Gold is not money Ben Bernanke's testimony to Congress in 2011
Gold is money. Everything else is credit J.P. Morgan's words to Congress in 1912
When you own gold you're fighting every central bank in the world Jim Rickards
There are decades where nothing happens; and there are weeks where decades happen

Vladimir Ilyich Lenin

The Gold Standard Goes Mainstream

August 30, 2012 2 comments

By Seth Lipsky | WSJ

An under-reported development of this campaign season is the Republican Party’s decision this week to send Gov. Mitt Romney into the presidential race on a platform effectively calling for a new gold commission. The realization that America’s system of fiat money is part of its economic problem is moving from the fringes of political discussion to the center.

This is a sharp contrast from the last time a gold commission was convened, in 1981, a decade after President Nixon abandoned the Bretton Woods system and opened the era of a fiat dollar. The 1981 commission recommended against restoring a gold basis to the dollar. But two members, Congressman Ron Paul and businessman-scholar Lewis Lehrman dissented and outlined the case for gold.

The new platform doesn’t use the word “gold,” describing the 1981 United States Gold Commission as looking at a “metallic basis” for the dollar. But the metal was gold, and the new platform calls for a similar commission to investigate ways “to set a fixed value for the dollar.”

What has stayed with me from 198 1when I covered the commission as a young editorial writer for this newspaper is how momentum for a new gold standard faded amid the successes of the supply-side revolution. President Reagan pushed through his tax reductions and Federal Reserve Chairman Paul Volcker maintained tight money. Inflation was defeated. The value of the dollar, which had sunk below 1/800th of an ounce of gold during President Carter’s last year in office, soared.

The 1981 commission was also stacked against a gold-backed dollar from the start. The ruling philosophy was monetarism which, as propounded by Milton Friedman, seeks to keep prices steady by adjusting the money supply. The commission’s executive director was Anna Schwartz, co-author of Friedman’s “Monetary History of the United States,” and the Democratic-controlled House held firm to monetarist orthodoxy.

Today things have changed. Both Friedman and Schwartz died as heroes of capitalism and freedom, but monetarism lacks the sway it once had. Even Friedman before he died seemed to adjust his thinking on using the quantity of money as a target. Schwartz predicted that monetary instability would be a breeding ground for a restoration for the role of gold.

In the ferment within today’s Republican Party, the gold standard has become almost the centrist position. On the left would be those who favor a system of discretionary activism in which brilliant technocrats, such as Ben Bernanke at the Fed, use their judgment in setting interest rates. A bit to their right would be advocates of a rule, such as John Taylor’s rule linking interest rates to various conditions, or one that requires the Fed to target the price of gold but stops short of defining the dollar in terms of specie.

In the center would be advocates of a classical gold standard, in which a dollar is defined as a fixed amount of gold. These include, among others, Mr. Lehrman, James Grant of Grant’s Interest Rate Observer, publisher Steve Forbes, economist Judy Shelton, and Sean Fieler of the American Principles Project.

A bit further to the right would be partisans of the Austrian school of economics, including Rep. Paul. He advocates less for a gold standard than for an idea of Friedrich Hayek, the Nobel laureate who came to favor what he called the denationalization of money and a system centered on private coinage and currency that would compete with government-issued money. Further right are purists such as the radical constitutionalist Edwin Vieira Jr., who would simply price things in weights of gold or silver.

A good bit of overlap exists among the camps, but Congress has come alive to all points on this spectrum. Rep. Kevin Brady, a Texas Republican who is vice chairman of the Joint Economic Committee, is seeking to pass the Sound Dollar Act, which would end the Fed’s mandate to keep unemployment down, instead having the central bank focus only on stable prices. Rep. Paul is pressing the Free Competition in Currency Act, which would end legal tender and put Hayek’s ideas into practice.

In the Senate, Jim DeMint, Mike Lee and Rand Paul are offering the Sound Money Promotion Act, which would remove the tax on the appreciation in the value of gold and silver coins that have been declared legal tender by the federal or a state government. Utah has already made gold and silver coins legal tender in the state.

Then there is Mr. Romney. In Paul Ryan he chose a running mate who understands the idea of sound money. In June 2010, as chairman of the House Budget Committee, Mr. Ryan asked Mr. Bernanke what he made of record-high prices of gold. (The value of the dollar had just slid to below 1/1,200th of an ounce of gold; it has since plunged to below 1/1,600th of an ounce.)

“I don’t fully understand the movements in the gold price,” Mr. Bernanke replied. He confessed his belief that some people were hedging “against the fact that they view many other investments as being risky and hard to predict at this point.” No wonder the eventual House bill to audit the Fed passed with overwhelming bipartisan support.

