shortage in physical gold. Historically most big buyers would leave their gold for safe-keeping in the vaults of the Fed, Bank of England or private bullion banks rather than incur the cost of moving gold to local depositories. However, large purchasers of gold, such as China, now require actual delivery of the gold they buy.
Demands for gold delivery have forced the use of extraordinary and apparently illegal tactics in order to obtain physical gold to settle futures contracts that demand delivery and to be able to deliver bullion purchased on the London market (LBMA). Gold for delivery is obtained from opaque Central Bank gold leasing transactions, from “borrowing” client gold held by the bullion banks like JP Morgan in their LBMA custodial vaults, and by looting the gold trusts, such as GLD, of their gold holdings by purchasing large blocks of shares and redeeming the shares for gold.
Central Bank gold leasing occurs when Central Banks take physical gold they hold in custody and lease it to bullion banks. The banks sell the gold on the London physical gold market. The gold leasing transaction makes available physical gold that can be delivered to buyers in quantities that would not be available at existing prices. The use of gold leasing to manipulate the price of gold became a prevalent practice in the 1990′s. While Central Banks admit to engaging in gold lease transactions, they do not admit to its purpose, which is to moderate rises in the price of gold, although Fed Chairman Alan Greenspan did admit during Congressional testimony on derivatives in 1998 that “Central banks stand ready to lease gold in increasing quantities should the price rise.”
Another method of obtaining bullion for sale or delivery is known as “rehypothecation.” Rehypothecation occurs when a bank or brokerage firm “borrows” client assets being held in custody by banks. Technically, bank/brokerage firm clients sign an agreement when they open an account in which the assets in the account might be pledged for loans, like margin loans. But the banks then take pledged assets and use them for their own purpose rather than the client’s. This is rehypothecation. Although Central Banks fully disclose the practice of leasing gold, banks/brokers do not publicly disclose the details of their rehypothecation activities.
Over the course of the 13-year gold bull market, gold leasing and rehypothecation operations have largely depleted most of the gold in the vaults of the Federal Reserve, Bank of England, European Central Bank and private bullion banks such as JPMorganChase. The depletion of vault gold became a problem when Venezuela was the first country to repatriate all of its gold being held by foreign Central Banks, primarily the Fed and the BOE. Venezuela’s request was provoked by rumors circulating the market that gold was being leased and hypothecated in increasing quantities. About a year later, Germany made a similar request. The Fed refused to honor Germany’s request and, instead, negotiated a seven year timeline in which it would ship back 300 of Germany’s 1500 tonnes. This made it apparent that the Fed did not have the gold it was supposed to be holding for Germany.
Why does the Fed need seven years in which to return 20 percent of Germany’s gold? The answer is that the Fed does not have the gold in its vault to deliver. In 2011 it took four months to return Venezuela’s 160 tonnes of gold. Obviously, the gold was not readily at hand and had to be borrowed, perhaps from unsuspecting private owners who mistakenly believe that their gold is held in trust.
Western central banks have pushed fractional gold reserve banking to the point that they haven’t enough reserves to cover withdrawals. Fractional reserve banking originated when medieval goldsmiths learned that owners of gold stored in their vault seldom withdrew the gold. Instead, those who had gold on deposit circulated paper claims to gold. This allowed goldsmiths to lend gold that they did not have by issuing paper receipts. This is what the Fed has done. The Fed has created paper claims to gold that does not exist in physical form and sold these claims in mass quantities in order to drive down the gold price. The paper claims to gold are a large multiple of the amount of actual gold available for delivery. The Reserve Bank of India reports that the ratio of paper claims to gold exceed the amount of gold available for delivery by 93:1.
Fractional reserve systems break down when too many depositors or holders of paper claims present them for delivery. Breakdown is occurring in the Fed’s fractional bullion operation. In the last few years the Asian markets–specifically and especially the Chinese–are demanding actual physical delivery of the bullion they buy. This has created a sense of urgency among the Fed, Treasury and the bullion banks to utilize any means possible to flush out as many weak holders of gold as possible with orchestrated price declines in order to acquire physical gold that can be delivered to Asian buyers.
The $650 decline in the price of gold since it hit $1900 in September 2011 is the result of a manipulative effort designed both to protect the dollar from Quantitative Easing and to free up enough gold to satisfy Asian demands for delivery of gold purchases.
