Transcript for Harvey Organ – Part II
Transcript for Harvey Organ: Get Physical Gold & Silver! – Part II
Welcome to part II with Harvey Organ.
Chris Martenson: Yes I am thankful about that, absolutely the price manipulation is actually got a positive side. It’s not all bad; it means I get cheaper stuff, which is good. Silver, we didn’t get to silver and silver to me, I love silver.
This is my Rip Van Winkle purchase, I don’t have grandchildren but this is what I will pass to them if I ever have them, it’s a very long-term hold for me because as you mentioned, at one point there were billions of ounces above ground, but it’s consumed every year. Consumed in industrial processes that in many cases aren’t irrecoverable, meaning we kind of lose the silver at the molecular level to the atmosphere, to the water, it goes somewhere.
Harvey Organ: That is correct.
Chris Martenson: And but it’s the most reflective substance, element on the periodic table, it’s the most conductive, it’s got all of these rising medical uses that are coming forward. It seems like every single industry, when they discover they go, “this is magic” – it does magic things.
Harvey Organ: Correct.
Chris Martenson: And so, I dug into it for a while. I had a hard time figuring out exactly how much is above ground because there is a little murkiness there, how much is out in plate silver and..
Harvey Organ: I’ll do the best I can for you. The amount of silver that is produced each year is somewhere around 700 million ounces a year.
Chris Martenson: Yes.
Harvey Organ: They say that 90% is already been discovered. And silver, most of the silver production is actually a byproduct of gold. So when you find gold, silver comes with it and a bit of copper. And the mining companies then sell off the excess; very few like Pan American Silver is a primary silver mine. But most of the silver is a by-product. So the supply coming from the mines are about 700 million and the demand is certainly over 900 million ounces of silver. And a lot of people are so concerned that when they had the new photography with using digital, that the demand for silver on the films would decline but actually most of the what do they call.. the excess, when you like photography. When you use the excess would be added into the market, like for the photography and they take the silver precipitate it out and recover the silver. But because photography is now less, that part is less.
So we are really having the demand increasing as new uses for silver come. And it’s coming close to the 900, 950 and the 700 is the supply. Meaning the deficit is 200 million ounces and that is what has to be funded. And people like ourselves who take the silver, buy it – there’s less amounts that come to the COMEX because we are buying and hoarding our silver. So it’s not getting to the COMEX. Which is a crisis for them. And you are seeing the massive movements of silver back and forth on the COMEX because you can tell they are having trouble. So they are robbing Peter to pay Paul as more and more people try to remove the silver as it becomes less and less on this planet.
Chris Martenson: You know I’m intrigued. If there’s really not that much in COMEX, let’s pick a number, what would it cost to break the bank there? In terms of stripping all of it’s supply out of there if you wanted to? It’s certainly it’s well within the means of probably several thousand individuals on the face of the planet at this point right?
Harvey Organ: Well I have my doubts as to .. well the total amount of silver that they claim is 140 million, of which.. that’s the total. And the dealer or what we call register, which is for sale silver is about 30 million. And I have my doubts that it’s really there. I really think that you are having paper. That it’s being served through paper rather… in other words, we really have one inventory. The SLV, the stuff over in London, and the COMEX is really one, with one big long bar numbers and everything and they borrowing left and right all over the place. And that’s why you are seeing all of these obligations. I don’t think there’s very much silver and you can tell that because, over many, many years, I would say when you took the delivery of silver, the first day, the first two days 100% would be taken and that’s the end. Okay? That’s your delivery month. Now it’s taking the entire month – why? Because it’s too costly, the insurance and storage, it’s costly. So I’m thinking they are having their trouble so I don’t really think the silver that is there is really there. Okay? And that’s my thinking and I don’t think the SLV silver is there – I think it’s a fraud.
Chris Martenson: Well when I was at a conference with Eric Sprott, he mentioned, I asked him to recount his difficulties in gaining… he’d brought a pretty hefty chunk five or six million ounces of silver for his fund.
Harvey Organ: He did.
Chris Martenson: And it took, quite a long time.
Harvey Organ: It did.