This is the context in which Mr. Romney last week moved so pointedly to distance himself from a suggestion by one of his advisers, Glenn Hubbard, that Mr. Bernanke should be considered for another term. Mr. Romney made clear that he would be looking for a new Fed chairman, an important signal from a candidate who has made some mistakes such as suggesting that monetary policy should be kept away from Congress. In fact, it is precisely to Congress that the Constitution (in Article 1, Section 8) grants the power to coin money and regulate the value thereof.

The New York Sun, the online paper I edit, has warned that a gold commission could prove to be the graveyard for sound money on the principle that if one wants to bury an idea, one need but name a commission. But it’s possible that a well-conceived and well-staffed gold commission could actually sort out the debate.

It’s no small thing that Mr. Romney’s platform calls for a gold commission and an audit of the Fed. The last Republican to run on a platform calling for a dollar “on a fully convertible gold basis” was Dwight Eisenhower, who cast the promise aside once in office. That’s a strategic misstep for Mr. Romney, should he win in November, to avoid.


Mr. Lipsky is editor of the New York Sun. The recipient in April of a grant in the form of a lifetime achievement award from the Lehrman Institute, he is writing a book on the constitutional dollar, forthcoming from Basic Books.

Related Articles:

The Aerographite Dollar: Returning the Fed to its golden roots

The CFTC Silver Investigation

August 10, 2012 Leave a comment

By Ted Butler | SilverSeek

There has been an explosion of interest and commentary these past few days as a result of a front page story in Monday’s edition of the influential Financial Times (of London). The story stated that the CFTC was set to drop its four year investigation into alleged silver price manipulation due to insufficient evidence to bring charges, according to three unnamed sources. I went to sleep Sunday evening when the story first appeared prepared to wake up to similar and confirming stories in other publications. Instead, there were no other stories confirming the case was set to be dropped; only strong statements that the FT was story was “premature” and “inaccurate in many respects” by a named source, Commissioner Bart Chilton of the agency.

The CFTC’s silver investigation is a hot button issue and the FT story, as well as Commissioner Chilton’s response to it, set off an outpouring of emotion and conjecture in the precious metals world. And for good reason, as this is an extremely important issue. There can be no greater concern than whether a market is manipulated in price. The issue of a silver manipulation is also a divisive matter, even within the CFTC itself; otherwise there likely wouldn’t have been leaks that the investigation was over and the immediate response of not so fast. As is usually the case with extremely divisive issues (like politics and elections), emotions take hold and the real issues can get distorted.

Let me try to frame the picture in an unemotional manner. Admittedly, that’s no easy task since I was the prime initiator behind this silver investigation and the two prior CFTC silver investigations in 2004 and 2008. (Too bad there’s no Olympic event for initiating government investigations). However, the truth is that four years ago I was not trying to get the Commission to investigate, as they had just completed a few months earlier, in May 2008, their second silver investigation in four years. By then, I knew where the Commission stood on whether silver was manipulated and it was pointless to ask them to investigate again. I had a different motive in mind when I urged readers to write to the CFTC about the now-infamous Bank Participation Report of August 2008. That was the report that showed that one or two US banks held an obscenely large and concentrated short position in COMEX silver futures that amounted to 20% of world production and 30% of the entire COMEX silver market. No major market had ever been that concentrated. I knew that this short position was so concentrated that, in and of itself, it proved silver was manipulated because the price would be radically higher in its absence. That is always the litmus test for manipulation, namely, what would the price most likely be if a concentrated position did not exist?

As a result of the August 2008 Bank Participation Report and subsequent CFTC correspondence to US lawmakers, I also learned at that time that JPMorgan was the big silver short, as I speculated on in this article. This is when and where the precious metals world came to learn that the big silver short was JPMorgan.

I asked readers to write to the CFTC not to investigate silver anew, but for the agency to simply explain how a big bank holding such a large percentage of the market would not be manipulation. This is a question that the Commission should have answered immediately since it was so basic to commodity law. The last thing I intended was for the agency to embark on a multi-year phony investigation as a delaying tactic for not being able to answer a basic regulatory question. Because the Commission could not explain the legitimacy of JPMorgan’s concentrated short position, they continued to drag out resolution by pretending to investigate. But four years is an extraordinarily long time for any government investigation, phony or otherwise, and it appears that the CFTC has to confront the issue soon; hence the FT article.

While the FT article was disappointing (at least it mentioned my name in a non-derogatory manner) and Chilton’s response was encouraging, the reality is that it is unlikely that the investigation will be resolved much differently than the version leaked to the paper. For one thing, nobody likes admitting they had royally screwed up and if the Commission were to bring manipulation charges now in silver, it would be admitting that it missed the wrongdoing for the previous two decades, despite continuous and documented warnings from 1986. How likely is that?

