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Jeffrey Christian's 100:1 Blunder

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Looking back at the farcical, CFTC “hearings” in hindsight, it's clear that a script had been written for this process, in advance. CFTC members were to feign “concern” over the institutionalized fraud in the bullion market. They would allow critics to testify – even their nemesis GATA – and then (regardless of what was said) conclude that there was nothing untoward going on. Like “Officer Barbrady” of South Park, they would “reassure” the world by saying, “Move along people...nothing to see here.”


The problem, of course, was that the CFTC was not only trying to hide decades of manipulation in the precious metals market, but its own rampant corruption, as well. Even the most skillful liars can only obliterate a finite amount of evidence with their “snow-jobs”. Sadly, for the anti-gold cabal, Jeffrey Christian of the CPM Group is not a skillful liar. Despite being a loyal foot-soldier who defended the cabal to the best of his abilities during his relatively brief testimony, Christian's gaffe-prone answers to the questions posed to him produced so many blockbuster revelations that he nearly managed to 'upstage' GATA – when they unveiled their “whistle-blower” on precious metals manipulation, metals-trader Andrew Maguire.


Christian began to crumble as soon as he tried to explain/justify the massive “short” positions of the bullion-banks: the most-concentrated positions in the history of commodities-trading – which have been allowed to get ever-larger through the CFTC's willful blindness to this rampant market-rigging. Christian's first stab at “justifying” the short positions was to state that whenever the bullion banks saw a lot of investors going “long” that they were forced to increase their “short” positions.


Of course, when “long”investors (with no connection to the bullion-banks) simply add to their own positions, there could be no possible market 'rationale' which “forces” the bullion-banks to increase their “shorts”. Instead, (as Adrian Douglas of GATA pointed-out in the now-famous “King” interview), Christian's remark was the proverbial “Freudian slip”: the bullion-banks felt “forced” to increase their “short” positions when there was a surge in buying – because that is/was the only way the bullion-banks could prevent the price from surging higher.


No better example exists (in all of history) than the savage take-down of the gold and silver markets in the fall of 2008, during the Wall Street-engineered, global “crash”. At a time when precious metals demand spiked to its highest level in decades, prices for the two metals were plummeting straight downward – a complete contradiction of the most basic elements of supply and demand.


Indeed, the great Manipulation of '08 was one of two examples of rampant bullion-manipulation which Andrew Maguire served-up on “a silver platter” to the CFTC, with the second example he provided being a manipulation which he successfully “predicted”, in advance. Knowing that Mr. Maguire's evidence was “out there”, and having refused him the chance to present that evidence, CFTC Chairman Gary Gensler obviously didn't like the direction in which Christian's testimony was leading, so he essentially told him to “try again” to justify the bullion-bank “short” positions. Big mistake.

 

 

In his second attempt to “justify” the bullion-banks' shorting, Christian began a rambling narrative, where he attempted to minimize the significance of the massive, short positions by describing the precious metals market as being far larger than 'the little people' (i.e. you and I) realize. In fact, said Christian, the “gold market” (in the eyes of the bullion-banks) was “a hundred times” the size/amount of all the world's (real) “physical” bullion.


Keep in mind that these words did not come out of the mouth of a GATA director (or other “enemy” of the cabal) in the form of an accusation. These were the words of an ally of the banksters, uttered without any “prompting” or leading comments, of any kind. This was a confession. In legal parlance, it was “an admission against one's own interests”. As a matter of law, our courts give such evidence an even higher level of credibility than ordinary testimony.


The reason for this is a matter of simple logic, and human nature. People are naturally reluctant to say things which are harmful to themselves (or their “friends”), and so, when a person makes a (freely given) statement against one's own interests, such testimony is deemed to be the most persuasive type of testimony. Thus, we now have an agent of the cabal, stating in open testimony, at a formal hearing of the U.S.'s bullion-market “regulator”, that the banksters' bullion is leveraged 100:1.


This one statement marks a total paradigm-shift in the precious metals market, so it's difficult to know where to start in analyzing the repercussions of this revelation. To begin with, as I stated in my most-recent commentary, this indicates that there is far more upward pressure on gold and silver prices than even the most-rabid precious metals bull could have imagined in their wildest dream. Even as a “whistle-blower” on precious metals manipulation, Andrew Maguire was flabbergasted at that revelation – with his own “worst-case scenario” being that the bullion-banks might be leveraged ten or twenty to one.


Consequently, suppressing precious metals prices has been many times more difficult for the bullion-banks – akin to saying that their “grip” on the precious metals market is far more precarious than any precious metals bull had previously realized. Think of it as a bull-rider trying to stay atop a bull which is bucking a hundred times harder than a normal bull. This not only implies that the cabal will lose any/all control over this market sooner than people might have suspected, but when that failure occurs, the upward explosion in precious metals prices will be much more violent than we would have previously imagined.