Around the time of the substantial drop in gold’s price in April, 2013, the Bank of England’s public records showed a 1300 tonne decline in the amount of gold being held in the BOE bullion vaults. This is a fact that has not been denied or reasonably explained by BOE officials despite several published inquiries. This is gold that was being held in custody but not owned by the Bank of England. The truth is that the 1300 tonnes is gold that was required to satisfy delivery demands from the large Asian buyers. It is one thing for the Fed or BOE to sell, lease or rehypothecate gold out of their vault that is being safe-kept knowing the entitled owner likely won’t ask for it anytime soon, but it is another thing altogether to default on a gold delivery to Asians demanding delivery.
Default on delivery of purchased gold would terminate the Federal Reserve’s ability to manipulate the gold price. The entire world would realize that the demand for gold greatly exceeds the supply, and the price of gold would explode upwards. The Federal Reserve would lose control and would have to abandon Quantitative Easing. Otherwise, the exchange value of the US dollar would collapse, bringing to an end US financial hegemony over the world.
Last April, the major takedown in the gold price began with Goldman Sachs issuing a “technical analysis” report with an $850 price target (gold was around $1650 at that time). Goldman Sachs also broadcast to every major brokerage firm and hedge fund in New York that gold was going to drop hard in price and urged brokers to get their clients out of all physical gold holdings and/or shares in physical gold trusts like GLD. GLD and other gold ETFs are trusts that purchase physical gold/silver bullion and issue shares that represent claims on the bullion holdings. The shares are marketed as investments in gold, but represent claims that can only be redeemed in very large blocks of shares, such as 100,000, and perhaps only by bullion banks. GLD is the largest gold ETF (exchange traded firm), but not the only one. The purpose of Goldman Sachs’ announcement was to spur gold sales that would magnify the price effect of the short-selling of futures contracts. Heavy selling of futures contracts drove down the gold price and forced sales of GLD and other ETF shares, which were bought up by the bullion banks and redeemed for gold.
At the beginning of 2013, GLD held 1350 tonnes of gold. By April 12th, when the heavy intervention operation began, GLD held 1,154 tonnes. After the series of successive raids in April, the removal of gold from GLD accelerated and currently there are 793 tonnes left in the trust. In a little more than one year, more than 41% of the gold bars held by GLD were removed – most of that after the mid-April intervention operation.
In addition, the Bank of England made its gold available for purchase by the bullion banks in order to add to the ability to deliver gold to Asian purchasers.
The financial media, which is used to discredit gold as a safe haven from the printing of fiat currencies, claims that the decline in GLD’s physical gold is an indication that the public is rejecting gold as an investment. In fact, the manipulation of the gold price downward is being done systematically in order to coerce holders of GLD to unload their shares. This enables the bullion banks to accumulate the amount of shares required to redeem gold from the GLD Trust and ship that gold to Asia in order to meet the enormous delivery demands. For example, in the event described above on January 6th, 14% of GLD’s total volume for the day traded in a 1-minute period starting at 10:14 a.m. The total volume on the day for GLD was almost 35% higher than the average trading volume in GLD over the previous ten trading days.
Before 2013, the amount of gold in the GLD vault was one of the largest stockpiles of gold in the world. The swift decline in GLD’s gold inventory is the most glaring indicator of the growing shortage of physical gold supply that can be delivered to the Asian market and other large physical gold buyers. The more the price of gold is driven down in the Western paper gold market, the higher the demand for physical bullion in Asian markets. In addition, several smaller physical gold ETFs have experienced substantial gold withdrawals. Including the more than 100 tonnes of gold that has disappeared from the Comex vaults in the last year, well over 1,000 tonnes of gold has been removed from the various ETFs and bank custodial vaults in the last year. Furthermore, there is no telling how much gold that is kept in bullion bank private vaults on behalf of wealthy investors has been rehypothecated. All of this gold was removed in order to avoid defaulting on delivery demands being imposed by Asian commercial, investment and sovereign gold buyers.
The Federal Reserve seems to be trapped. The Fed is creating approximately 1,000 billion new US dollars annually in order to support the prices of debt related derivatives on the books of the few banks that have been declared to be “to big to fail” and in order to finance the large federal budget deficit that is now too large to be financed by the recycling of Chinese and OPEC trade surpluses into US Treasury debt. The problem with Quantitative Easing is that the annual creation of an enormous supply of new dollars is raising questions among American and foreign holders of vast amounts of US dollar-denominated financial instruments. They see their dollar holdings being diluted by the creation of new dollars that are not the result of an increase in wealth or GDP and for which there is no demand.