More importantly, were the agency to charge JPMorgan with manipulation of the silver price (as it should) that could set off a series of events that could easily grow out of control. One thing that makes the silver manipulation so potentially profound is that the core allegation is of a crime in progress. The CFTC has never busted up a manipulation that was in force; like most government agencies, it only reacts after the fact. Don’t take that solely as a complaint, but more as an observation that governments are more reactive than proactive. Because the silver manipulation is very much in force, were it to be terminated by CFTC actions against JPMorgan and/or others, it would be a “live” event for the first time. History shows that all manipulations end violently. In the case of silver, since it has been depressed in price by a downward manipulation, its termination would necessarily cause prices to explode higher. Any charge brought by the CFTC would send a clear signal to the world that silver had been depressed in price and was undervalued and, therefore, should be purchased. This would cause a flood of buying and discourage new selling, causing the price to truly explode, most likely in disorderly market conditions. Do you find it likely that the CFTC would wish to cause that disorderly pricing that could lead to further unsettled conditions in other markets?

If JPMorgan (and perhaps the CME Group) were found to be the main culprits in the silver manipulation and the CFTC brought charges against them, the repercussions to JPM and the CME could be a threat to them as going concerns. It was never a case that JPMorgan couldn’t financially afford to buy back its concentrated silver short position; it was always a case that should JPM ever move to buy back aggressively to the upside that would prove conclusively that it had been manipulating the price of silver all along. That would set JPMorgan (and the CME) up for a legal holocaust, both civil and criminal. There has been talk of a civil litigation nightmare for those banks deemed guilty in the developing Libor manipulation; but determining damages will be difficult because the Libor rates were allegedly manipulated both up and down, making the damages unclear and hard to prove. Were there to be findings of a downward manipulation in silver, those damaged, from investors to producing companies and countries could easily demonstrate the damage. Back in the Hunt Bros silver manipulation of 1980, one of the successful litigants was Minpeco, the government producer organization from Peru, who I remember collected more than $100 million. That would be chicken feed compared to the consequences of the much longer downward silver manipulation of today by JPMorgan. And this says nothing of potential criminal liability.

JPMorgan is perhaps the most important and influential US bank and for the CFTC to move against them in a matter as important as basic market manipulation could lead to unintended consequences that could threaten the world’s financial system. Do you think the CFTC would dare challenge the supremacy of JPMorgan considering that potential financial fall-out? Besides, as I have written previously, JPMorgan is too big to sue, at least matched up against the CFTC. The matter of the bank manipulating any market is something that JPMorgan would defend against to the death, as for it to be found guilty could possibly end the bank in its current form. JPMorgan would certainly spend $5 billion (only one quarter’s net profits) to fight any charges in connection with a silver manipulation and, at a minimum, delay a legal resolution for decades. On the other hand, the CFTC is struggling to fund the whole agency on $200 to $300 million annually. This is most likely the reason behind the leak to the FT about the silver investigation being dropped, namely, the CFTC is no match for JPMorgan and the agency knows it. This has nothing to do with law, or justice, or doing what is right; it is simply a case that the crooks at JPMorgan (and the CME) can bully anyone they chose, including the US Government. The most plausible alternative explanation, of course, is that the Treasury Dept ordered the CFTC to keep its hands off JPMorgan. Either way, it stinks.

[Besides financial constraints, there's also political considerations.  Referring to the money laundering & LIBOR investigations, this is ZeroHedge's take on why only selected banks ( Standard Chartered, HSBC & Barclays, etc) are targeted but not the likes of JPMorgan -Ed]

The truth is that the silver investigation was a ruse from the start in that the CFTC could never have moved against JPMorgan or the CME in any circumstance. The proof of that is evident in the many other specific instances of price manipulation in silver that have occurred after the soon to be dropped investigation began. The most obvious instances were the two separate 30% and 35% price smashes in a matter of days that occurred in silver in 2011. There never were such blatant price declines in such a short time in any world commodity in history, to say nothing about there being no obvious supply/demand changes to account for the declines.

In other words, the CFTC started their third silver investigation four years ago as a way of avoiding having to explain how JPMorgan could be allowed to hold a clearly manipulative concentrated short position and then ignored the two greatest manipulative price events in commodity market history while the phony silver investigation was under way. Think of how devious and dishonest the CFTC has been; it announces a formal silver investigation to avoid having to answer bedrock regulatory questions, then ignores the two most manipulative prices events in history claiming it can’t comment on them because there is an active investigation under way. If government officials could ever be horse-whipped for malfeasance and for failing to protect the public interest, surely the CFTC’s performance in silver would permit it.

