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Times are finally changing. It will never be at
the speed the GATA camp expects, yet slowly but surely our time is coming.
The GATA camp will be proven correct and it will evolve into one of the most
grotesque scandals in history … dwarfing the Enron, Madoff, MF Global
and Barclays scandals combined, in terms of its effects on financial markets
around the world.
First of all, it has come to my attention that in
January 2011 JP Morgan, for some yet unknown reason, was compelled to stop
manipulating the silver market. That is when the price of silver went
vertical to the upside…
Silver practically went straight up to $49 an
ounce. THEN, it collapsed for no apparent reason. That reason, from my most
well informed source, was that JPM came back into the market in June. Now, if
that is the case, JPM worked through some sort of auxiliary account to
overnight raid silver in the earliest of May in 2011, because that is when
The Gold Cartel/JP Morgan went into combative action in earnest to crash the
price down…
Monthly silver price
http://futures.tradingcharts.com/chart/SV_/M?...ache=1341620769
I hope to be able to explain more of this in the
near future, but that is what I can put in the public domain for the moment.
But, there must be more for me to be jumping up
and down like I am doing here, and there is.
To begin with, there is the Barclays LIBOR market
manipulation scandal. Many of the participants are the same banks GATA has
cited over the years for manipulating the gold and silver markets. Speaking
of some of those banks…
Libor
rate-fixing scandal spotlight now on Citi, JPMorgan
By Agence France-Presse
Saturday, July 7, 2012 9:03 EDT
***
Yes, you know much about this, but the fact that
this market rigging scandal is now evolving into the criminal stage is no
minor event.
And, let me say this; JP Morgan’s public
declaration about being offside on a $2 billion dollar "hedge
transaction" was not fully transparent. My sources tell me that was the
case, but in addition, that what JPM CEO Jamie Dimon said at the time was
camouflaging another serious financial problem. At the time it made little
sense that a CEO would talk about a trade loss of
that kind when his firm was making $18 billion dollars a year. The smell
meter that the situation was much more serious than $2 billion lit up the
light bulbs on the GATA camp scoreboard. Since then New York Times has
reported the amount of the loss could be as high as $9 billion.
The bottom line here: my well informed source
tells me that the Jamie Dimon lament is about a derivatives problem that also
involves the silver position JPM took over for the Fed when Bear Stearns went
belly up. I hope to have more particulars on this declaration in the near
future. The main point is that JPM has some serious issues with their present
short silver position and is having difficulty extricating itself from that
position. Whether it has to do with coming up with a large amount of borrowed
physical silver, I am not sure. We will stay on the case and report on any
new developments.
OK, let us move on to why the gold/silver market
manipulation scheme is getting that much closer to blowing up…
*Every GATA follower knows that the CFTC has been
investigating JP Morgan’s role in their manipulation of the silver
market for nearly FOUR YEARS. All I can say that CFTC Commissioner Bart
Chilton, whom I have met twice and have the highest respect for, has told me
that something is going to surface (either way) on this matter in the next
month or two.
*The Barclays LIBOR market manipulation scandal is
just one more proof of what the GATA camp has been saying for eons …
that our financial markets are blatantly manipulated. As the investigations
into this scandal grow, it could easily lead into what certain banks have
been doing in the gold and silver markets in anti-trust fashion.
*The latest revelations in Thomas Pascoe’s
expose in The Telegraph in London are likely to stir the pot further about
the manipulation of the gold and silver markets. The article reads as if it
was written by one of us in the GATA camp, as Pascoe makes one point after
another that we made so long ago. Here it is again for your review…
Revealed: Why Gordon Brown Sold Britain's Gold at a Knock-Down Price
By Thomas Pascoe
The Telegraph, London
Thursday, July 5, 2012
A great deal of Gordon Brown's economic strategy
would strike a sane man as troubling. Not a great deal was mysterious. The
orgy of consumption spending, frequent extensions of the cycle over which he
would "borrow to invest," proclamations of the "end of boom
and bust": These are part of the armoury of modern politicians of all
political hues.
One decision stands out as downright bizarre,
however: the sale of the majority of Britain's gold reserves for prices
between $256 and $296 an ounce, only to watch it soar so far as $1,615 per
ounce today.
When Brown decided to dispose of almost 400 tonnes
of gold between 1999 and 2002, he did two distinctly odd things.
