Silver Whistleblower Interview on King World News

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  • Wed, Mar 31, 2010 - 04:48pm

    #41
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    Re: Silver Whistleblower Interview on King World News

Erik wrote:

This reminds me of the 9/11 investigation stuff: There is plenty of good reason to wonder why a 47-story skyscraper (WTC 7) collapsed in its own footprint after not being hit by any airplanes and suffering only light fire damage. But then a bunch of complete morons (the 9/11 conspiracy crowd) made such asses of themselves that grown-ups decided it wasn’t worth taking the allegations too seriously.

Who and where are these “grown-ups”? 

  • Wed, Mar 31, 2010 - 08:36pm

    #42
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    Re: Silver Whistleblower Interview on King World News

[quote=Erik T.]

But there’s no great conspiracy here and nothing unique to the metals market. Think of this as akin to fractional reserve banking. If every depositor suddenly tried to withdraw all their funds, the bank wouldn’t have the money. The classical run on the bank. But in regular and normal times, the reserves on hand are adequate to cover routine withdrawals. There has to be a fallback plan if the unexpected happens and more people want to withdraw (or take delivery) than there is supply available. In the case of banking, the fallback is FDIC insurance. In the case of the futures market, the fallback is cash settlement. The rules are spelled out in the exchange rules and all competent futures traders understand that if they elect to take physical delivery – which is actually an unusual occurrence – it is possible there will be insufficient product and a failure to deliver resulting in forced cash settlement. It’s just part of the game. 

[/quote]

Let’s stick with this analogy, I like it. Except the FRR is 10 to 1, while the ratio of paper claims on gold to physical gold may be as high as 100:1. So banks can create debt money out of thin air and go looking for reserves later, which is relatively easy when operating in an economy with fiat currency that is unlimited in supply. Unfortunately, physical gold supply is absolutely limited. Neither of these things are conspiracies, because they are sanctioned by corrupt governments. For huge banks, its just another way to artifically keep the price down (of money or gold) and then cash in on concentrated shorts (whether on gold or on debt).

 

  • Wed, Mar 31, 2010 - 09:27pm

    #43
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    Re: Silver Whistleblower Interview on King World News

Erik said,

When we talk about the futures market, it’s important to understand that the whole point of the futures market is to trade FUTURES – contracts promising to buy or sell things that we and our counterparties don’t yet have. For example, when you buy December 2011 Wheat Futures, the seller obviously doesn’t have the wheat yet. His intention is to grow the wheat between now and then, and he’s doing the selling now to lock in a good price in case the economy tanks after he plants his seeds. So it’s regular and normal to sell stuff you don’t own in the futures market, and that’s the whole reason it’s called the futures market.

I forget the exact statistics, but the vast majority of futures contracts traded are never delivered. For example, that farmer who sold Wheat futures is probably not going to transport his wheat to Chicago to deliver on the futures contract. Instead, he waits until harvest time, then buys back the futures contract (closing his position) right after he sells his wheat locally on the spot market. The purpose of his futures trade was to offset his actual sale price (up or down) to lock in the net price that prevalied when he first sold the futures contract.

Erik, you have me baffled.

Using your little farmer analogy, yes he can hedge his crop by shorting the wheat futures, and agreed he will not bother to drive to Chicago to make delivery so he’ll close out his short before delivery date. At 5,000 bushels/contract how many contracts will he short to hedge his crop? Well let’s say  he thinks he can grow 10,000 bushels. He would short 2 contracts to be fully hedged.

What if he shorts 20 contracts? He can not make physical delivery even if he wanted to, so now he has moved from a hedger to a speculator, his full right under this system, but what if he shorts 2,000 or 20,000 or 200,000 contracts? At a certain size he moves from a speculator to a market manipulator.

Now I know that the little farmer can not short 200,000 contracts do to position and margin limits. But my point is this; we are now in a world of infinite money where JPMorgans, HBSC’s, and Central Banks can short as many contracts as they want, and what is happening is not rampant speculation, but it is market manipulation to prop up currencies, fleece the masses, curb buying interest, and it is all a form of control for the benefit of a few insiders at the expense of those outside the club.

