When the CFTC finally announced an official termination to the silver futures market investigation last week, nobody was particularly surprised. If there’s one thing that has become clear since the financial crisis of 2008, it is that regulatory bodies in the United States are not able to properly regulate the markets over which they preside.
The Dodd-Frank act that was supposed to herald a renewed rigour in the regulation of derivatives such as futures and options has repeatedly and successfully been challenged by the financial services industry, to the point where the CFTC’s official statement in regard to the end of the silver manipulation investigation is conspicuous for its wording.
Especially this sentence: “Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets.” (the italics are my addition).
Once can almost discern an apologetic note of frustration in such wording, as it is very peculiar placement in the statement. As if to say, “the laws are screwed up, not us”.
And screwed up doesn’t begin to address the level of abuse that the current law as it exists encourages in the futures market.
Most glaringly, the defeat of the rule seeking to limit the size of positions in futures markets by speculators – or non-users of the actual commodity – exactly one year ago has made it possible for institutions such as JP Morgan and Goldman Sachs to originate unlimited contracts, for example, of 100 ounce bars of gold. The result is that the futures market shows a future price of gold lower than the current price, which influences the market to sell off, and take the price successively lower. The future short side pressure originating from futures contracts overwhelms the immediate demand for actual physical gold, and so the closing spot price is forced lower.
Thus, JP Morgan and Goldman Sachs – two of the largest beneficiaries of the financial crisis they were instrumental in triggering both with the avalanche of garbage sub-prime mortgages and their collaborative refusals to extend Bear Sterns’ and Lehman Brothers credit relief at critical junctures in the crisis timeline – are able to continuously drive the price of gold, silver, and any other commodity they have an inclination to just by sheer volume of short contracts originated.
The CFTC agreed that JP Morgan was able to influence the prices of silver in their investigation, but emphasized that, due to the current status of the law, this does not constitute illegal market manipulation.
And this is among the clearest of examples of how the government has become subordinate to elite financial services entities, facilitating their predation on the population instead of curbing it.
The financial services cartel mounts challenges against any aspect of Dodd-Frank or any other law they don’t like, and overwhelm the courts with many times the legal firepower than the sparsely funded CFTC can muster.
(See Reuters – September 28, 2012 – Judge Throws Out CFTC’s Position Limits Rule)
And since then-Treasury Secretary Robert Rubin bullied former CFTC commissioner Brooksley Borne in 1999 into a premature resignation as a result of changes she sought to make that would make the derivatives business more transparent, the CFTC’s revolving door of politically benign and passive senior management readily demonstrates that when it comes to regulation of major financial institutions, the CFTC is really just a toothless clerk shop designed to convey the appearance of regulation, where in reality, none exists.
Americans and much of the global general public fail to grasp just how insidious this situation is for the global economy and especially the U.S. dollar. The growing discrepancy in the price one must pay to actually take delivery of gold and silver bullion versus what the future price of gold and silver is quoted as points to a rising credibility crisis in the futures market.
As it stands, delivery of larger quantities of gold in futures markets is famously non-existent, with contracts continuously rolled over or settled in cash. The U.S. government, who is fabricating money out of thin air through their legally permitted yet morally and mathematically suicidal quantitative easing debacle relies on a bear market in gold and silver to justify the low interest rates that makes their reliance on fractional banking to create the illusion of prosperity in U.S. markets and the financial layer of the economy possible.
Against a rising gold and silver price, the demand for U.S. dollar-denominated assets would evaporate, and the distortedly low prices on all commodities – including gold and silver – would rise. This is the inflection point building in the commodities and derivatives markets. When there is an utter breakdown in the central banks’ and futures market banks to deliver actual gold and silver, the begin of the end for the U.S. dollar will be at hand, and that is when the financial crisis that has been momentarily deferred thanks to stimulus, will resume with horrific consequences for governments everywhere.
Mind you, this is what the conspiracy-lablelled alternative financial press has been portending for years, and it has yet to materialize. But so far, thats because entities like the CFTC make the continuity of the illusion possible through dis-regulation enforced by defeated legal rules.
So the question really becomes, “How long can this go on and when does it end”?
The answer, unfortunately, as long as the courts are held hostage to limitless financial firepower and influence of lobbyists, is “Who knows?”
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