First, he broke with convention and announced the
sale well in advance, giving the market notice that it was shortly to be
flooded and forcing down the spot price. This was apparently done in the
interests of "open government" but had the effect of sending the spot
price of gold to a 20-year low, as implied by basic supply and demand theory.
Second, the Treasury elected to sell its gold via auction. Again, this
broke with the standard model. The price of gold was usually determined at a
morning and afternoon "fix" between representatives of big banks
whose network of smaller bank clients and private orders allowed them to
determine the exact price at which demand met with supply.
The auction system again frequently achieved a
lower price than the equivalent fix price. The first auction saw an auction
price of $10 less per ounce than was achieved at the morning fix. It also
acted to depress the price of the afternoon fix which fell by nearly $4.
It seemed almost as if the Treasury was trying to
achieve the lowest price possible for the public's gold. It was.
One of the most popular trading plays of the late
1990s was the carry trade, particularly the gold carry trade.
In this a bank would
borrow gold from another financial institution for a set period, and pay a
token sum relative to the overall value of that gold for the privilege.
Once control of the gold had been passed over, the
bank would then immediately sell it for its full market value. The proceeds
would be invested in an alternative product which was predicted to generate a
better return over the period than gold which was enduring a
spell of relative price stability, even decline.
At the end of the allotted period, the bank would
sell its investment and use the proceeds to buy back the amount of gold it
had originally borrowed. This gold would be returned to the lender. The
borrowing bank would trouser the difference between the two prices.
This plan worked brilliantly when gold fell and
the other asset -- for the bank at the heart of this case, yen-backed securities
-- rose. When the prices moved the other way, the banks were in trouble.
This is what had happened on an enormous scale by
early 1999. One globally significant US bank in particular is understood to
have been heavily short on two tonnes of gold, enough to call into question
its solvency if redemption occurred at the prevailing price.
Goldman Sachs, which is not understood to have
been significantly short on gold itself, is rumoured to have approached the
Treasury to explain the situation through its then head of commodities Gavyn
Davies, later chairman of the BBC and married to Sue Nye, who ran Brown's
private office.
Faced with the prospect of a global collapse in
the banking system, the Chancellor took the decision to bail out the banks by
dumping Britain's gold, forcing the price down and allowing the banks to buy
back gold at a profit, thus meeting their borrowing obligations.
I spoke with Peter Hambro, chairman of
Petroplavosk and a leading figure in the London gold
market, late last year and asked him about the rumours above.
"I think that Mr Brown found himself in a
terrible position," Hambro said.
"He was facing a problem that was a
world-scale problem where a number of financial institutions had become
voluntarily short of gold to the extent that it was threatening the stability
of the financial system and it was obvious that something had to be done."
While the market manipulation that occurred when
the gold reserves were sold was not illegal as the abuse at Barclays may have
been, the moral atmosphere in which it took place was identical.
The crash which began in 2007 and endures still was the result of an abdication of
responsibility across the financial sector. This abdication ranged from the
consumer whose thirst for goods pushed him beyond into grave debt to a
government whose lust for popularity encouraged it to do the same.
Responsibility is evaded by all bar those on whose
shoulders it ought to rest. The gold panic of 1999 was expensively paid for
by the British public. The one thing politicians ought to have bought with
that money was a lesson in the structural restraints that needed to be placed
on banks now that the principle that they were ultimately public liabilities
had been established.
It was a lesson that
could have acted to restrain all players in the credit market boom of the
2000s. It was a lesson nobody learnt.
-----
Thomas Pascoe worked in both the Lloyd's of London
insurance market and in corporate finance before joining the Telegraph. He
writes about the financial markets.
* * *
Perhaps Thomas Pascoe might like to read a portion
of what I wrote for the Café on September 5th 1999, three
weeks prior to the September 26th Washington Agreement
announcement, one which sent the gold world into a tizzy.
Cafe des
Scandales
It is fascinating to me that much of
what we have covered in the Café over the past year is starting to
synchronize and beginning to boil over a bit. Thus, I thought I would put
some labor into this Labor day weekend and examine what is happening on the
potential "scandal" front, as well as update The Café on the
peculiar nature of it all.