I realize that what I have written to this point paints a picture that is not optimistic for the resolution of the silver investigation that most would favor. I am sorry about that, but I try to be an analyst and not an entertainer. That said I’d like to spend some time explaining why the outcome of a dropped case may not matter much and that the net result is good for silver. More than anything, this FT leak was likely a trial balloon for the CFTC to gauge public reaction to it dropping the case. If so, the reaction couldn’t be clearer; even I was taken aback by the near universal condemnation of the agency for proposing to drop the case. I think what got to people the most was the suggestion that the agency would walk away without bothering to explain the concentration and the two historic price drops of 2011, to say nothing of the almost daily beatings in silver as a result of crooked High Frequency Trading. If anything, the FT article may have given legs to the silver manipulation allegations.

While it was a mainstream media publication that leaked the story, the silver manipulation is surely not a mainstream media issue. The silver story is an Internet and private publication issue that grew despite being ignored in the mainstream media. As such, any declaration that the matter is now closed will not close it anywhere outside the MSM, where it was never accepted to begin with. It’s not just that the silver manipulation was never accepted by the MSM, it was more a case of it never being allowed to be openly discussed. But legitimate questions of undue market concentration and historic and unjustified silver price movements are matters worthy of transparent examination that MSM censorship has been unable to stifle.

Not only is the matter not going away, the leak to drop the case may bring greater attention to it. Such attention could prove to be the death knell for the silver manipulation, as the last thing the silver manipulators want or need is a fully transparent examination of the facts. One of my longest held beliefs has been that as time rolls on more would become aware of the real silver story and once they did, more investment demand in silver would result. That has occurred and any new attention brought to silver as a result of a dropped investigation will likely accelerate the process. The truly amazing thing is in how slowly the real silver story has spread in the ranks of super big investors. Aside from Eric Sprott, very large investors have overlooked the silver story completely. I am as certain as I can be that these very large investors just haven’t taken the time to look objectively at silver. I think it’s a case of silver being such a universally known item that most people assume they already know all the facts because they know what silver is. This includes very large investors who, in addition, may actually be turned off that so many smaller investors have invested in silver. It’s a common human failing to dismiss something because others thought to be less knowledgeable got there first. In the long run, however, very large investors are more concerned with superior returns, so the key is getting them to look at silver objectively. The dropping of the silver manipulation may be that key.

Perhaps the most amazing thing of all, at least to me, is the glaring fact that even after four years of non-stop public allegations about involvement in the silver manipulation, JPMorgan still remains the big short. It is hard for me to comprehend how such a large and powerful financial organization (as well as the CME) could silently tolerate the obvious reputational damage which is accruing. While JPMorgan’s short COMEX silver position is in the lower range of what it has been since the Bear Stearns takeover of March 2008, it remains shockingly large and concentrated. After last week’s big increase of 3000 contracts, JPM’s short position, at 18,000 contracts (90 million oz), is still more than three and a half times the proposed position limit in silver.

The most plausible explanation for why JPMorgan has not rid itself completely of this manipulative short position is because it can’t do so easily. This is particularly true if JPMorgan tried to buy back its silver short position on rising prices. It would be a shock to the silver market system if the biggest short seller of last resort suddenly turned buyer. In essence, this is the root problem with concentrated positions in general – they cannot be unwound without market upheaval. For JPMorgan to turn to the silver buy side would beg the question – who would sell to them and at what price? The problem with the sharply higher silver prices that JPMorgan would cause if it turned silver buyer is that it would confirm that the bank was, in fact, manipulating the price of silver all along. To my mind, this means JPMorgan is trapped. They can’t run and they can’t hide. This is precisely the conclusion that any large investor would reach if that investor took the time to study silver closely. I can’t see how that won’t happen in time and a more bullish set up is hard to imagine.

Of course, I would be the happiest guy in the world to be proven wrong about what the CFTC will do with the ongoing silver investigation. But the potential of the likely greater exposure of the real issues in silver that a dropped investigation would bring is plenty good. With silver, it’s always been about getting people to learn the real facts.

Ted Butler


Updated: August 13

David Morgan comments on Ted’s article above:

  • Manipulation exists, but only in short term trends
  • Long term trends cannot be manipulated
  • CFTC is in a catch 22 situation
  • Market will over power manipulation
  • Silver mining stocks undervalued
  • & more

Crime of the Millennium

August 9, 2012 Leave a comment

By Jeff Nielson | Silver Gold Bull

As few people in our societies even know, all of the world’s governments have (foolishly) granted exclusive monopolies for the printing of all the world’s currencies (our “money”) to a cabal of privately-owned corporations called “central banks” – given that name because it is a cabal exclusively owned/operated by bankers.

