Trying to make sense of the silver fraud

[foofighter]

Hi,

The past week I've been really delving into the silver fraud that JP Morgan has committed, and am trying to understand just what it means. By writing this I'm hoping that someone else can help me see if it is accurate, or whether I'm missing something.

So, what has happened is that in February Andrew Maguire blew the whistle on the silver trading fraud committed by JP Morgan. Essentially, JPM has been doing naked short selling of silver, at a ratio of 100-1. Meaning, for every 100 paper saying "I'm worth 1kg silver" that they trade, there is only 1kg of actual silver. This means that on the one hand, the actual supply of silver, which is used by many industries for production of goods, is way way lower than what the market currently thinks. Second, the price of silver is now artificially low, since people think the supply is higher than it is, and since whenever someone buys silver, new silver appears out of nowhere a la "debt as money", so the price stays low. It is, as Mike Maloney of goldsilver.com puts it, "dirt cheap" as the current price barely covers the production cost.

Because this fraud has now been uncovered, if traders start calling this bluff, i.e. they start demanding the physical silver to be delivered, lots of paper silver will default. It will also mean that the price of silver will skyrocket, to compensate for the 99% that isn't there, but should have been there. What the observers are waiting for is that someone will actually do this, but believe that at the moment noone does, because of the implications. The implications, as I understand it, is that once the price skyrockets, the confidence in fiat paper money will go away, sending the entire economy into chaos. So will anyone have the guts to do it? I don't know, but it's possible.

There is also speculation that the same fraud applies to gold, it's just not been proven yet. The same 100-1 leverage is suspected for paper gold.

At the same time, the US is printing money like crazy to cover for debts. This on its own would create a lot of inflation, and a depreciation of peoples savings accounts and pension funds, but when taken together with the above creates an explosive situation, which can erupt this year.

Does the above seem correct to you? Has anyone else been staying up to date with this story and the implications?

If it is correct, then the proper thing to do, as far as I can tell, is to take any paper money you have, and buy PHYSICAL silver and gold, and then just wait. When the prices goes kablooey you can earn a LOT on it. The catch is, of course, that at that point the money you get won't be worth much anyway, due to the hyperinflation that come into play.

And this is just two sides of it. Add in the food production of 2009 that got screwed up, the honeybees that died this winter, and the lack of sunspots causing colder weather, and 2010 seems like a pivotal turning point in our society.

 

[Beorn]

Hi foofighter,

[quote author="foofighter"]So, what has happened is that in February Andrew Maguire blew the whistle on the silver trading fraud committed by JP Morgan. Essentially, JPM has been doing naked short selling of silver, at a ratio of 100-1. Meaning, for every 100 paper saying "I'm worth 1kg silver" that they trade, there is only 1kg of actual silver. This means that on the one hand, the actual supply of silver, which is used by many industries for production of goods, is way way lower than what the market currently thinks. Second, the price of silver is now artificially low, since people think the supply is higher than it is, and since whenever someone buys silver, new silver appears out of nowhere a la "debt as money", so the price stays low. It is, as Mike Maloney of goldsilver.com puts it, "dirt cheap" as the current price barely covers the production cost.[/quote]

Well the whistles been blown quite a few times but it appears not many who can do anything about it are listening. The problem isn't with the short selling in itself but the way it has been used to manipulate the market. After all, a short in gold or silver is also a long in some other currency(usually USD). My only comment about the 100-1 leverage is that you would need to look at the capital used to back that up. For instance you could trade silver at 100-1 but use only a small portion of available funds, say 2% or 3% of you capital meaning you end up with 2-1 or 3-1 if you follow me. The problem isn't the trading ratio but the size of the positions relative to the market.

[quote author="foofighter"]Because this fraud has now been uncovered, if traders start calling this bluff, i.e. they start demanding the physical silver to be delivered, lots of paper silver will default. It will also mean that the price of silver will skyrocket, to compensate for the 99% that isn't there, but should have been there. What the observers are waiting for is that someone will actually do this, but believe that at the moment noone does, because of the implications. The implications, as I understand it, is that once the price skyrockets, the confidence in fiat paper money will go away, sending the entire economy into chaos. So will anyone have the guts to do it? I don't know, but it's possible.[/quote]

Well people have been talking about calling their bluff for years but who's got the money to do it? Suppression of gold and silver has been used to inflate the value of the USD, once they let go of their grip paper money will be worthless imo.