In my estimation if it is not clearly illegal, it should be, and I salute GATA for their tireless work in exposing this scam of supposed ‘free markets’.

 

  • Thu, Apr 01, 2010 - 01:20am

    #44
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    Re: Silver Whistleblower Interview on King World News

[quote=John99]…He would short 2 contracts to be fully hedged.

What if he shorts 20 contracts? He can not make physical delivery even if he wanted to, so now he has moved from a hedger to a speculator, his full right under this system, but what if he shorts 2,000 or 20,000 or 200,000 contracts? At a certain size he moves from a speculator to a market manipulator.

Now I know that the little farmer can not short 200,000 contracts do to position and margin limits. But my point is this; we are now in a world of infinite money where JPMorgans, HBSC’s, and Central Banks can short as many contracts as they want, and what is happening is not rampant speculation, but it is market manipulation to prop up currencies, fleece the masses, curb buying interest, and it is all a form of control for the benefit of a few insiders at the expense of those outside the club.

In my estimation if it is not clearly illegal, it should be, [/quote]

Outstanding, John. Sounds like you “get it”. Perfect description, and yes, I agree that while speculating on 20 or 200 contracts is perfectly legit, if our farmer somehow comes up with the margin needed to hold a concentrated short that can be used to manipulate the market, that should be prohibited.

Yes, there is manipulation in the gold and silver markets, and Yes it needs to be stopped. Post-haste!

[quote=John99]…and I salute GATA for their tireless work in exposing this scam of supposed ‘free markets’.[/quote]

That’s where our opinions part ways. You showed a more accurate understanding of the functioning of the futures markets in this post than GATA did in their interview or testimony!

The business about 100:1 has nothing to do with leverage or reserves. (Ashvinp, to some extent my own analogy was flawed in that sense). The point is that markets are used both for hedging and speculation. When a contract is sold (as a speculative downside bet) and subsequently closed out before the first notice date, that is absolutely not a “default” as GATA has alleged. It’s a perfectly normal function of the market. If a contract is held past the first notice date, is assigned for delivery, and then the seller fails to deliver, that certainly is a default but that’s not the case here and has nothing to do with Jeff Christian’s 100:1 comment.

Using my 9/11 conspiracy analogy, GATA is really blowing it here. They have a very legitimate issue (concentrated shorts unfairly manipulating the market), they have eathshatteringly strong evidence (Andrew Maguire’s e-mail and phone conversations with SEC and their inaction), and they have a perfect opportunity to diligently advance their cause. But instead they are flaunting their ignorance by trying to make something out of Jeff Christian’s “damning statement” which really wasn’t damning at all. GATA is really letting us down here.

Erik

p.s. I quite enjoy the discussion guys but just had house guests from the U.S. show up last night so I may not have as much time to post about this or other stuff for the next 10 days

 

  • Thu, Apr 01, 2010 - 01:28am

    #45
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    Silver Whistleblower Interview on King World News

 

We will miss you !

Enjoy

 

  • Thu, Apr 01, 2010 - 02:23am

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    Re: Silver Whistleblower Interview on King World News

[quote=Erik T.]It’s true that Christian did mis-speak at one point and Gesler called him on it.  [/quote]

Yes, that was quite amusing. The banks were selling hand over fist so they went to the Comex to hedge by selling short. I guess what he meant was they went to the Comex to drive down the price and shake those buyers loose.

His correction seemed rather strained.

  • Thu, Apr 01, 2010 - 05:08am

    #47
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    Re: Silver Whistleblower Interview on King World News

Here is Jeffery Lewis’ opinion on one obvious example of the silver manipulation( july/aug 08) and what may happen if the CFTC (actually) try and regulate speculative interests.. You may think no it will never be regulated .. however the alternative is to have a genuine supply crunch in the future.. A failure to deliver.. (this would be much worse to let it come to that… much much worse) Ide like to see the msm try and not report on that story.. The whole world will know..