Understand that the monopoly to print money is nothing less than a license for economic rape. These private banks lend us all the paper that they print out of thin air (at zero cost to themselves). The result is that after roughly 100 years of this economic rape we have (collectively) paid these banks $trillions in “interest” for nothing, and currently owe them $10’s of trillions for nothing. History’s single greatest act of legal theft.

Indeed, these bankers have stolen such unimaginably huge sums of wealth from our societies that the Thieves now voluntarily return most of the additional amounts they steal each year. There are two reasons for this act of pseudo-remorse. To begin with, with the Little People drowning in debt individually, and with our nations drowning in debts collectively; the Thieves were/are worried that their Victims might actually notice them sitting on top of their mountains of (stolen) money.

However the second reason – the real reason – is that the countless $trillions that these central banks have stolen from us are literally just the tip of the iceberg during their reign of legal-crime. This private cabal of central banks has not only been given monopolies to print money out of thin air for their own benefit, but thanks to the abominable euphemism which they call “fractional-reserve banking”; they are allowed to delegate their License to Steal to other private banks.

Specifically, for each dollar that the central bankers lend to their other banker-friends (at zero/near-zero interest rates); these private banks are allowed to print ten more dollars out of thin air, and lend them to the Little People (at higher rates of interest). Thus the central banks don’t mind returning most of the additional money which they steal each year, since their own thievery only represents 10% of the total banker-plundering of the wealth of all economies.

What is the inevitable result of a capitalist system where every new dollar that is used to fuel the economy is lent into existence? Debt Slavery: the ultimate goal of every (paper) fiat currency system.

There is now somewhere in excess of $200 trillion in debt sloshing around the global economy, most of that debt being totally fraudulent, in that it is interest paid to bankers (literally) for nothing. Somewhere around 25% of every dollar earned by all of our Western economies is now paid to these banker-parasites as interest on their fraudulent debts. The bankers would like to steal even more, but already all of our economies are teetering on the verge of bankruptcy.

Greece was already forced to default, and the U.S. (the world’s largest Deadbeat Debtor) is only able to ward-off debt-default by fraudulently maintaining its own interest rate at zero percent. Put another way, if U.S. interest rates had ever reached the same level as those which were inflicted on Greece by Wall Street’s economic terrorists; the U.S. would have defaulted even faster than Greece. It would have required the U.S. government to quadruple tax revenues just to pay the interest on its own (fraudulent) debt.

Having enslaved us all with debt thanks to being granted their License to Steal, history’s greatest thieves  are also history’s greatest hypocrites. Whenever one of our (subservient) governments has the audacity to actually suggest taking a closer look at the bankers’ Theft Monopoly; the Thieves look down their noses, point their fingers at us, and accuse of us “threatening their independence.” Yes, there is no one who places a higher price on his own freedom than the Slave Master. What about our independence?

The latest example of this supreme hypocrisy comes from (surprise, surprises) Benjamin Shalom Bernanke. Feeling especially pleased with himself after his two-day love-fest with the banker sycophants of the U.S. Congress; B.S. Bernanke chose that moment to launch yet another attack at Rep. Ron Paul – and his “Audit the Fed” bill.

Bernanke’s specific accusation? As paraphrased by the Corporate Media, Bernanke whined that “the ability to review monetary policy decisions…could compromise central bank independence.” This is by no means a new argument. Indeed, it is the Big Lie which the banker-thieves have hid behind for a hundred years – since it has never had a shred of validity.

The Big Lie is based on the artificial/arbitrary distinction of all economic policies as being either “fiscal policy” (the realm of government) or “monetary policy” (the realm of private bankers). The obvious fiction here in attempting to create some invisible wall between the two groups of policy-makers is that there is only one economy.

Pretending that the fiscal policy of an economy can act “independently” of monetary policy (or vice versa) is precisely as absurd as suggesting that a car’s transmission could operate “independently” from the engine. Indeed, this metaphor is very useful since the analogy of the fiscal and monetary policy of an economy and the engine and transmission of a car is precisely parallel.

As with a car’s engine, fiscal policy “powers” any/every economy, since it represents the physical economy itself. Conversely, monetary policy is merely the throttle (or “transmission”) which regulates the speed of the economy. Obviously neither of these elements can ever possibly be fully “independent” of the other. It is equally obvious in both these pairings which must be the dominant component and which must be the subordinate component.