However, this is only the beginning of this paradigm-shift. Any and every investor who (mistakenly) believes that he she is holding “bullion” - through one of these fraudulent, paper-gold “pushers” - is only holding 1% as much bullion as he/she currently believes (at best).


This has tremendous significance to the demand-side of the bullion market. As any reasonably-informed investor knows, precious metals are the ultimate form of protection in terms of “wealth preservation”. In other words, gold and silver are the best form of “portfolio insurance” - in global markets which are (to put it mildly) extremely volatile and uncertain.


In the words of TARP-inspector, Neil Barofsky (only a couple of months earlier), U.S. “systemic risk” has increased not decreased. Said Barofsky:


Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding road, but this time in a faster car.”


This is a hugely important psychological dynamic to keep in mind. There have been some knuckle-draggers who assert that when the banksters' massive bullion-fraud finally implodes that this will cause precious metals prices to “crash” - because investors will simply flee this fraudulent market. Clearly, this is specious logic. While people might be very angry about being scammed on one component of their “insurance”, people do not react to insurance-fraud by avoiding that insurance.


In fact, the actual dynamic is the diametric opposite. Realizing (in panic) that all the “insurance” these investors thought they held is just worthless paper, there will be a frantic scramble to obtain real insurance – except this time no one will be gullible enough to accept worthless banker-paper as a “substitute” for that insurance: real, physical bullion. And at the same time that real demand increases (more or less) by a hundred times, over-night; there will be the concurrent realization that supply is only 1% as large as previously realized. Picture a herd of elephants all trying to simultaneously squeeze-through a keyhole.


In short, precious metals prices will zoom upward to something approaching “fair market value”. To pull out a couple of ball-park numbers, just for the sake of argument, let's assume that gold jumps up to $5,000/oz, while silver goes to $100/oz (as “medium-term” targets). As much as investors will want their “insurance”, those who are not lucky enough to be first through the “keyhole” will undoubtedly suffer some “sticker-shock” when they view those prices.


With no physical bullion available at “affordable” prices, and with investors automatically rejecting any banker-paper whose only “bullion content” are the words “gold” or “silver” written on those fraud-devices, this will push a massive wave of investors into the only other “proxy” for real bullion: the equities of the miners who dig gold and silver out of the ground. Their “reserves” provide a concrete asset to which investors can attach their wealth – without worries of such an investment plummeting to zero (like the shares of a Wall Street bank or a U.S. Treasury “bond”).


Naturally, Christian's confession also provided 100% proof of the banksters' fraud. However, in the world of U.S. markets (with their make-believe “regulators”), 100%-proof of criminal conduct is ignored on a regular basis – with Bernie Madoff's relatively tiny Ponzi-scheme being the obvious example. The SEC had no problem ignoring proof of Madoff's blatant scamming until the crescendo of those exposing Madoff reached such a level that even the U.S. propaganda-machine was forced to acknowledge it with its “news”.


Clearly, the bullion-market has not yet reached that saturation-level of awareness which makes it impossible for the CFTC to continue to refuse to perform its duties as regulator. Thus, the banksters who are still safely ensconced in their Wall Street ivory-towers, were quite happy to publicly wallow in their own corruption at those hearings.


Returning to the Christian confession, his news of 100:1 leverage caused many/most precious metals commentators to forget to analyze Christian's “justification” for the massive, Comex short positions. Essentially, there were two components to Christian's explanation.


First, Christian “justified” the huge, “naked” short positions on the Comex by saying that there equally-huge “naked” long positions. In other words, the lying/cheating/stealing the banksters engage in on the short side of the market is “justified” because they are doing an equal amount of lying/cheating/stealing on the long side of the precious metals markets. In the eyes of the banksters, its “O.K.” to beat your wife – if you're also beating your children.


However, there was an additional element to Christian's justification/explanation of the banksters' Comex short positions. When Christian observed that the bullion-banks had leveraged their bullion 100:1, he made it very clear that the vast majority of that leverage existed in the derivatives market. When Christian made it clear that the “real” bullion-market was one hundred times the size of the actual bullion market, he stressed that not only the long derivatives positions but also the short derivatives positions totally dwarfed all trading which is taking place in the Comex. In other words, while the concentrated short-positions are, themselves, the largest concentrations in the history of commodities-trading, they are dwarfed in size by the derivative short positions.


The Comex-manipulation which people like Ted Butler, GATA, and Dan Norcini have faithfully reported to us for all these years is just the “tip of the iceberg” when it comes to bankster bullion-fraud. With the banksters' cumulative acts of bullion-fraud having produced a mountain of misdeeds greater than any other scam in history (even Wall Street's multi-trillion Ponzi-scheme built atop the U.S. housing bubble), this makes it much harder to keep this scam from imploding.


If “Jack the Ripper” had slashed a thousand prostitutes, rather than 'only' a dozen, he most certainly would have been arrested and convicted. The magnitude of the banksters' crimes makes their (eventual) exposure and prosecution a certainty.