Chris Martenson: For that to get to him and so we were talking about that and then he had this other really interesting anecdote which is around GLD, saying that just the day before, it had been on I forget, probably CNBC where they’d said, you know there have been concerns about whether GLD actually holds the physical gold. So a reporter was taken to see some of this gold and it was all cloak and dagger, this person had to wear a blindfold and a hood and they were driven somewhere and then taken into this room. And you know Eric’s first observation was, really? You don’t want people.. these vaults are ultra-secure for a reason, knowing where the vaults are is not.. you didn’t save any criminals any time, with that little shenanigan. So that was really for effect. The thing that was really funny was the bar that they held up, you could see the number on it. So of course he went and tried to match the bar number with what GLD claims on it’s holdings and it didn’t exist there. That bar was actually registered to somebody else at that moment.
Harvey Organ: That’s correct.
Chris Martenson: So it was a little bit of a flub there, I don’t know what they..
Harvey Organ: I don’t know if you know Reg Howe, but Reg Howe and I are very good friends and I was one of the first to.. I said, “Reg, I don’t believe there is any gold in the GLD.” And he says, “Harvey, it’s got to be there.” So first he talked to Pierre Lesson (sp) of Franklin Nevada and Pierre said “Yes it’s there.” And I said “Reg, it can’t be there.” And then he was speaking to Catherine Fitz and she goes and says, “You know Reg, in the indenture, the GLD people can swap gold with the Bank of England.” He could never get it to balance. He was always out gold when he did his analysis on the Bank of International’s gold supplies and he was always out about a thousand tons, which was the amount of gold that was registered to the GLD. And when he takes that out he comes into perfect balance. So in essence, that’s how these guys did it. They moved it from one cubby hole to the other and there’s really nothing backing it. And that kind of suggests why there’s a credit or not a.. it’s a 98% of NAV to GLD with gold where as the Sprott gold is a positive 3% and the Central Fund of Canada is 2 to 3%.
And the people know that the real physical is there and they’ll pay for it. And the SLV and the GLD is nothing but a fraud.
Chris Martenson: Well I don’t understand how a swap would work because or a lease because a typical lease would work..
Harvey Organ: No, it’s a swap, it’s a swap.
Chris Martenson: It’s a swap but so, explain how that swap works because as the price of gold rises, somebody has to lose out on that particular arrangement.
Harvey Organ: No, the Bank of England, the Bank of England has gold. If you put, if you deposit.. if you are a rich Arab and you deposit gold at the Bank of England. So it’s the same as if you deposit money, the Bank of England can use it for whatever they want. So they have this on deposit. So what they did is, they took the gold that’s on deposit, then swap it with the GLD people. In return the GLD gives back paper money. So now the gold is sitting in GLD so it looks like it’s there, all right? Because all they did was move from one cubby hole to the other. And in essence it says “Okay, the Bank of England can re-swap this back at any time they want.” But of course they want to keep paper money alive and they gave full blessing to the GLD people to keep this game going. So they don’t ask for it back – just like they don’t ask for the lease gold back. The same scam goes on for years and that’s probably what’s going on now.
Chris Martenson: Well when they swap it back though, are they going to swap it..
Harvey Organ: They haven’t swapped it back.
Chris Martenson: But if they did, would it be at current prices or at the original swap rate?
Harvey Organ: Oh in essence, no – the dollars would go back to the GLD people, just dollars. And gold would go back.
Chris Martenson: At which price though? The original price of gold at the date of the swap or the market price at the day of unwinding of the swap?
Harvey Organ: Well they have to give the gold back. There is no real price, they give it back.
Chris Martenson: But which amount of dollars do they get back?
Harvey Organ: The dollars, the original dollars that were swapped, so if they bought it at 300, it’s 300 plus whatever interest that was earned.
Chris Martenson: So..
Harvey Organ: So the GLD shareholders would get totally annihilated.
Chris Martenson: Yes, yes so it… any gold that’s swapped, I don’t understand so the GLD must be out hedging that in some way, shape or form. Probably in the futures market.
Harvey Organ: That is correct, yeah probably and they just keep hypothecating, and it goes on around and around and around and around. And this is why you have 100 to 150 to one derivatives on that same ounce of gold. And that’s what I’m.. and that I am sure, I am 100% sure that’s going on in the gold. I am not so sure on the silver. And the reason is, there’s no real Central Bank silver. Although the 137 million ounces of Buffett silver started the game, that certainly started the SLV, and I’m not sure how they are doing but I’m certainly convinced that there is some sort of major fraud going on there. They probably have some silver but not nearly what they claim.
Chris Martenson: So this swap arrangement then potentially sheds some light on something that confused me at the time. So Venezuela says “Hey, we want our 99 tons of gold home, we are going to repatriate it, it’s hangout over in London.”