With every car, its transmission is clearly subordinate to its engine. It is transmissions which are designed to optimize engine performance, and not engines being designed to optimize any particular transmission. Similarly, it is monetary policy which must naturally/automatically be subordinate to fiscal policy, rather than fiscal policy being designed to cater to the whims of private bankers (i.e. the Thieves). The Tail cannot be allowed to wag the Dog.

Thus when B.S. Bernanke claims that central banks “must maintain their independence” he is not uttering some profound truth. Rather, he is merely repeating the bankers’ Big Lie, a vacuous fiction which as a matter of simple logic never could have any validity. It is a Lie with one very obvious purpose: to minimize scrutiny as a small cabal of bankers perpetrate theCrime of the Millennium.

With our nations (and most of their citizens) drowning in fraudulent debts while the bankers sit on their mountains of ill-gotten money, it literally adds insult to injury for these bankers to arrogantly maintain we (the ones who granted them their License to Steal) have no right to take a closer look at how they have been robbing us blind for the last century.

This would probably be a good time to remind the Thieves how History tends to (eventually) reward them for their deeds. Less than a week after a news item appeared out of Iran reporting that the Iranian government had executed several bankers for a multi-billion dollar act of serial fraud, an interesting article appeared (ironically) on the blog for the Wall Street Journal itself.

The writer of that article notes the following:

The Code of Hammurabi, more than 3,700 years ago, stipulated that any Mesopatamian who violated the terms of a financial contract – including the futures contracts that were commonly used in commodities trading in Babylon – “shall be put to death as a thief.”

…In medieval Catalonia, a banker who went bust wasn’t merely humiliated by town criers who declaimed his failure in public squares throughout the land; he had to live on nothing but bread and water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be executed…Bankers who lied about their books could also be subject to the death penalty.

In Florence during the Renaissance, the Arte del Cambio…made the cheating of clients punishable by torture…

But financial crimes weren’t merely punished; they were stigmatized…

Contrast that with our modern societies where “punishment” for so-called white-collar crime is (at worst) nothing but a slap on the wrist in comparison to punishment handed out for blue-collar crime: the crimes of the Little People. The entire basis of this two-tier justice was the presumption (never supported with evidence) that the rich did not require as much deterrence from crime as the poor – and thus the sentences for their misdeeds did not need to be as severe.

Today, as the bankers now openly confess to a single act of fraud which they themselves estimate is roughly $350 trillion in scope, well over 90% of all crime in the world (by dollar value) is now white-collar crime. Meanwhile, we just had 25% of Wall Street executives confess that crime was a way of life in banking (and presumably the other 75% were lying).

In short, never in all of human history has white-collar crime required such maximum deterrence. I suggest to all these Thieves that they not only study their history books, but (for those based in the U.S.) that they also take a glance toward Death Row, and contemplate what “maximum deterrence” means in the 21st century U.S.A.


Further Reading:

Own Physical Gold, but Audit Paper Gold

August 8, 2012 Leave a comment

Much has been written here and elsewhere about the merits of holding physical gold as opposed to paper representations of gold, otherwise known as gold derivatives or paper gold. However, when it comes to auditing gold stored in vaults, counting the physical gold bars and drilling holes into them are not necessarily the way to go. Ironically, when it comes to auditing, it’s the “paper” that’s more importing than the physical.

In this recent interview at Capital Account, Chris Powell, co-founder and treasurer of Gold Anti Trust Action Committee (GATA) explains why he’s not excited about news that the US Treasury is auditing its gold stored at the NY Federal Reserve.

The dramatic news of drilling into the bars to ascertain their purity is of little relevance to him. He’s more interested in an audit of the paper claims to the gold. He doesn’t doubt that the gold is physically there, nor that they are pure. Rather, he wants to know who actually owns the gold? How many parties are claiming ownership to each bar of gold? Have they been leased or swapped?

Watch this very informative interview, which also covers other topics of interest:


For further reading:



Is a Strong Dollar Trouble for Gold?

August 7, 2012 Leave a comment

By Vedran Vuk | Casey Research

You’ve probably heard that a strong dollar means weaker gold prices.

Yet anyone who has been watching the markets closely knows that “strong dollar = weak gold” isn’t exactly true.

Sometimes, when the dollar strengthens, gold will fall. Other times it will stay flat or can even rise.

So where does that uncertainty leave gold investors?

The Dollar-Gold Relationship Has Some Surprises

We really need to understand the gold-dollar relationship in precise terms, not general ones.

One thing that you can do is look at a chart of gold and the USD/EUR over the past six months, starting from the February 1 price of $1,749.50:

It clearly shows that gold has been going down as the dollar has been gaining against its primary competitor, the euro.

