This is not the first time that Paul Craig Roberts and his colleagues have exposed flagrant rigging of the Comex (paper) gold market downward by market insiders. One possible motive for such manipulation "...is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar..." Blogger's recommendation: Buy real gold metal (not paper) now, because sometime in the not too distant future such rigging will no longer work, whereupon the value of gold metal will double or triple over night...

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Insider Trading and Financial Terrorism on Comex

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July 16, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Paul Craig Roberts and Dave Kranzler

July 16, 2014. The first two days this week gold was subjected to a series of computer HFT-driven “flash crashes” that were aimed at cooling off the big move higher gold has made since the beginning of June. During this move higher, the hedge funds, who typically “chase” the momentum of gold up or down, built up hefty long positions in gold futures over the last 6 weeks. In order to disrupt the upward momentum in the price of gold, the bullion banks short gold in the futures market by dumping large contracts that drive down the price and make money for the banks in the process.

As we explained in previous articles on this subject, the price of gold is not determined in markets where physical gold is bought and sold but in the paper futures market where contracts trade and speculators place bets on the price of gold. Most of the contracts traded on the Comex futures market are settled in cash. The value of the contracts used to short gold and drive down the price is well in excess of the actual amount of physical gold that is kept on the Comex and available for delivery. One might think that regulators would pay attention to a market in which the value of contracts outstanding exceeds by several multiples the amount of physical gold available for delivery.

The Comex gold futures market trades 23 hours per day on a global computer system called Globex and on the NYC trading floor from 8:20 a.m. EST to 1:30p.m. EST (the 8:30 a.m. opening time on the face of the graph below is a draftsman’s error). The Comex floor trading session is the highest volume trading period during any 23 hour trading period because that is when most of the large U.S. financial institutions and other users of Comex futures (jewelry manufactures and gold mining companies) are open for business and therefore transact their Comex business during Comex floor hours in order to achieve the best trading execution at the lowest cost.

The big hedge funds primarily trade gold futures using computers and algorithm programs. When they buy, they set stop-loss orders which are used to protect their trading positions on the downside. A “stop-loss” order is an order to sell at a pre-specified price by a trader. A stop-loss order is automatically triggered and the position is sold when the market trades at the price which was pre-set with the stop-order.

The bullion banks who are members and directors of Comex have access to the computers used to clear Comex trades, which means they can see where the stop-loss orders are set. When they decide to short the market, they start selling Comex futures in large amounts to force the market low enough to trigger the stop-loss orders being used by the hedge fund computers. For instance, huge short-sell orders at 2:20 a.m. Monday morning triggered an avalanche of stop-loss selling, as shown in this graph of Monday’s (July 14) action (click on graph to enlarge):

In the graph above, the first circled red bar shows the flash crash that was engineered at 2:20 a.m. EST, a typically low-volume, quiet period for gold trading. 13.5 tonnes of short-sales were unloaded into the Comex computer trading system. The second circled red bar shows a second engineered flash-crash right before the Comex floor opened at 8:20 a.m. EST. This was triggered by sales of futures contracts representing 27.5 tonnes of gold. A third hit (not shown) occurred at 9:01 a.m. This time contracts representing 40 tonnes of gold hit the market.

The banks use the selling from the hedge funds to cover the short positions they’ve amassed and book trading profits as they cover their short positions at price levels that are below the prices at which their short positions were established. This is insider trading and unrestrained financial terrorism at its finest.

As shown on the graph below, on Tuesday, July 15, another flash-crash in gold was engineered in the middle of Janet Yellen’s very “dovish” Humphrey-Hawkins testimony. Contracts representing 45 tonnes of gold were sold in 3 minutes, which took gold down over $13 and below the key $1300 price level. There were no apparent news triggers or specific comments from Yellen that would have triggered a sudden sell-off in gold — just a massive dumping of gold futures contracts. No other related market (stocks, commodities) registered any unusual movement up or down when this occurred:

Between July 14 and July 15, contracts representing 126 tonnes of gold was sold in a 14-minute time window which took the price of gold down $43 dollars. No other market showed any unusual or extraordinary movement during this period.

To put contracts for 126 tonnes of gold into perspective, the Comex is currently reporting that 27 tonnes of actual physical gold are classified as being available for deliver should the buyers of futures contracts want delivery. But the buyers are the banks themselves who won’t be taking delivery.