[quote author="foofighter"]There is also speculation that the same fraud applies to gold, it's just not been proven yet. The same 100-1 leverage is suspected for paper gold.[/quote]

There's some pretty good evidence. See Pirates of the Comex report below.

[quote author="foofighter"]At the same time, the US is printing money like crazy to cover for debts. This on its own would create a lot of inflation, and a depreciation of peoples savings accounts and pension funds, but when taken together with the above creates an explosive situation, which can erupt this year.[/quote]

Yes, that's why they are hiding the M3 data which is the broadest measure of money supply in the US. Ron Paul says "M3 is the best description of how quickly the Fed is creating new money and credit."

[quote author="foofighter"]If it is correct, then the proper thing to do, as far as I can tell, is to take any paper money you have, and buy PHYSICAL silver and gold, and then just wait. When the prices goes kablooey you can earn a LOT on it. The catch is, of course, that at that point the money you get won't be worth much anyway, due to the hyperinflation that come into play.[/quote]
Well you can if you want but do you really think you are going to be able to exchange your gold or silver for anything when the dollar collapses?

[quote author="foofighter"]And this is just two sides of it. Add in the food production of 2009 that got screwed up, the honeybees that died this winter, and the lack of sunspots causing colder weather, and 2010 seems like a pivotal turning point in our society.[/quote]
Yeah I think the race is on. What's it going to be? Economic collapse, ice age, meteor, earthquakes...

This report is from a year ago but still pretty interesting.
http://www.gata.org/files/PIRATES-OF-THE-COMEX.pdf

Here's some quotes. The two banks being JPM and HSBC.

[quote author="Pirates of the Commex"]To observe what influence anyone is having on the market we have to determine
what “Net Position” they hold. If you were to buy 100 contracts long of silver and
sell 100 contracts short at the same time, your influence on the market price will
be nil. If however you buy 10 contracts long and you sell short 100 contracts your
effect on the market price is a function of the net short position of 100-10=90
contracts.

The commercials collectively are nearly always net short. Their effect on the
price is a function of the commercial net short position which is the total
commercial short position minus the total commercial long position. To determine
how influential the positions of the US bank participation are in the market we
need to compute what percentage the net short of the banks represents
compared to the total commercial net short position.

Figure 1 shows the price of silver in black which is tied to the left hand scale
while the net short of two US Banks as a percentage of the total commercial net
short is on the right-hand scale. I have inverted this scale so that it moves in the
same direction as price. An increasing short position means the price will be
driven lower. What can be seen very clearly is that from July to November 2008
the two US Banks went from having just 9% of the total commercial net short
position to having 99%! The correlation with price is evident. The indisputable
conclusion is that these two banks dominated the market to the extent they
represented the entire net short position of the commercials and as such they
controlled the price of silver, which is illegal. Furthermore, the amount of
contracts that were sold short to achieve this represented 25% of the annual
global mine production! Could there be any clearer sign of manipulation?
...

Now as the credit markets started to show signs of serious trouble at the end of
2007 and early 2008 one would imagine that customers of JPM and HSBC would
want to buy “call” type derivative contracts such that they would be bets that
precious metals were going to go higher.

What we have observed is that two unknown banks fraudulently manipulated the
COMEX silver market in 2008 with an outrageous 99% ownership of the entire
Commercial Net Short position which resulted in the price of silver crashing from
$20/oz down to less than $9/oz. That is a real coincidence that two banks on the
hook for the equivalent of 140% of all the silver mined in one year in notional
value of derivatives should suddenly get lucky that the silver price plummeted
such that all those unlucky derivatives customers didn’t get to cash in their calls!
Coincidences like this don’t happen. From Q3 to Q4 2008 JPM and HSBC
managed to reduce their derivatives in precious metals by 6.6B$ or 43%. This
provides a very good reason why two banks in the middle of 2008 suddenly
decided they were going to break commodity law by gaining a concentration that
represented 100% of the commercial net short of the COMEX market. The most
likely reason is these two banks who have manipulated the COMEX market so
blatantly are the same two banks who own a monstrous oversized and
unregulated derivative position which needed to be reduced.
...