In fact, the percentage gain for the dollar is nearly the same as the decline in gold, just under 10%. Seems like an almost perfect inverse correlation, right?

No, not exactly. Look closer.

There are a lot bumps and anomalies along the way. Sometimes gold has a mind of its own, separate from the dollar, meaning that other factors must be driving it.

To find out more, we also calculated the correlation of returns on gold and the USD/EUR currency pair.

For a quick refresher on definitions:

  • A correlation of +1 means two variables are moving perfectly together.
  • 0 means no correlation between the variables.
  • -1 means a perfectly inverse correlation - when one variable goes up, the other goes down.

So what’s gold’s correlation with the USD/EUR currency pair over the past six months? It is -0.471.

To make sure this wasn’t a euro-only phenomenon, we also checked the correlation of gold to the US dollar Major Currency Index, which reflects the strength of the dollar relative to the currencies of the Eurozone, Canada, Japan, the United Kingdom, Switzerland, Sweden, and Australia.

Once again, the correlation was far weaker than one might expect, at -0.531.

So what does this mean to you and your gold investments?

If you’re expecting more flights to safety boosting the dollar, then these correlations are definitely something to think about. At the same time, the correlations are not that strong.

Many gold investors falsely believe that a stronger dollar will simply run gold into the ground. Yes, a strong dollar would present challenges, but we need to also remember that we’re not talking about a correlation of -1.

Bottom line… the dollar influences gold prices, but it is not the sole determinant of its value.

Another factor for gold investors to consider is that the relationship between these variables can change over time. -0.471 is not set in stone - the correlation can get stronger or weaker from there.

In fact, over the past five years, the correlation has typically been weaker.

It’s hard to believe, but in the six-month period preceding September 21, 2010, gold hit a peak positivecorrelation to USD/EUR of +0.149. On the other end of the spectrum, gold had its most negative correlation of -0.741 in the six-month period prior to September 12, 2008. From these two points, gold has been everywhere in between.

So a strong dollar doesn’t mean the end of the world for gold.

If we enter a period of an even stronger dollar, gold investors might be concerned, but nonetheless, as the data show, gold and the UD dollar are not the perfect inverse of each other.

Even if the correlation were to become as negative as -0.741 again, a rising dollar wouldn’t necessarily crush the gold price.

Furthermore, there’s also the possibility of gold becoming less negatively correlated to the dollar. Even without the statistics, this is apparent. After all, the dollar has already strengthened, and gold is still holding up well. Has it been roaring to new heights as it did in years past? Not lately; but it hasn’t been beaten into the ground either - and there’s a lot more of the gold story yet to play out.


Vedran Vuk is a senior analyst at Casey Research, publishers of 10 research services read by over 175,000 independent-minded investors around the world. The August issue of BIG GOLD, due out Tuesday afternoon, outlines a new trend in gold that most analysts haven’t picked up on yet - and more importantly, an actionable solution. Now is the time to buy gold and gold stocks while prices are down.

The first Central Bank on Mars

August 6, 2012 1 comment

This is the first image taken by NASA’s Curiosity rover. Image credit: NASA/JPL-Caltech

After 8 years of planning, 8 months of space flight covering 566 million km and performing flawlessly throughout its “7 Minutes of Terror”, Curiosity landed right on time and on the spot inside the  Gale Crater, Mars at 0530 GMT, August 5.

This nuclear powered rover, about the size of an SUV is loaded with the most-sophisticated instruments ever used off Earth. The Mars Science Laboratory will keep hundreds of scientists and engineers busy over the next Martian year (23 earth-months) as they assess whether the landing area has ever had or still has environmental conditions favorable to microbial life.

Now, this is rocket science, and how much does it cost? A mere $2.5 billion! That’s loose change or a rounding error when compared with the thousands of billions created out of thin air to bailout banksters and Wall street gamblers. On the one hand, we have people gambling with financial derivatives to the tune of hundreds of trillions of dollars, creating massive illusionary wealth for themselves when they win while burdening the masses with trillions in bailouts when they lose. On the other hand, we have these heroes of modern civilization building real things, doing real science, creating new technologies - all real, physical stuff working on shoe string budgets with constant threats of further budget cuts:

In the Obama Administration’s budget request for next year, which was unveiled last month, NASA planetary science suffered a 21 percent cut, compelling the agency to scale back its robotic exploration efforts and drop out of two future European-led Mars missions entirely.

Dear Obama, Geithner & Bernanke,

Would you consider passing over some of your money printing loose change to these good folks over at NASA, and maybe, just maybe, you get the right to set up your first Federal Reserve central bank on Mars to propagate your fraudulent fractional reserve banking system on the red planet and beyond. Remember, there will be be a few humans over there in the not too distant future. You want to be the first to suck their blood dry, don’t you?