Quantitative Easing is a threat to the dollar’s exchange value. The Federal Reserve, fearful that the falling value of the dollar in terms of gold would spread into the currency markets and depreciate the dollar, decided to employ more extreme methods of gold price manipulation.
When gold hit $1,900, the Federal Reserve panicked. The manipulation of the gold price became more intense. It became more imperative to drive down the price, but the lower price resulted in higher Asian demand for which scant supplies of gold were available to meet.
Having created more paper gold claims than there is gold to satisfy, the Fed has used its dependent bullion banks to loot the gold exchange traded funds (ETFs) of gold in order to avoid default on Asian deliveries. Default would collapse the fractional bullion system that allows the Fed to drive down the gold price and protect the dollar from QE.
What we are witnessing is our central bank pulling out all stops on integrity and lawfulness in order to serve a small handful of banks that financial deregulation allowed to become “too big to fail” at the expense of our economy and our currency. When the Fed runs out of gold to borrow, to rehypothecate, and to loot from ETFs, the Fed will have to abandon QE or the US dollar will collapse and with it Washington’s power to exercise hegemony over the world.
Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.
Tuesday, January 21, 2014
Here below is the nature of the "Sword of Damocles" hanging over not just the gold bullion market but also the values of the paper money of nations like the U.S. that no longer have physical gold to back up their paper gold. If you have physical gold, save it for a “rainy day.” If you have paper dollars, use them now to buy something tangible that will hold its value, or even grow in value, when the dollar crashes …as it surely shall.
BILLIONS IN GOLD MISSING FROM U.S. FEDERAL RESERVE
Friday, 10 January 2014 06:25 Original here
January 10, 2014 6:30 AM EST (TRN http://www.TurnerRadioNetwork.com ) -- Billions of dollars in gold from Germany, stored with the U.S. Federal Reserve, seems to have gone "missing" and Germany wants to know where it went and why they're being given someone else's gold as replacement? When Germany demanded to SEE their gold, the Federal Reserve at first refused, then later allowed the Germans to see only ONE of NINE vaults allegedly containing German gold, but refused to allow the Germans to enter that one vault or even touch the gold. The Fed then told Germany it will take until the year 2020 to get all their gold back.
For those who are unaware, the world has a system in place for gold reserves similar to a massive safety deposit box. If, for example, you put your gold wedding ring in a box at the bank — in this case the Federal Reserve — you expect to get that exact ring back, not a roughly equal amount of gold.
Years ago, many countries in Europe, worried their national wealth would be plundered during World War II, stored their gold with the U.S. Federal Reserve and each of them marked their gold; in this case, it said "Bundesbank, Germany."
Germany has had billions of dollars worth of gold in the Federal Reserve for decades, but announced last year that it would like at least a percentage of it returned by 2014, and more in subsequent years. The initial request generated massive international speculation, but the actual return so far has been less publicized.
A report from Zero Hedge indicates the initial gold returned to Germany by the United States “didn’t have the Bundesbank stamp on it.” The Federal Reserve reportedly said it had to melt down the gold for transport. This doesn't make any sense since the gold was transported TO the federal reserve in its original shape, size and weight, without any difficulty. Why would modern transport systems be unable to ship it back that way?
Another explanation could be that the Federal Reserve has already sold it off, lent it out or used it as collateral for its own borrowing, and is now scrambling to replace it.
if this is true, it could bring about an unprecedented financial crash on a global scale; potentially cataclysmic. To give readers an idea of how serious this is, remember back to the 2008 “Sub-prime crisis." Imagine that crash on a global scale, and instead of houses it’s gold. People who lent money to the federal reserve THINKING it had gold as collateral, will find the FED has no collateral. UH OH! Suddenly, the world views federal reserve notes (you know, our cash money) as worthless.