One motive of the manipulation is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar, as we’ve described in previous articles on this topic. And, of course, the banks make money from the manipulation of the futures market.

The Commodity Futures Trading Commission, the branch of government which was established to oversee the Comex and enforce long-established trading regulations, has been presented with the evidence of manipulation several times. Its near-automatic response is to disregard the evidence and look the other way. The only explanation for this is that the Government is complicit in the price suppression and manipulation of gold and silver and welcomes the insider trading that helps to achieve this result. The conclusion is inescapable: if illegality benefits the machinations of the US government, the US government is all for illegality.

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LONG TIME WALL STREET EMPLOYEES JOIN OCCUPY WALL STREET! ...THEN CREATE OCCUPY THE SEC

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FEBRUARY 24, 2012                                                                                                                 .

Occupy the SEC: Former Wall Street Workers Defend Volcker Rule Against Banks’ Anti-Regulatory Push

The latest offshoot of the Occupy Wall Street movement, Occupy the SEC, has submitted a 325-page comment to the Securities and Exchange Commission that calls on regulators to resist the financial industry’s lobbying efforts to water down the Volcker Rule, a section in the Dodd–Frank Wall Street Reform and Consumer Protection Act, that aims to prevent large banks from making certain kinds of risky, speculative investments. The group is made up of former Wall Street professionals who once worked at many of the largest financial firms in the industry. We’re joined by Alexis Goldstein, who worked as a computer programmer for seven years at Morgan Stanley, Merrill Lynch and Deutsche Bank. She left Wall Street in 2010 and joined the Occupy Wall Street movement soon after the encampment began. "Banks shouldn’t behave like a hedge fund," Goldstein says. "Hedge funds are there to make money and take risky bets, and their clients tend to be these really wealthy clients. And the Volcker Rule sort of says, 'Well, wait a minute. These big banks that enjoy all this government support shouldn't be in that business." [Original includes rush transcript]

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My Advice to the Occupy Wall Street Protesters

Hit bankers where it hurts

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Protesters at the 'Occupy Wall Street' movement demonstrate in New York.

By MATT TAIBBI
October 12, 2011 8:00 AM ET

I've been down to "Occupy Wall Street" twice now, and I love it. The protests building at Liberty Square and spreading over Lower Manhattan are a great thing, the logical answer to the Tea Party and a long-overdue middle finger to the financial elite. The protesters picked the right target and, through their refusal to disband after just one day, the right tactic, showing the public at large that the movement against Wall Street has stamina, resolve and growing popular appeal.

But... there's a but. And for me this is a deeply personal thing, because this issue of how to combat Wall Street corruption has consumed my life for years now, and it's hard for me not to see where Occupy Wall Street could be better and more dangerous. I'm guessing, for instance, that the banks were secretly thrilled in the early going of the protests, sure they'd won round one of the messaging war.

Why? Because after a decade of unparalleled thievery and corruption, with tens of millions entering the ranks of the hungry thanks to artificially inflated commodity prices, and millions more displaced from their homes by corruption in the mortgage markets, the headline from the first week of protests against the financial-services sector was an old cop macing a quartet of college girls.

That, to me, speaks volumes about the primary challenge of opposing the 50-headed hydra of Wall Street corruption, which is that it's extremely difficult to explain the crimes of the modern financial elite in a simple visual. The essence of this particular sort of oligarchic power is its complexity and day-to-day invisibility: Its worst crimes, from bribery and insider trading and market manipulation, to backroom dominance of government and the usurping of the regulatory structure from within, simply can't be seen by the public or put on TV. There just isn't going to be an iconic "Running Girl" photo with Goldman Sachs, Citigroup or Bank of America – just 62 million Americans with zero or negative net worth, scratching their heads and wondering where the hell all their money went and why their votes seem to count less and less each and every year.

No matter what, I'll be supporting Occupy Wall Street. And I think the movement's basic strategy – to build numbers and stay in the fight, rather than tying itself to any particular set of principles – makes a lot of sense early on. But the time is rapidly approaching when the movement is going to have to offer concrete solutions to the problems posed by Wall Street. To do that, it will need a short but powerful list of demands. There are thousands one could make, but I'd suggest focusing on five:

1. Break up the monopolies. The so-called "Too Big to Fail" financial companies – now sometimes called by the more accurate term "Systemically Dangerous Institutions" – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.

2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it's supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.

3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer's own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can't do both. Butt out for once and let the people choose the next president and Congress.