Bailouts for the banksters in 2008 alone could fund over 680 of these incredible missions!

Updated:  Aug 7

  • Watch Lyndon Larouche’s take on the significance of the Curiosity landing. “This is a vindication for mankind and science versus Obama!”


High Frequency Trading & the price you pay for your gold.

August 4, 2012 1 comment


In the U.S., High-Frequency trading (HFT) now accounts for 70-80% of all equity trades. If these figures sound alarming, consider for a moment that HFT is merely a sub-class of automated trading, often referred to as algorithmic trading, black-box trading or robo trading. Hence, algorithmic trading, where trades are executed automatically often at high speeds without human intervention could account for well over 80% of stocks traded in the US.

It has been said that HFT is usually not suitable for the derivatives markets. Negating this notion is CFTC commissioner, Bart Chilton. In his speech at the High Frequency Trading World, USA 2010 Conference, he  said:

A recent report says HFT firms account for about 50 percent of European markets.  CFTC economists say high frequency traders (HFTs) account for roughly one-third of all trading volume on regulated U.S. futures exchanges.

Connecting the dots, we can see that a high volume of gold & silver derivatives traded at the U.S. futures market is done through these algorithmic trading machines. But why does it matter?

Just as these sophisticated algorithms, written by some of the best brains in mathematics, physics and finance can enable large institutions to execute gigantic buy orders with minimum upward movement in price, they can be programmed to do the exact reverse. Observers of gold & silver futures price actions at the Comex have documented countless cases of engineered waterfall declines. This is how Bix Weir puts it.

How hard is it to rig the gold and silver markets?  Not hard at all.  It takes no effort, metal, or trading strategy.  Simply put, it takes nothing.  All you do is set your computers to trade back and forth with themselves on the PAPER markets until you hit the predetermined price.  Then you hold it there with the same programs until everyone FORGETS the price should be higher and buyers go away.  It has been this way since Greenspan implemented the first computer trading programs for ex-Fed Chairman Arthur Burns in the early 1970′s.  It will stay this way until the computers are turned off.

Yes, unfortunate or ironic as it may sound, the price you pay for your physical gold & silver, or the paper value of gold & silver you hold is determined largely by these machines and the powers that be controlling them. Be aware however, that these algo machines can, and have on many occasions gone wrong, creating havoc in the markets they dominate. If you’ve not heard of the May 2010 flash crash, this becomes a must read - Nanosecond Trading Could Make Markets Go Haywire.

This Wednesday’s algo machine gone wrong fiasco at Knight Capital is a case in point. I’ll be wary of parking any investments in the financial system during this phase of the crisis. Check this out if you’re still not convinced. Greyerz: The Risk Of Systemic Collapse Is Now Enormous.


Updated: Aug 7

Gone in Sixty Nanoseconds and other “Knight-Time” Stories w/David Greenberg

Lauren of Capital Account discusses the Knight Capital $440 million “technical glitch” and the implications of nano-second HFT for retail investors with David Greenberg, former NYMEX board member.

Implication for retail investors:
Swings, very large price swings when HFTs get into action. Can you handle these?

Implication for markets in general:
HFTs now act as market makers because there are now no more (human) market makers on the floor of the stock markets. Without the HFTs, there’ll be no markets at all (well, almost). Do you want to park your investments in such a market?

Updated: Aug 9

Dark Pools and High-Frequency Trading

Lauren of Capital Account continues her series of interviews on HFTs following the Knight Capital debacle. This interview with Scott Patterson, author of Dark Pools, discusses the following:

  • Manipulating strategies - Spoofing, Layering & Quote Stuffing; How they work
  • 70% equity trading volume is HFT, 90-95% is Algorithmic
  • 99% of HFT orders are put out only to be cancelled later
  • There’s no more place to hide from HFT now, not even in Dark Pools!


Updated: Aug 10

A High Frequency Attack on Gold

Now we look closely at the second 21:21:20. The figure below shows all the prices in the relevant second, an Intra-Second Chart, so to speak. As is common, the vertical axis indicates the price in dollars per ounce. On the horizontal axis the trades during that second are sequentially numbered. In addition, the prices before and after are shown, and so-called indicative prices (in red).
The almost 500 trades of second 20: Clearly visible are many sharp drops, followed by recoveries. These movements happened in fractions of a second.

Read the full analysis here.


Updated: Aug 26

Share Wars: How the Robots are Robbing You
A look into the HFT game at the Australian Stock Exchange (ASX)



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