Harvey Organ: Yes.
Chris Martenson: And it took them forever to get it. And I was just wondering, what’s the big deal? 99 tons, I mean – we have 2500 tons coming on market every year and the markets are potentially, extremely liquid. But plus, it was Venezuela, so theoretically it’s in a pile somewhere, they just put it on a pallet and send it. And it took a long time and they said “Oh well it’s very complicated, to figure out how we are going to ship this.” Like what do you mean? You are going to put it on a plane, maybe you want to hide when that plane’s leaving for obvious reasons but it can’t be that complicated? And so I didn’t really you know, I’m always curious when I see that in Sprott’s case or Venezuela’s case, that when somebody comes and says, “I need a significant chunk of precious metal”, theoretically that metal should just be there..
Harvey Organ: Correct.
Chris Martenson: And it’s just like if you ordered grain and it’s in a silo, you go and get it delivered and that’s the end of that.
Harvey Organ: I think you should be careful on the Venezuela situation, I don’t.. there’s a funny story because I went back to the actual amounts of gold coming to Chavez and I saw the first UK telegraph article that said something like 14 tons of gold arrived first. And that there are many more tons to come and I was watching this like a hawk. They received the second amount and it was something like 15 tons that came out. The amount was 15. And they said “That’s all.” As if they got it. But I’ve only counted two deliveries of 29 tons and nothing came from England. And I think Chavez knows – he’s keeping his quiet and he is trying to get physical gold. You go back to the literature and I think it was Emma Rollings (sp) was the girl that wrote that the amount of gold coming on the first shipment and it was four carloads arriving and it was fanfare and everything and it was 14 tons of gold. And the second one, was announced, it was something like 15 or 16 tons or something. I don’t think that our friend Chavez got his 99 tons in the Bank of England. There are a lot of strange things that were said and I think he’s hiding it.
Chris Martenson: There was something not quite right in that story, you tracked it more closely that I did.
Harvey Organ: Yes.
Chris Martenson: I didn’t yes.. it’s just every time somebody wants physical – my antenna go up because I’m just wondering, what’s going to happen there and for whatever reason, it’s got more secrecy, it’s harder to track, there’s less good news around it. I mean nobody fudges things like this when it comes to like oil inventories or other things..
Harvey Organ: Correct.
Chris Martenson: And to me that just tells me something, that for whatever reasons and you can pick your own set of reasons, we still shroud precious metals in a lot of secrecy compared to most other transactions that are.. and substances that are out there.
Harvey Organ: That is 100% correct.
Chris Martenson: Which says that’s basically.. if you just wanted one piece of information that said this would be a great thing to own, actions speak louder than words to me all the time. You know so barbarous relic and all that but where is most of the monetary metal held? It’s held in Central Banks and they’ve been net accumulators, which is a huge structural shift. So yes we’ve been seeing these extraordinary structural shifts from West to East, from official dis-hoarding back to official hoarding. Official meaning Central Bank to private investors demand coming up, and through all of this, we see the same old same old with these bear raids conducted at two in the morning, in thin markets which should be investigated. It’s like, it’s such a no-brainer to me that there’s shenanigans going on there but, then again, I was really shocked with MF Global went down and they took people who had warehouse receipts…
Harvey Organ: Yes.
Chris Martenson: And these were actual funds that big players, who had warehouse receipts with numbered bars on them that belonged to them, that were then taken, sold, pooled, assets – and they got 72 cents on the dollar back for their trouble. To me, that clearly violated what my sense of custody and possession was but apparently there are wrinkles in those laws that I wasn’t privy to.
Harvey Organ: That wasn’t the first time for MF Global; the previous Revco had the same default, same idea. Because they defaulted as well and took quite a few people, some major players.
Chris Martenson: Right.
Harvey Organ: Gerald Pawlenty got hit on the last one, and Jimmy Rogers got hit on the first one – these are major players who knew better and then they got caught, crooked. That’s why you can’t.. you just got to go with the physical stuff.
Chris Martenson: Yes.
Harvey Organ: And you can’t play with these.. you just can’t play with these crooks.
Chris Martenson: Right.
Harvey Organ: They are out to get you, they know.. and the collusively together and I can assure you that the.. most of the Commissioners are together. I do know that the Commissioners will never read an email. That I can tell you for a fact. Only one does and that’s Bart Chilton. All the rest will not. Okay? The FCC Chairman never reads an email. Okay and this is bad, I mean this is what they are on earth for. So they are allowing these crooked things to ferment.