When the Manipulation Occurred

 

One of the most identifiable manipulations was said to occur in July and August of 2008.  During this time, the price of silver nosedived without any measurable changes in open interest, nor in the aggregate long and short positions placed on the market.  Silver investors believe this was due in part to manipulative practices in which one or several banks used their magnitude to drive the price of silver lower. 

 

The CFTC has yet to report on its official findings of the investigation, but has released a few preliminary explanations including: a difference in reporting models that could show a change in market interest models without a change in the public interest models, as well as a rare case in which an acquisition of two similar but different entities could create off the market volume.

 

Moving Forward with Regulation

 

Along with a formal investigation, the CFTC is considering new regulations within the silver market that would limit a firm’s position, and therefore free up the pricing to smaller market participants. 

 

In addition, the CFTC contests that position limits would remove power from speculative interests and allow the market to operate on the value of physical metals, which often cost more than “paper” metals on the futures exchange. 

 

The Impact of the Investigation’s Results

 

If the CFTC does eventually find some serious indication of market manipulation, mostly to the downside, the price of silver could skyrocket.  Many analysts now believe that silver has been manipulated for so long – and has become so rare thanks to generally low prices – that silver may be one of the rarest metals in existence, and the price could multiply in a matter of days following the findings of the investigation.

 

Dr. Jeffrey Lewis

http://news.silverseek.com/SilverSeek/1270064398.php

  • Thu, Apr 01, 2010 - 05:39am

    #48
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    Re: Silver Whistleblower Interview on King World News

John99 – thanks for that great explanation! 

Larry

 

 

  • Thu, Apr 01, 2010 - 11:11am

    #49
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    Re: Silver Whistleblower Interview on King World News

Remember the Beijing put?? This article suggests its alive and well. I think it was Max Keiser or someone talking about it last year.. If its true it will mean a disconnect from the predictable PM selloff if there is another round of deflation..(or maybe just not as severe, as the support level will be strong if this article is correct)

Mineweb readers will recall that we broke a story about the state-owned Chinese banks promoting the purchase of gold and silver just over a year ago – China pushes silver and gold investment to the masses – and that this effectively meant that the Chinese state would do its utmost to maintain the gold (and silver) price at a decent level so its citizens, who it had persuaded to buy the precious metals in the first place, did not lose out to the vagaries of the market.  Given that state entities will have been understood to be leading the ever-wealthier Chinese middle classes in this direction the state is hardly likely to want to ‘lose face’ through a declining gold price making an influential, and growing, group of its citizens poorer as a result.  And China is certainly, as we have pointed out before, in a strong position to control the gold price should it wish to do so to protect itself.

Indeed given the strong current resistance to a downtrend in gold around the $1,100 level, and the big purchase in the SPDR Gold Trust ETF by the Chinese sovereign wealth fund, CIC, this support for the gold price may already be under way.

According to statements out of Beijing today, there now exists a Memorandum of Understanding between the ICBC and the World Gold Council whereby they will share gold market resources, promote domestic demand, boost gold investment in China, and develop and market new gold investment products within the country. This thus represents yet another major attempt to further increase gold ownership in China – already the world’s second largest consumer, and rising

What this will do to the gold price is anybody’s guess – but does appear extremely positive!  It would at least underpin the gold price level with the World’s two biggest consumers keen to retain current prices at the very least, as a collapse would undermine domestic wealth, which means gold price downside is probably very limited.  On the upside it could thus be assumed that the sky’s the limit here, although again it may not be in China and India’s best interests – politically and economically – to see massive price rises as this could be very inflationary as more and more of their huge populations are drawn into the gold purchasing community.

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=101831&sn=Detail&pid=72068

West

  • Thu, Apr 01, 2010 - 11:45am

    #50
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    Re: Silver Whistleblower Interview on King World News

Over at 0 Hedge there is a good read —- start at the bottom for the part about the US in the late 1970’s. Confirms what Eric Sprott said about CB’s and one day they may wake up and realize – They have NO gold.

 

 

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