Metals Manipulation, Machinations, and Assassinations
Having recently escaped from academia, Nick decided to drop his tights (the required attire of a trapeze artist) and joined Port Phillip Publishing. Instead of telling everyone about the Daily Reckoning, he now spends his time writing for the weekend edition.Every now and again, something comes up that is so curious it just needs to be mentioned, regardless of how paranoid it makes us look. The emerging scandal over manipulation of the silver market is one of those things. Some have said it is the largest fraud in history. To make the story even more dubious and enthralling, we shall start ... at the beginning:
How many US presidents have been assassinated while in office? (That's right, the story begins here.)
The answer is four.
Of those four, how many were sound money advocates (favoured gold or silver backing of the currency) and had sound money as one of their key policies?
All four of them.
Lincoln favoured silver backing of the currency after the America Civil War. McKinley and Garfield fought for the gold standard against their presidential opponents. Kennedy managed to reintroduce silver backed dollars before being knocked off. Those silver backed dollars were subsequently taken out of circulation by the Federal Reserve. The "Dead President's Society" conspiracy is its own story, but not one to be covered here.
The next intriguing bit of history comes from the Credit Rivers case, an obscure but insightful 1968 U.S. court case that bears on whether or not bank money is "real" money. But before we get into that case, one has to understand a basic concept of contract law. For a contract to be binding there must be an exchange of consideration, which is something of value. That is why gifts are not legally binding exchanges. The giver does not receive consideration in return.
The importance of the Credit Rivers case comes from the fact that the presiding Justice recognised that fiat currency is not valid consideration, as it is simply created out of thin air by banks. "Only God can create something out of nothing" is the famous quote from the case. For all the proceedings from that case, you can go here. But the main point is that the Justice (of the Peace) held that the bank could not foreclose on the house in question, as the loan it had created was not valid consideration.
Justice Mahoney then held that the bank could not appeal the decision, as it failed to pay the $2 court fee for lodging such an appeal. Amusingly, the bank had paid this fee, but had done so in the same fiat currency that was previously held to be worthless, thus invalidating their payment!
Justice Mahoney died in a fishing accident after giving his decision. His precedent was not followed.
You may be wondering how on earth is all this relevant to the latest development out of the gold and metal market.
Well, to understand the concerns that people have, you have to understand the history. Now, on to the more recent developments.
Precious metals trader Andrew Maguire informed the commodities trading regulator, the Commodities Futures Trading Commission (CFTC), that there was substantial manipulation of the metals market occurring on a regular basis. For example, he alleges that by purchasing Bear Stearns, JP Morgan had gained control of the precious metals market and was using this control to make significant profits. Other savvy metals traders caught on and simply hung on for the ride.
The CFTC didn't seem particularly interested in his claims, so Maguire gave them several predictions, based on the manipulations that metals traders expected. Those predictions were completely accurate, but the CFTC simply stated that it was investigating, as it had previously done.
Imagine the police had an informer telling them that a rape would occur, when it would occur and who was going to be the perpetrator and the victim, but they merely watch it happen and then "investigate". That is what the CFTC did.
Andrew Maguire was thoroughly annoyed at this point and went to GATA, the Gold Anti-Trust Action Committee. GATA has campaigned to expose such market manipulation for many years. The organisation is frequently ridiculed by the mainstream press. But with Maguire's claims it is now apparently armed with the credible witness it needs.
Representatives from GATA appeared at a CFTC hearing, armed with their new whistle blower's information, and promptly blew the commodity regulator's committee out of the water. Unfortunately, the camera filming the testimony happened to break shortly before the GATA chairman began speaking. It began working again shortly after he had finished.
Andrew Maguire, the whistleblower, was recently subject to a hit and run traffic accident. All major media organisations have cancelled their scheduled interviews with GATA. The press is not covering the developments.
It has since emerged that the London Bullion Market trades on 100 to 1 leverage, meaning that for every ounce of real gold, there are 100 ounces of paper gold being traded. If, or when, people try to take delivery, there could be a dramatic shortage, leading to a huge spike in the gold price.
Some have estimated the size of the fraud to number in the trillions.
[Editors note: Please take the time to inform yourself of developments in this story. Only a fraction of it was covered here.]
These two interviews are a good place to start:
Interview with the whistle blower and a GATA representative
Interview with the GATA board and the whistle blower
Nickolai Hubble
for The Daily Reckoning Australia
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