Chris Martenson: Right.
Harvey Organ: And by the way, you are looking at today is, one of the rare days, I don’t think I’ve ever seen a day like this in probably ten years. I’ve seen gold rise and the DOW down 172 points, I don’t think I’ve ever seen that in a long time. Physical is now overpowering the paper business and that’s what you want.
Chris Martenson: Yes. This is a rare day, maybe we’ll mark this.
Harvey Organ: Mark this down. It’s unusual.
Chris Martenson: Great, hey we’re..
Harvey Organ: But by the way when I tell you, the word I was telling was scrap metal, scrap is what – the amount of scrap is the .. silver is now becoming less and less. So that was the word I was trying to get before..
Chris Martenson: Oh yes, and I had a wonderful interview with a guy name Robert Mish who’s been in the business 49 years, trading metals out of in Menlo Park, and in a storefront operation. And he noted as well the West to East migration. When I asked him, “Who are your customers?” he said “Well, big people.” Meaning people who are spending you know $250,000, $500,000 – $1 million dollars, big buyers are walking in and those are the buyers. There’s not that many of them. But there are plenty to meet demand. And the sellers, he said – two years ago, they were getting really high quality sales. People were walking in with these giant coin collections or big trunks of bullion and all of that. And he said now they are down to just dribs and drabs..
Harvey Organ: For sure.
Chris Martenson: That the first great weak hand at unloading happened and now we’re just down to a few rings and trinkets and maybe a coin here and there. Stuff like that. So that’s been another sort of big trend is that you know the quality of that scrappage as it were, that’s coming in is – we’re really down at the bottom of the barrel..
Harvey Organ: I can tell you another good story. The Central Fund of Canada, complained because he – normally he gets good delivery bars of …and all of a sudden the ounces are no longer the size. He’s getting 130 to 140% of the size of good delivery bars. And it’s driving him crazy because he can’t stock them properly. So he says they are coming to the bottom of the barrel. Okay, so that’s another interesting .. and the other thing..
Chris Martenson: Wait, wait, wait – they are supposed to be thousand ounce bars? And they are coming in at what size?
Harvey Organ: Well they were getting 1300, 1200… [laugh] the bars were much higher and he was complaining! You know who was getting the extra? You’d pay for it, but he paid for what he got it for but all of a sudden he was complaining because.. see he stacks them properly right? He has a big vault at the CIBC, and all of a sudden he couldn’t store those. So he’s complaining – he says “Why you keep … “ I’m taking delivery but… In other words, what I’m trying to tell you is they are coming to the bottom of the barrel where they have to give these oddball sizes to pay these guys who were taking delivery. That’s another fascinating thing.
Chris Martenson: So they don’t have enough to pour two bars so they have enough to pour one sort of grotesque bar?
Harvey Organ: Or whenever it was made, that’s correct.
Chris Martenson: Yes okay.
Harvey Organ: And Sprott was noticing that I don’t know if you noticed this but Eric told me that he was getting the freshly minted bars. In other words, even though we ordered it two months earlier, the marking was just a few days and then he got it. So that’s another sign that they are desperate, these are not old bars – they are brand new. They are robbing Peter to pay Paul – to pay for everybody.
Chris Martenson: Right..
Harvey Organ: Now by the way, you should know that both Central Fund of Canada and Eric will go, they will go to mining companies to get their silver and gold. They will not go to a banker basically – they go outside. Which is another reason why the COMEX is in trouble because they won’t have the supplies that they need. So as you get more and more guys going to direct.. and so will China. China will certainly make deals with mining companies. And they will pay spotless 5%, spotless 6% in order to secure metal.
Chris Martenson: Yes you made the point earlier that the CFTC, they are in the business to keep their business running and maybe they are shooting themselves in the foot with some of their actions and that’s – that’s a larger theme that really, to me, the great crime of MF Global, wasn’t they stole a billion dollars or whatever. You know that happens. But the great crime was, in not actually prosecuting or at least giving the appearance that there was rule of law that still applied in the U.S. system. Because I think the U.S. has this hubris, which says, “We are the dominant financial center of the Universe.” As if somehow the assumption under that is well that will be true forever. And the truth is, that there are a lot of people who are very smart all over the world who are willing to work not that hard for grotesque amounts of money and create a financial system.