RESERVE BANK OF INDIA SOUNDED THE WARNING MONTHS AGO
The people of India have a voracious appetite for gold. One of the options that was looked at very closely by the Reserve Bank of India was actually similar to what goes on at the Commodities Exchange (Comex). In other words, luring Indians into buying paper gold, and as a result, it would deflect interest that would otherwise be routed to physical gold. "Paper gold" is a contract, with a set expiration date, that promises the buyer to deliver a fixed amount of metal gold at a certain price. This paper gold contract is used to speculate in gold without having to cough-up the actual cash to take delivery of the gold. Buyers of these paper gold contracts pay a "premium" over the existing gold price, as the cost to have the contract. If the buyer exercises the contract before it expires - which few of them do - they must pay the actual cost of the gold delivered under that contract. If the contract expires and the buyer does not exercise his right to take delivery, the "premium" paid goes into the pocket of whoever sold the paper gold contract.
There is a Chapter V in the Reserve Bank of India report titled, ‘Dematerialization Of Gold.’ And as you get to the chart under gold-backed instruments in global trends, what you see is a chart that was excerpted right out of CPM’s book from 2011. CPM Group is a commodities market research, consulting, financial advisory, and asset management firm. What the chart shows is the paper claims on gold being approximately 93 to 1 vs physical gold that is available in the same year. This is an astonishing admission.
It is also admitted in that 2011 report that there was 11.2873 billion ounces of gold as having traded, against an available physical market supply of 120.8 million ounces. Now, to save people from having to do the arithmetic, that’s a ratio of over 93 to 1.
Put simply, anyone who "owns" several ounces of gold through a paper contract which "promises" to deliver physical gold at a specific price -- if physical delivery is demanded -- is one of 93 people in line for the same several ounces of gold. If all 93 people demanded delivery, ONE of those 93 people would get it; the other 92 won't because the paper gold commodities markets sold 93 contracts for every 1 contract they could actually deliver on! They gambled that 93 people would not all want the gold delivered and as their payoff on such a gamble, they profited from premiums on the 93 paper gold contracts. Put bluntly, the paper gold market is a charade.
COMEX GOLD REPORT CONFIRMS THE FACTS
On January 8, 2014, the COMEX Warehouse published a disclosure chart which confirms the facts of this story. That chart, shown below, proves that there are 79.972 "owners" for every single ounce of gold in the COMEX warehouse. They admit they've sold the same ounces of gold to 79 different people! This is a system that cannot sustain itself once folks start demanding physical possession of gold; and they'll do that when they realize the paper money isn't worth the paper it's printed on. If all those people start demanding "their" gold, COMEX collapses!
LONDON BULLION MARKET ASSOCIATION IN SAME CHARADE
The same paper charade going on in the COMEX is happening at the London Bullion Market Association (LBMA) which describes itself as "The international trade association that represents the market for gold and silver bullion, centred in London but has a global client base, including the majority of the central banks that hold gold, private sector investors, mining companies, producers, refiners and fabricators. On their web site, the LBMA freely admits "Since the passage of the Financial Services and Markets Act 2000, spot and forward trading in bullion in the UK have not been regulated activities." NOT REGULATED!
Egon von Greyerz, founder of Matterhorn Asset Management of Zurich, Switzerland, said the LBMA will eventually collapse. "The simple fact is that the LBMA collapse is coming no matter how many distractions that various agents of the bullion banks, or the mainstream media might seek to create. And as that collapse of the paper gold fraud begins to take place, that is the moment in time when you will see what I have warned about for some time now in the gold market, and that is the beginning of the greatest short squeeze in modern financial history.”
According to Andrew McGuire of Coghlan Capitol as early as last April, “Entities went to the LBMA and said, ‘We don’t trust anybody anymore. We want our physical metal.’ They were told they would be cash settled instead by a bullion bank. The Western governments have been trying to plug holes, and the reason for it has to do with the default that was taking place at the LBMA."
These facts indicate the U.S. federal reserve is broke; has used other countries' gold to cover-up what's been going on at the LBMA and perhaps even in the COMEX, and as a result, the United States and the entire western financial system is on the brink of sudden, complete, total collapse because the gold that everyone thought they had, is gone. Nothing is backing their paper currency.
Want proof? Those of you who own gold via paper contract, try asking for the metal to be delivered. One of you will get it; 92 others will be forced to accept paper money instead; the same paper money that is heading toward worthlessness.
One more point: Paper money is "legal tender for all debts, public and private." So even though you have a contract that "promises" to deliver physical metal gold to you, the fact that "legal tender" exists means you are REQUIRED to accept that legal tender in lieu of the gold; you can't refuse the paper money! You'll be left with paper money that isn't worth anything.