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…
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 aCEO 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…
*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.
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.
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. If you would like to become a Trial member and take advantage of the “free two week ‘get acquainted’ offer”, pleaseclick here