So the idea that my country would very willingly, seemingly without any sense of the longer term consequences, really thumb their nose at the importance of the rule of law in both appearance and fact. And I think what they are risking here is pretty much everything. Because if the U.S. is not a financial center anymore, if for whatever reason, sake of argument somewhere down the road, the treasury market is no longer the revered and loved last bastion of safe haven resort..
We will discover that we.. yes we are floating $1.5 trillion new fresh, treasury bonds this year, but the rollover including the 30 day and the cash management bills and all that. We need.. it’s about $10 trillion of liquidity that has to flow in that market every year and it’s climbing. It’s about $10 trillion this year..
Harvey Organ: That’s correct.
Chris Martenson: Any hiccup in that? Like we say in that failed auction in Spain and the whole thing literally flies apart in record speed.
Harvey Organ: You got it.
Chris Martenson: So massive..
Harvey Organ: You got it exactly correct.
Chris Martenson: Massive hikes in interest rates to lure people rates..
Harvey Organ: Oh they can’t do it – interest rates cannot rise. And the reason is, maybe sixty percent of the entire derivatives are interest rate swaps and this is J.P. Morgan holds most of them and if interest rates rise, they blow up in seconds.
Chris Martenson: Yes.
Harvey Organ: If long-term rates go over 5% – that will blow them up. Mark my words on that one.
Chris Martenson: Yes.
Harvey Organ: So that’s why, it will never come to that. A great paper by Rob Kirby – called “The Elephant in the Room”. Where he talks about the interest rate derivatives, interest rate swaps and what it did to interest rates and how J.P. Morgan is manipulating the bonds. It’s just a scary thing, but meanwhile they are massively printing. And that’s the key, the key is every nation, United States, England, Europe, Japan, China – they are all massively printing. And when you are seeing a global amounts of paper just skyrocketing throughout the world, you got to have your precious metals.
Chris Martenson: Absolutely.
Harvey Organ: And it will certainly be a lot higher than what it is trading today, I rarely.. I don’t like quoting what gold will be because it will be much higher… but I can assure you, it will be in multiples of what it’s trading today.
Chris Martenson: Great, well in the few minutes we have left, what do you see for the rest of this year – 2012? How does this play out in your mind?
Harvey Organ: I think Spain. I’m convinced that Spain will fail by June. And then you are going to see just a mess… so I think you are going to see 2012, the year where everything just comes apart. You just can’t paper over debt with more debt. It just doesn’t happen. And you are now seeing it and days like today is what I want to see, and everyone will tell you, I’ve been watching this for years. I wanted to see gold rise, so it’s up to $16, $17 and the Dow down 182 points. I just look up at the sky and say “Thank you!” because this is the day I’m looking for. This is what you want. In other words, the Dow and the gold are decoupling. Bankers are losing control and they are losing control from Europe, and they are going to lose control here. Because here’s it’s just a paper – but the physical, as long as I have our nations of eastern persuasion saying “I want metal! I don’t care what you do!” and they line up and they go to the London fix, they go on the morning fix and the afternoon fix and say “Whatever you have available, I’ll take.” And they do it every day. And that gold is now gone and remember, every ounce they take out, the derivative mess they leave behind is just an absolute disaster. And that derivatives will bring the whole system down.
Chris Martenson: So there will be a moment in time, and we will mark this moment by personally observing whether we had gold in our possession before that moment happened or didn’t because my prediction has always been that when that day comes, we will discover that basically at the retail level, gold and silver will become almost impossible to procure, because the big players will vacuum it all up.
Harvey Organ: Correct.
Chris Martenson: And by the way, the numbers of big players required to vacuum it all up is tiny, it’s miniscule.
Harvey Organ: That’s right.
Chris Martenson: Compared to the amount of big money that’s actually kicking around out there.
Harvey Organ: Remember what I’m telling you, you will probably see a bid with no offer on gold. You’ll see a bid of three, five – whatever the bid is, no offer, nobody’s willing to sell. That’s when the end game is, that’s when the fun begins..
Chris Martenson: Right. All right, with that, this has been a really pleasant call and conversation. I’ve enjoyed myself – thank you. Obviously you know quite a lot about the markets. I love how you track the numbers so closely, knowing that it’s 53% unemployment in Spain for the under 24 crowd, wonderful. So thank you very much and I hope we can have this conversation again sometime.
Harvey Organ: Anytime.
Chris Martenson: All right. Thank you so much, bye.
Harvey Organ: Thank you so much, take care, bye.