We can also like add a few trillion dollars more to the size/amount of the law suits which will be launched against the Wall Street crime syndicate. With the largest tidal wave of litigation in human history still in its infancy, at the same time we will witness precious metals markets and precious metals prices finally moving toward some rational equilibrium, for “dessert” we will get to observe an endless procession of Wall Street's financial pyschopaths being stripped of that which they covet above all else: their money.


Speaking of “dessert”, some regular readers may have spotted an apparent “omission”: no mention of one of my favorite targets for criticism: the (so-called) “bullion-ETF's”. To those readers, I will add that I plan on dealing with the bullion-ETF's in my next commentary – where I can sink my teeth into the facts surrounding these shams in much more detail.

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Jeff Nielson
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written by Jeff Nielson, April 20, 2010
SailorTony, thanks for posting that link - as the writer makes some valid points. But he ALSO deliberately twists certain points, as an obvious apologist for the banksters.

First he is right to state that much of (most of?) the "leverage" in the bullion market is through "derivatives". He is WRONG to say that this "isn't really leverage". Instead, to make the point accurately, there are TWO types of "leverage" in the bullion market: the leverage of "naked" long (and short) positions ("physical" leverage), and the paper-leverage inherent in the derivatives market.

While it may not be accurate to say the bullion-banks "sold 100 times the amount of gold they own", let's keep our perspective here.

When Jeffrey Christian gave what that blogger called his "unremarkable testimony", he DIRCECTLY talked about 100:1 leverage. Other weasels can play their games of semantics, but that was the PLAIN MEANING of Christian's words. This was at a FORMAL HEARING for the "regulator" of this market.

Did the CFTC immediately ask Christian: is ALL this leverage in the derivatives market, OR is there leverage in the "physical" market (i.e. "naked" and illegal long or short positions) too? Don't you think a REGULATOR should have asked that question?

It is not up to Adrian Douglas, GATA, or myself, to produce the INTERNAL records of the bullion-banks - the only way of conclusively proving the nature and extent of "leverage" in the bullion market. It is up to the REGULATOR to ask those questions, and for the bullion-banks to answer them.

In the ABSENCE of both questions and answers, there is nothing illegitimate about framing what WAS admitted in as damning a way as possible. The obvious point to make is that if the bullion-banks could have produced evidence which would have minimized/neutralized the "damage" of Christian's testimony, don't you think it would have been introduced?

Christian's testimony was confirmation of what GATA and many other respected precious metals commentators have been saying for years. For that blogger to call Christian's testimony "unremarkable" is the most-obvious proof that the writer is incapable of discussing the subject objectively.

As a final point, in my PRIOR criticisms of the bullion-ETF's, all it would take to potentially make those funds totally worthless is 2:1 leverage. We don't need to demonstrate 100:1 leverage to validate everything we have been writing about the bullion-banks - that was merely a number which THEY served up on a "silver platter".
sailortony
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written by sailortony, April 20, 2010
Sorry, forgot the link:

http://www.financialsense.com/editorials/townsend/2010/0419.html
sailortony
...
written by sailortony, April 20, 2010
Financial Sense attempts to rewrite the CFTC Hearing saga and titles it:

"Debunking the Post-CFTC Precious
Metals Fear Mongering Campaign"

What do you make of it?
Jeff Nielson
...
written by Jeff Nielson, April 14, 2010
Mike, given that Schiff the POLITICIAN is now offering (himself and) the Republican Party as the "cure" for the Democratic Party, I'm wondering what the DATE of that quote was?

Otherwise, yeah, your quote beats mine.
mikem54321
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written by mikem54321, April 14, 2010
“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding road, but this time in a faster car.”

Great quote Jeff! smilies/cheesy.gif I like this one from Peter Schiff too:

"Bush steered the car for the cliff, Obama jumped in and hit the gas."
Brian Boutilier
...
written by brian boutilier, April 14, 2010
When folks eventually ask, did you hear about the silver/gold bullion scandal, we can say sure: been there, done that, got the t-shirt. and provide the URL as proof. smilies/cheesy.gif
Hank Harrington
...
written by CJ McNamara, April 14, 2010
I thought people might like that one Brian smilies/grin.gif
Brian Boutilier
...
written by brian boutilier, April 13, 2010
Nice photo, love the t-shirt.
Jeff Nielson
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written by Jeff Nielson, April 13, 2010
Good plan, Chad! FYI, to those who haven't been watching our Bulletin Board, we've been putting in a fair bit of time to add some quality content there - which is why I'm no longer putting out a new commentary every day (along with the wear-and-tear from pecking at my keyboard all day).

Also there is a "videos" section in the center of the page - where there should be something to interest and/or offend everyone!
Hank Harrington
...
written by CJ McNamara, April 13, 2010

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