Much of the hubbub about the manipulation of the
gold market began early last fall. Then, Long Term Capital Management was
supposedly taken off the hook on a 300 tonne "borrowed gold" short
position by the financial entities that bailed them out. Since I had heard as
early as May, 1997, that they might have this amount of gold exposure, it was
no surprise to me to hear so many rumors floating around of this nature and I
did not hesitate to publicly question the propriety of it all.
Our protestations caught the attention of Long
Term Capital Management and their attorney, James G. Rickards, who sent us a letter, along with an affidavit from Principal, Eric
Rosenfeld. Rickards stated that Long Term Capital Management denies any
involvement in the manipulation of the gold market and Rosenfeld said to the
Cafe, "None of LTCM, LTCP, nor their affiliates, has ever entered into
any transaction involving the purchase or sale of gold, including without
limitation, spot, forwards, options, futures, loans, borrowings, repurchases,
coin or bullion, long or short, physical or derivative or in any other form
whatsoever."
I responded to Rickards in a letter saying that
the Café never accused LTCM of manipulating the gold market, nor did I
ever say that that they "traded" gold. I strongly suggested that
had "borrowed" 300 tonnes (approx) of gold and had gold exposure in
a credit sense with the bullion banks and asked him for a response.
He never did respond to me and it was just
announced over the press wires that he resigned from Long Term Capital
Management to join another firm. I will now have to find out who their new
attorney is and start all over.
Then there is information we received from a very
sophisticated source that a blind trust for Hillary
Clinton "shorted" gold instruments just prior to the Bank of
England gold sale. Ironically, the media reported yesterday that the down
payment for the Clinton's new home in Westchester County, New York, came from
her blind trust.
It was strongly suggested to me from a source that
we try and find out if Hillary Clinton has a blind trust at Goldman Sachs.
The Gold Anti-Trust Action Committee and the Café now have allies
looking into this matter. We are trying to find out who is handling her blind
trust(s) or any other type of account she might have and, once identified,
attempt to elicit a response about the gold shorting innuendoes.
Why would this be the H-bomb as far as we are
concerned? Simply put, I have set forth much commentary linking The Clinton
administration, the N.Y. Fed, Goldman Sachs, Long Term Capital Management,
England's Exchequer, The Bank of England and Prime Minister Tony Blair. A
revelation of this nature would solidify the link. For example:
*Former Treasury Secretary Robert Rubin, is a former Goldman Sachs CEO.
*Former N.Y. Fed Governor, Ed Corrigan is a senior partner at Goldman Sachs
*London based senior partner, Gavyn Davies, is Goldman Sach's international
economist and has close ties to Tony Blair. Davies wife, Susan Nye, is
Chancellor of the Exchequer's office manager.
*Dr Sushil Wadhwani, former Director of Equity Strategy at Goldman Sachs
International (1991-95), sits on the Bank of England's Monetary Policy
Committee. The committee's duties include determining the Bank's objectives
and strategy, ensuring the effective discharge of the Bank's functions and
ensuring the most efficient use of the Bank's resources.
*Jon Corzine, former Goldman Sachs CEO, has close ties to John Meriwether,
chairman of Long Term Capital Management.
*Former Fed vice chairman, David Mullins , was a
partner in Long Term Capital Management which, of course, was bailed out in part
by Goldman Sachs.
Exhibit 2 and further background information on
the significance of the Hillary Clinton gold "shorting" story: this
is commentary about the Bank of England gold sale from the document that I
sent to Senator Phil Gramm, Chairman of the Senate Banking Committee:
"Yet, the night before the BOE announcement
(May 6, 1999), I feared duplicity and this is what I wrote in my Midas du
Metropole commentary:
"We know 'the squad' are all lining up, one
more time, to try and stifle a decent gold move to the upside. Deutsche Bank,
Chase, Swiss Bank and Goldman Sachs were all there selling gold during
today's session and, when they had to, even throwing the kitchen sink at the
bull's attack. Deutsche Bank has been especially aggressive and noticeable in
their selling the past few days. We got word late this afternoon that their
bullion desk is calling their clients saying that the gold market is stopping
at $290. I don't think Midas followers will be surprised when we tell you
that big sellers late in the day today and taking on all bids were 'Squad'
honchos Goldman Sachs and Deutsche Bank. 'The Battle for Navarone' is an
important stand for them, for if $290 is taken out to the upside, their long
standing bearish position could begin to look a bit shaky."