As another amazing coincidence JPMorganChase is the custodian of the silver
that is supposedly purchased on behalf of SLV Exchange Traded Fund investors,
and HSBC is the custodian of the gold that is supposedly purchased on behalf of
GLD Exchange Traded Fund investors. Yet these two banks are seen recklessly
gambling more gold and silver paper promises in an unregulated market than
they could ever get their hands on. Those are truly bizarre credentials to be in
charge of the safe keeping of other people’s precious metals![/quote]

 

[foofighter]

Thanks JP for that feedback!

Well people have been talking about calling their bluff for years but who's got the money to do it? Suppression of gold and silver has been used to inflate the value of the USD, once they let go of their grip paper money will be worthless imo.

The speculation I've seen is that asian investors would(/could) call the bluff. But whether they would actually do that, is another story. But even if they don't call it, per se, there still seems to be an increase in interest of investing in gold and silver, because of the crazy money printing. Which in turn would bring up the prizes. Right?

[quote author="JP"]
Well you can if you want but do you really think you are going to be able to exchange your gold or silver for anything when the dollar collapses?
[/quote]
If I can exchange it for worthless money and pay off the house with that, that would be ok. Do you have any other ideas about what to do, other than just watching it all tumble?

 

[Beorn]

[quote author="foofighter"]If I can exchange it for worthless money and pay off the house with that, that would be ok. Do you have any other ideas about what to do, other than just watching it all tumble?[/quote]

Hmm, that's a difficult one. I trade a little and I'm generally long silver but I do go both ways. My current thinking is that there is a window of opportunity in which XAU and XAG prices will be driven up before somebody pulls the plug, so to speak (either dropping the USD for something else or society becomes too chaotic to be able to trade paper money at all). I mean silver's already up 80% from the beginning of last year. I could be wrong but I just don't think the PTB are going to let the small time investors get away with selling gold for $40,000 per ounce or whatever is the price some people say it should be worth.

To be honest with you though my main priority is to just do the meditation and observe what happens. I want to grow a vegetable garden also. In my mind that might prove to be the most useful if I survive whatever is headed this way over the next few years.

 

[realitybugll]

I was keeping up for a bit. partly because the max keiser reports are so entertaining to watch :P. the economy is hard to understand, but I think who knows what will happen. If anyone thought the Jp morgan silver story would skyrocket the price of silver well... it has not as of yet. If it had been run on more mainstream news sites maybe it would have. my thought is that everything will be kept in place by the PTB until the time is right. If I had money in savings I would probably buy some ounces of silver (to have delivered for me ) not a paper guarantee and its storage somewhere else. My mom started collecting "pandora charms" I was thinking oh boy what another way for her to spend money but then i realized she is investing in silver :).

Well you can if you want but do you really think you are going to be able to exchange your gold or silver for anything when the dollar collapses?

I am wondering about this, yes. there is this thread: http://www.cassiopaea.org/forum/index.php?topic=11095.0 that I read where the question is discussed. I would advocate that necessities like food / shelter would be most valuable in the time of a collapse. however some members make some good arguments i think that gold WOULD be helpful and that you WOULD be able to exchange it somehow. or that it would assume the place of the dollar as a temporary currency... I forget a bit...

 

[SeekinTruth]

[quote author="JP"]
Well you can if you want but do you really think you are going to be able to exchange your gold or silver for anything when the dollar collapses?

If I can exchange it for worthless money and pay off the house with that, that would be ok. Do you have any other ideas about what to do, other than just watching it all tumble?

[/quote]

It's hard to say, in your specific situation, what is the best move. You may be able to pay off your house. Depends how much you owe on it, how much savings you have in cash to purchase silver (or gold), what the exact situation will be when the jig is up with the paper currency scam, etc. The PTB seem to want to switch from worthless paper that gets its worth by spreading and maintaining the perception that paper currencies are worth something (and they are as long as people accept them in exchange for valuable goods & services -- but there's always the problem of diminishing buying power of the paper currencies) to the only thing that could be worse than paper currencies backed by nothing which is virtual money -- totally electronic entries into accounts.