4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break, which allows hedge-fund titans like Stevie Cohen and John Paulson to pay taxes of only 15 percent on their billions in gambling income, while ordinary Americans pay twice that for teaching kids and putting out fires. I defy any politician to stand up and defend that loophole during an election year.

5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later. It should be: You make a deal today, you get company stock you can redeem two or three years from now. That forces everyone to be invested in his own company's long-term health – no more Joe Cassanos pocketing multimillion-dollar bonuses for destroying the AIGs of the world.

To quote the immortal political philosopher Matt Damon from Rounders, "The key to No Limit poker is to put a man to a decision for all his chips." The only reason the Lloyd Blankfeins and Jamie Dimons of the world survive is that they're never forced, by the media or anyone else, to put all their cards on the table. If Occupy Wall Street can do that – if it can speak to the millions of people the banks have driven into foreclosure and joblessness – it has a chance to build a massive grassroots movement. All it has to do is light a match in the right place, and the overwhelming public support for real reform – not later, but right now – will be there in an instant.

This story is from the October 27, 2011 issue of Rolling Stone.

Robert Reich: "...I just think it’s wrong that a single hedge fund manager earns a billion dollars, when a billion dollars would pay the salaries of about 20,000 teachers."

Blogger's Note: I've come to prefer photographs over cartoons to head my posts, because they generally seem more serious and are usually closer to the point.  However, this is the third time I've run the cartoon below, which sums up this issue better than any photograph ever could.   Just think of the character on the right as Peter G. Peterson or one of the 25 most successful hedge-fund managers who earned a billion dollars each last year ...and the person on the left as as one of the 20,000 recently laid-off school teachers.

The Challenge of Closing Tax Loopholes For Billionaires

Robert Reich
Robert Reich's Blog
Sunday, May 23, 2010

Who could be opposed to closing a tax loophole that allows hedge-fund and private equity managers to treat their earnings as capital gains – and pay a rate of only 15 percent rather than the 35 percent applied to ordinary income?

Answer: Some of the nation’s most prominent and wealthiest private asset managers, such as Paul Allen and Henry Kravis, who, along with hordes of lobbyists, are determined to keep the loophole wide open.

The House has already tried three times to close it only to have the Senate cave in because of campaign donations from these and other financiers who benefit from it.

But the measure will be brought up again in the next few weeks, and this time the result could be different. Few senators want to be overtly seen as favoring Wall Street. And tax revenues are needed to help pay for extensions of popular tax cuts, such as the college tax credit that reduces college costs for tens of thousands of poor and middle class families. Closing this particular loophole would net some $20 billion.

It’s not as if these investment fund managers are worth a $20 billion subsidy. Nonetheless they argue that if they have to pay at the normal rate they’ll be discouraged from investing in innovative companies and startups. But if such investments are worthwhile they shouldn’t need to be subsidized. Besides, in the years leading up to the crash of 2008, hedge-fund and private equity fund managers weren’t exactly models of public service. Many speculated in ways that destabilized the whole financial system.

Nor are these fund managers especially deserving, as compared to poor and middle-class families that need a tax break to send their kids to college. Nor are they particularly needy. Last year, the 25 most successful hedge-fund managers earned a billion dollars each. One of them earned 4 billion dollars. (Paul Allen’s personal yacht holds two luxury submarines and a helicopter. Henry Kravis is one of the wealthiest people in the world.)

Several of these private investment fund managers, by the way, have taken a lead in the national drive to cut the federal budget deficit. The senior chairman and co-founder of the Blackstone Group, one of the largest private equity funds, is Peter G. Peterson, who never tires of telling the nation it faces economic ruin if deficits aren’t brought under control. Curiously, I have not heard Peterson advocate closing this tax loophole as one way to further the cause of fiscal responsibility.

Closing tax loopholes for billionaires may seem like a no-brainer, especially at a time when the nation is cutting back spending on the middle class — slashing budgets that fund child care, public schools, and public universities. Tens of thousands of teachers are getting pink slips.
But you can expect a huge fight.

There is also a moral issue here. Call me old fashioned but I just think it’s wrong that a single hedge fund manager earns a billion dollars, when a billion dollars would pay the salaries of about 20,000 teachers.
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Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, Locked in the Cabinet, and his most recent book, Supercapitalism. His "Marketplace" commentaries can be found on publicradio.com and iTunes.