The next morning I awoke to the Bank of England
announcement. Since then the price of gold has collapsed over $36 - or almost
15% per cent - and the sale has ignited a furor all over the world, fostering
talk of conspiracies, etc…
http://www.lemetropolecafe.com/Pfv1.cfm?pfvID=378&SearchParam=Nye
***
Hmmm…
*GATA could not have been too far off base with
what we knew about LTCM, the enormous hedge fund that blew up in September of
1998. For sure the bullion banks were protecting that size short position at
LTCM because they were all doing the gold carry trade that T Pascoe is
referring to. Do you think the these days very visable Jim Rickards would
have come to London to make a presentation at GATA’s Gold Rush 2011
conference at the Savoy Hotel last August if we were way off base?
*David Mullins? … partner at LTCM and former Fed vice chairman. No one is more involved in
rigging the gold price than the Fed. The Fed coordinated the liquidation of
LTCM including preventing the price of gold from taking out $300 on the
upside.
*Phil Gramm? He never was any help to GATA. And
his wife Wendy …. She was the chairman of the CFTC from 1988 to 1993.
After a lobbying campaign from Enron, the CFTC exempted it from regulation in
trading of energy derivatives. Subsequently, Gramm resigned from the CFTC and
took a seat on the Enron Board of Directors and served on its Audit
Committee.
What more needs to be said on that one!
*Which takes us to the notorious Jon Corzine, of
MF Global scandal note. Farmers in the Midwest, and investors (some of whom I
know) are still waiting to get the money back he and his firm stole from them
when they went belly-up. Money that was supposed to be default free as per
the CME and its faulty dictates. Money, that in part, went to JP Morgan.
Seems like if there is a financial market scandal these days, JP Morgan
won’t be far away. And, of course, Corzine was a Goldman Sachs man at
one time.
*Good ole Goldman "Hannibal Lecter"
Sachs, as I called them for years. Goldman Sachs was the ringleader of The
Gold Cartel from the beginning. Visibly, they were the largest short on the
TOCOM in Japan for many years too. However, several years ago GS exited the
gold market rigging scheme … before the price of gold really took off
to where it is today.
From Corzine to Robert Rubin, who was the one who
popularized the gold carry trade in the first place. We know this for a fact
from the person who carried out his dictates at GS owned J. Aaron in London.
Back then interest rates were relatively high and Rubin began borrowing gold
on the cheap, selling it, and used the proceeds to fund its operations and
market activities … just as Thomas Pascoe said in his article.
Rubin then took it a step further when he became
US Treasury Secretary. The rigging of the gold price was the lynchpin of his
much talked about "Strong Dollar Policy."
*Probably could go on and on, but you get the
picture. What an incestuous story … the Blair Government, LTCM, the
Clintons, the Fed, the Bank of England, Goldman Sachs. When the gold and
silver markets finally BLOW UP, much of this will come out in the wash. Just
a matter of time.
Thomas Pascoe mentioned Peter Hambro, who is quite
the gentleman and quite a business success. I have met Peter a couple of
times in London and very much enjoy his company. He sent me the following on
January 3, 2000, which is related to this subject matter. You might find some
of the details to be of interest. Anyways it can’t hurt to have it out
there on the public record again…
The following is an email I received from Peter
Hambro on this correspondence.
Bill,
My thoughts are simple on this:
* Here we have correspondence between, on the one
hand, a genuinely interested and informed gold miner and, on the other the
Governor of the Bank of England and the Number Two person at the UK Treasury.
* The questions I asked are reasonable and, in
spite of what the Governor says, do not require any disclosure of
confidential client information.
* Instead the UK Authorities steadfastly refuse to
answer any of the detailed points.
*
Either they have something to hide or they are failing in their duty to deal
in the open manner with a UK taxpayer that Mr Blair and his New Labour
government have promised. I hope that your
readers will make up their own minds which.
PH
***
That’s all for now except to sum up and say
the smoke is starting to billow as far as the gold/silver market manipulation
scandal is concerned. Yes, it probably will take more time than I think to go
mainstream, but it is a scandal whose time has come.
Bill Murphy is the editor of “Le
Metropole Café”, in which he analyses daily the Gold Market as
well as current economic affairs.
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