I'm no expert by any means but this is my understanding of the situation and views on precious metals. If you have lots of savings (I'm talking at least US$50,000 but the more the better) it would probably be a good idea to buy gold and silver with maybe up to 15 to 25% of your savings as a form of insurance to preserve your "wealth." These metals do not really appreciate in value, but if and when their prices skyrocket, it would be because they finally began to reflect the true value that the paper currencies (really the US dollar) lost. Basically the real value of the dollar would at that point be much closer to reality. What should the real prices, without all the manipulation and fraud, for gold and silver be and where will their prices eventually end up? I don't know. I've read and heard all sorts of figures bandied about in the last couple of years that gold should be at anywhere from $1500 to $3000 an ounce, and may eventually go above $10,000 an ounce. There are supposed to be ways of figuring out the M3 from other statistics within a reasonably accurate margin even though this figure is not being published for the last few years. And there are also ways of figuring out total obligations by US and other governments (debts), etc., and combined with the real demand for the physical metals come to a more objective price.

It seems to me the less savings you have, the MORE careful you have to be to provide for the necessities for your family. The more savings you have, obviously the more flexible you can be -- the more options you'll have for securing the basic necessities of life. Also the more savings, the higher that percentage of your savings to have in precious metals may make sense, after getting other things of real value but still having a considerable amount of cash.

There is quite a bit of information (including links to other sites/articles) in the Gold thread posted above by wetroof. But you need to decide if it is worth putting all the time and energy into looking into all that info. You know your own particular situation and amount of time you can/want to devote. I think it would have been very good idea if someone had lots of savings a few years ago to have purchased gold (and possibly silver) when it was between $600 and $700 an once of gold. It would simply have preserved there savings rather than have the buying power of cash increasingly erode. But probably most people who were in a position to do so back then did so.

Again, I don't know where the prices will end up, but the paper currencies will eventually collapse. If you think overall it makes sense for you to convert some cash savings to silver, it may work out when the fiat currencies finally crash and burn, but you should consider carefully the more precarious your financial situation is, because the less you will be able to afford a bad move -- for instance the timing of your purchase, since the major manipulators/insiders only know which way the prices will be going, by how much and when.

 

[crazycharlie]

I think Silver is still a bargain for the moment.
(the Romans traded silver close to 10 to 1 with gold, we are at more than 60 to 1 )
but will it be convertible or have trade value who knows ?
There could be a brief window to jump out ( of silver) for a good return ?
( I have bought a small amount of silver - its all I can afford )
its an individual issue, I rent and may move again soon
so a garden is difficult,best to have a savings of some sort to continue to
buy what food ( and at what prices ) will be available. . .
very unlikely I would lose what money I have spent on silver instead of just
keeping it in cash ....
(glad to see you all discuss survival a little here- the C's seem to dismiss 3d matters
and to focus on the spiritual, but I forgive my self for trying to work all the angles-
we got a foot in both worlds ) ... just my thoughts . . . .

 

[meta-agnostic]

For what it's worth, it looks like plans to buy silver partly in order to stick it to JP Morgan are starting to go mainstream. At least if articles linked off of coinflation.com can be considered "mainstream".

http://dailyreckoning.com/j-p-morgan-and-the-great-silver-caper/

Furthermore, the kinds of folks who tend to buy gold and silver are also the kinds of folks who have contempt for Wall Street…and for Wall Street banks like J.P. Morgan. So it should come as no surprise that a grassroots campaign has formed – the sole purpose of which is to punish J.P. Morgan for its attempted manipulation of the silver market.

These videos are also pretty informative and funny:

http://www.youtube.com/watch?v=Gl47z2g2EvI

http://www.youtube.com/watch?v=I0mhX9hpq3g

The first one does sort of turn into a commercial for silvergoldsilver.com at the end, which is where I found the second one.

As of this post silver is at 28.40 USD and gold is at 1380.70 to help with historical perspective if you're looking this up later like I did. Certainly a reflection of the times we live in and ahead of us as well as a possible opportunity to benefit personally for those able and willing. As always, important to keep things balanced. ;D